Healthcare Finance News

Best hospitals have lower Medicare costs

Ron Shinkman — Tue, 15 May 2012 20:39:43 -0400

The best hospitals in the country also have Medicare costs that are below other facilities, reported Kaiser Health News. The news organization compared the 16 hospitals placed on the U.S. News and World Report "Best Hospitals Honor Roll" and their costs to other hospitals. At $17,808, they are 1 percent below the national median Medicare hospital cost of $17,988. More than 25 percent of the nation's hospitals cost more than those on the honor list, while another 25 percent were less costly than those on the roll, according to KHN. Article

Former CMS chiefs want SGR repeal

Ron Shinkman — Tue, 15 May 2012 20:18:19 -0400

Four former administrators of the Centers for Medicare & Medicaid Services were all in agreement last week: The sustainable growth rate (SGR) formula for physicians is completely broken and needs to be replaced, reported Kaiser Health News.

Gail Wilensky, Bruce Vladeck, Mark McLellan and Thomas Scully all testified in front of the Senate Finance Committee on May 10 that the current SGR is completely unfeasible.

"There is no reward for efficiency, no reward for quality, and no link to how physician practices (operate)," Wilensky said, according to KHN video footage.

The SGR, introduced in the late 1990s, has never really functioned to keep a lid on escalating Medicare payments to physicians. Instead, the formula has made physicians subject to double-digit rate cuts in recent years--including a pending 30 percent cut in 2013--prompting Congress to pass temporary "fixes" to the program while a permanent solution is found.

Currently, bipartisan legislation put forth by the U.S. House of Representatives would introduce more payment flexibility, with money going to practices depending, in part, on geography, specialty and practice type, reported The Hill's Healthwatch.

Among the fixes proposed by the former CMS chief, McLellan suggested more use of bundled payments--as is the case with the various accountable care organization pilots, according to the KHN video. "It's up to this committee and leaders of Congress to make a change," McLellen said.

For more:
- view the Kaiser Health News video
- read The Hill's Healthwatch blog post

Children's hospitals have stronger financial bearings

Ron Shinkman — Tue, 15 May 2012 20:13:18 -0400

Children's hospitals are faring better financially than their general acute counterparts, according to a new report from Fitch Ratings. The ratings firm reported that the average standalone children's hospital had a rating of AA-, one point higher than the average A- rating for all other hospitals and hospital systems.

"The higher average rating reflects children's hospitals' robust liquidity, unique market positions, strong philanthropic support, and specialized clinical services," the report said. It noted that capital spending is much higher than among non-specialty hospitals.

Children's hospitals also have a much higher visibility than general acute care facilities. For instance, a recent video for Seattle Children's Hospital that featured patients lip-synching to a Kelly Clarkson song recently went viral and may boost philanthropic efforts, reported the Associated Press.

Fitch also suggested there are some weaknesses in the children's hospital realm. For example, it has a much higher exposure to government payers than the general acute care sector.

"Children's hospitals are typically exempted or cushioned from Medicaid cuts, reflecting societal and political support to provide pediatric services … children's hospitals were either exempted or shielded from many of the recent inpatient Medicaid cuts in Florida and Texas," the report said. "Fitch views this political support as a key credit strength and historically has mitigated credit concerns regarding the high exposure to Medicaid."

To learn more:
- here's the Fitch ratings report (registration required)
- read the Associated Press article

Hospitals ask HUD to drop interest rate hike

Ron Shinkman — Tue, 15 May 2012 20:08:17 -0400

The American Hospital Association (AHA) is urging the Department of Housing and Urban Development (HUD) to back off from a proposal to increase interest rates for its Section 242 program that insures mortgages on hospitals, AHA News Now reported.

According to a recent entry in the federal register, the proposal includes boosting the interest rate by 20 basis points--a 2 percentage point bump in interest and a 40 percent increase from the current interest rate of 5 percent per year. The Federal Register does not give any reason for the changes in financing.

"The proposed increase is unnecessary to maintain the positive financial balance of Section 242 program," AHA Executive Vice President Rick Pollack wrote in a letter to HUD's general counsel. "Not only does the program have some of the best credit scoring within HUD, but the department's own numbers show that credit scoring for fiscal year 2012 improves over fiscal year 2011 for all healthcare programs without an MIP increase."

The Section 242 program gives hospitals billions in saved interest. Even a small hospital can benefit generously: Rio Grande Hospital in Del Norte, Colo., recently refinanced through HUD and will save about $1.7 million over the 10-year life of the loan, HUD announced earlier this month.

To learn more:
- read the AHA News Now brief
- here's the AHA letter (.pdf)
- read the HUD statement

Providers missing out on billions of incentives

Ron Shinkman — Tue, 15 May 2012 20:01:55 -0400

New research suggests that providers are missing out on as much as $20 billion a year in incentives because their availability is poorly communicated. The study, by Illinois-based ZS Associates, concluded that up to 75 percent of incentives are going unnoticed by providers.

Provider incentives have proliferated in recent years. Altogether, there are more than 170 pay-for-performance programs nationwide, compared to just 10 in the 1990s, according to Physicians News Digest.

Although 85 percent of providers--including individual nurses and physicians--are eligible to receive some form of incentives, 75 percent were unaware of them, or unable to tease out the incentives from base payments, according to the study. And one third said the payment itself was not enough to motivate a change.

"Incentives have proven to be effective in many other settings. But they have not been executed in a way that can help change provider behavior in healthcare," Angela Bakker Lee, managing principal at ZS, said Monday in a statement.

"For example, many healthcare organizations focus on selecting the right pay-for-performance metrics in their incentives plans. They believe if they get that part right, success will follow. However, they often overlook other key principles that make incentives work. It is here where we need to correct the course," she said.

For more:
- here's the ZS research announcement
- read the Physicians News Digest article

Tax breaks aim to lure providers from Massachusetts

Ron Shinkman — Tue, 15 May 2012 19:57:43 -0400

New Hampshire policymakers are pushing for tax breaks and incentives to draw specialty hospitals along its southern border in the hopes of gaining patients from much more populous Massachusetts, reported The Boston Globe.

The initial intent is to draw a facility from Cancer Treatment Centers for America, a for-profit hospital chain, according to the Globe. But lawmakers also are interested in drawing kidney, spine and other specialized providers.

The incentives include an exemption from a state hospital tax, as well the revocation of the Granite State's certificate of need law. The New Hampshire Union Leader, the state's leading newspaper, has editorialized in favor of a repeal.

"We're right on the border of Massachusetts, but we're also 45 minutes from the Maine border,'' New Hampshire House majority leader David J. Bettencourt told the Globe. "If you look at these specialty destination hospitals, they tend to cluster around one another, so this could create thousands of jobs.''

But Massachusetts hospital executives and policymakers are concerned the initiatives would draw away business and jobs, according to the article.

"It's going to destabilize the hospitals in northeastern Massachusetts,'' Chris Murphy, spokesman for Steward Health Care System, told the Globe.

To learn more:
- read the Boston Globe story
- read the Union-Leader editorial

Providers praise proposed SGR repeal, fee-for-service phase out

Alicia Caramenico — Thu, 10 May 2012 12:18:24 -0400

A proposed House bill would permanently repeal the sustainable growth rate (SGR) formula, preventing a 30 percent Medicare pay cut in 2013, and would phase out fee-for-service payments.

The Medicare Physician Payment Innovation Act of 2012, proposed by Rep. Allyson Schwartz (D-Pa.) and Rep. Joe Heck, (R-Nev.), would use savings from the military pull-out from Iraq and Afghanistan to cover all costs, reported Medscape Medical News.

The bill's timetable for reforming the Medicare physician payment system is a slightly adjusted version from the plan Schwartz called for last fall. This time, payment rates would stay at 2012 levels for one year; then from 2014 to 2017, primary care, preventive and care-coordination services would get a 2.5 percent annual increase, while reimbursement for other services would rise 0.5 percent, according to the bill summary.

Moreover, in 2018, physicians would get rewarded for value over volume, although Medicare still will pay physicians on a fee-for-service basis at 2017 levels. After that, physicians still using fee-for-service will face 2 percent pay cuts in 2019, 3 percent in 2020, 4 percent in 2021 and 5 percent in 2022, with fee-for-service rates frozen at 2022 levels going forward.

Provider groups already have praised the plan to repeal and replace SGR. For instance, the American College of Physicians "enthusiastically supports" the bill. "It not only addresses the continued threat of the SGR formula, it also addresses moving us beyond the fee-for-service payment model toward new models that better align payment with value," ACP President David L. Bronson said in a statement.

Meanwhile, Glen Stream, President of the American Academy of Family Physicians, said his members are pushing Congress to pass the bill. "This legislation begins the transition to a sustainable payment system and helps our complex system better recognize the value of primary medical care," he said in a statement. "Only by stabilizing Medicare physician payment can we ensure that elderly and disabled patients will have access to the care they need, when they need it."

For more information:
- here's the a summary of the bill and provider support
- read the Medscape article

Hospitals face potential $5B Medicaid shortfall in Pennsylvania

Ron Shinkman — Tue, 08 May 2012 14:55:30 -0400

Pennsylvania's hospitals are facing a potential shortfall in Medicaid payments that could total more than $5 billion by 2015, according to the Hospital & Healthsystem Association of Pennsylvania .

A report released by the association last week estimated that reductions in Medicaid payments as part of the budget for the upcoming fiscal year and increases in uncompensated care will quickly widen the shortfall facing Keystone State hospitals.

"In fiscal year 2011, Medicaid paid Pennsylvania's hospitals $542 million less than the cost of care for Medicaid patients," HAP President Carolyn Scanlan said in a statement. "For fiscal years 2013 through 2015, the shortfall exceeds $1 billion annually and peaks at $1.454 billion in 2015."

Scanlan noted that the state's hospitals are facing cuts in special payments for trauma and neonatal care and to critical access hospitals, on top of a 4 percent reduction last year in general Medicaid payments. Moreover, hospitals project more cuts in revenue as a result of the Affordable Care Act. Scanlan urged lawmakers to address the shortfall.

In Alabama, another state where hospitals have been hit hard by Medicaid cuts, the legislature is mulling a bill that would provide general fund monies to its Medicaid program to better allow it to draw federal matching funds, reported The Birmingham News.

To learn more:
- here's Pennsylvania Hospital & HealthSystem statement
- download the projection chart (.pdf)
- read the Birmingham News article

Facing tighter revenues, hospitals boost efficiencies

Ron Shinkman — Tue, 08 May 2012 14:24:16 -0400

In response to the changing revenue climate, systems such as University Hospitals in Ohio are entering into accountable care organizations, expanding the use of electronic medical records and merging facilities, The Plain Dealer reported.

"We cannot predict the future, but we can prepare for it," University Hospitals CEO Thomas Zenty told the newspaper.

In addition to the cost-cutting measures, University also is upping its fundraising efforts and fine-tuning its community benefits planning, according to the article.

Non-profit systems like University are making changes given the likelihood that revenue streams will be straitened in the coming years. According to the forecast issued by Moody's Investors Service, nonprofits reported median revenue growth of 5.3 percent during 2011, up from 4.5 percent in 2010. However, the historic median annual growth rate has been about 7 percent, noted the ratings agency.

"Low revenue growth is due primarily to flat volume trends and payer pressures," Moody's analyst Sarah Vennekotter said in statement last month. "Inpatient admissions were again flat in 2011, repeating trends seen in 2009 and 2010, and will continue to be a factor in our expectations for lower-than-average revenue growth."

One of the drivers is the cancellation of elective procedures by patients, which often costs hospitals millions of dollars a year in lost revenues.

There also continues to be a revenue shift to public payers. Medicare and Medicaid now represent 56.5 percent of all gross patient revenues, according to Moody's. That compares to 53.9 percent in 2009. Both programs tend to pay at or below hospital cost for many procedures.

In response, hospital and system managers have cut expenses that have maintained profit margins, Moody's noted. Liquidity also increased as a result.

To learn more:
- read the Plain Dealer article
- here's the Moody's summary on hospital revenue

Bill would cut state healthcare spending growth in half

Ron Shinkman — Tue, 08 May 2012 00:25:57 -0400

Massachusetts lawmakers have introduced legislation that, if enacted, would limit what hospitals and physicians could charge for services and create an agency that would monitor medical spending, The Boston Globe reported. The legislation intends to cut the growth in healthcare spending in half by 2016 and save the typical family $2,000 a year on health insurance premiums. Both lobbies for the Bay State's physicians and hospitals say they will fight parts of the bill, calling it too restrictive. Article

Hospital-payer billing errors abound

Ron Shinkman — Mon, 07 May 2012 23:59:08 -0400

Billing between hospitals and payers is often riddled with errors, creating a confusing situation as to how much healthcare delivery actually costs, reported The Plain Dealer.

Up to 40 percent of claims between providers and payers contain mistakes, according to Stephen Parente, a professor of health finance and insurance at the University of Minnesota.

"Somebody didn't put on the right diagnosis code or didn't put on a diagnosis code at all," Parente told the Plain Dealer, citing an analysis he undertook.

Partly as a result, consumers may be hit with higher bills than expected, despite laws in states such as Ohio that attempt to add clarity to healthcare pricing. For example, the newspaper cited a "facility fee," which some hospitals charge but are not always clearly delineated in the bills they issue.

Among Ohio providers, the trend can be exacerbated when hospitals try to collect on nominal amounts rather than providing charity care. That was the case with Mount Carmel Health System in Columbus, which charged an outpatient $1,800 for prenatal services even though she likely qualified for charity care, and then sued her, according to Kaiser Health News.

For more:
- read the Plain Dealer article
- here's the Kaiser Health News article

Will too many future docs forgo primary care for specialties?

Ron Shinkman — Mon, 07 May 2012 23:41:40 -0400

The nation's medical schools are gearing up to graduate nearly a third more doctors than in the past, but concerns are rising that too many will be trained for specialties rather than primary care, reported The Fiscal Times.

Many incoming medical students are gravitating toward specialties that pay better than primary care. Observers worry that this could conspire to drive up hospital and overall healthcare costs rather than serve to contain them by placing more emphasis on preventative care, according to the article.

The pay gap is glaring, with specialists such as cardiologists commanding as much as $300,000 a year to start and often earning close to $1 million a year by the time they're in their 40s, according to the Fiscal Times. By contrast, primary care physicians earn an average of $150,000 to $175,000 a year, reported RTT News.

"Cardiology pays twice as much as primary care. That's a really hard incentive structure to fight against," Atul Grover, a physician and chief of public policy at the American Association of Medical Colleges (AAMC), told the Fiscal Times.

According to AAMC data, more than 21,300 students will matriculate at the nation's medical schools in 2016, 30 percent higher than levels a decade ago.

The AAMC claims that about a third of those students will go into primary care, but the System for Studying Health System Change contends that number is closer to 20 percent, notes the Fiscal Times.

To learn more:
- read the Fiscal Times article
- here's the RTT News article

Healthcare workers, hospitals agree to drop minimum charity care, pricing caps

Ron Shinkman — Mon, 07 May 2012 23:12:02 -0400

A major healthcare labor union in California has reached an agreement with the state's hospitals to drop ballot initiatives that would have put charity care floors and pricing caps on many facilities, both groups announced last week.

The SEIU-United Healthcare Workers West (SEIU-UHW) and California Hospital Association (CHA) have agreed to explore ways to lower healthcare costs and improve the quality of care, according to California HealthLine. The CHA also has agreed to implement communications between its member facilities that are not unionized.

The agreement is a way "to make durable, lasting, meaningful change to a system that everybody understands has to change dramatically and quickly," SEIU-UHW President Dave Regan told the Los Angeles Times .

The SEIU-UHW had collected more than enough signatures to get initiatives on the November 2012 ballot that would have capped hospital billing to 25 percent above its costs and compel hospitals to spend at least 5 percent of its revenue on charitable care, noted California Healthline. However, large providers, such as Kaiser Permanente, would have been exempt from the initiative, primarily because it has a long-term contract in place with the union, according to the Los Angeles Times.

"Both sides were hoping we could avoid an all-out war at the ballot box," Jan Emerson-Shea of the California Hospital Association told the Los Angeles Times. "That didn't really serve anybody's objectives."

For more:
- read the California HealthLine article
- here's the LA Times article
- read the joint statement

Health system backs off patient debt collections

Ron Shinkman — Tue, 01 May 2012 20:42:13 -0400

Fairview Health Services in Minnesota has pulled back on collecting patient debts after the state's Attorney General accused the firm it hired to obtain payments of widespread abuses, according to the St. Paul Pioneer Press. Attorney General Lori Swanson last month condemned Chicago-based Accretive Health and suggested it engaged in aggressive collections practices on behalf of other providers.

Meanwhile, Fairview CEO Mark Eustis disclosed that both his son and the son of the head of Fairview's medical group are Accretive employees. Article

Looming reimbursement cuts stifle hospital budgets

Ron Shinkman — Tue, 01 May 2012 20:28:53 -0400

A sizable percentage of hospitals expect to reduce their spending on capital projects during 2012 as they confront a variety of budget issues, according to a new survey of 730 hospitals from Premier healthcare alliance.

Premier's 2012 Economic Outlook indicated that 35 percent of healthcare leaders said their capital budgets declined over the past year--a tougher climate than the 2011 survey, when 28 percent reported a drop, reported DOTmed News.

However, 65 percent of those surveyed believed their budgets remained about the same or have increased compared with 2011. Premier noted that 72 percent of those surveyed last spring reported flat or increased capital budgets.

The survey also found that 76 percent of the healthcare leaders said future reimbursement cuts were dictating most capital budget decisions.

Next year, most of the capital investments will go to information technology and telecommunications, according to more than 40 percent of respondents; 30 percent said the majority would go toward infrastructure.

"The nation's current debt concerns and looming reductions in reimbursement have, for the most part, slowed hospital spending and increased demand for greater value," Premier Chief Operating Officer Mike Alkire said in a statement yesterday. "The one exception is HIT, where hospitals are placing a great deal of fiscal and operational focus."

Premier's survey also indicated that hospitals are trying to cut costs by standardizing more care.

To learn more:
- read the Premier 2012 Economic Outlook (.pdf)
- read the DOTmed News article
- here's the Premier statement