Its ability to improve inpatient admissions has helped for-profit Hospital Corporation of America post healthy earnings. Tenet, despite an 8.4% increase in net operating revenues, experienced a "volume decline on the inpatient side and flat-ish volume for outpatient," says one analyst.
For-profit hospital giant Hospital Corporation of America (HCA) continues to post strong earnings even as the industry contends with the complex, myriad, and expensive mandates around healthcare reform, lower inpatient admissions, and reduced Medicare reimbursements.
For the third quarter of 2013, the Nashville-based company reported:
Total revenues of $8.4 billion, an increase of 4.9% over the third quarter of 2012;
Same facility equivalent admissions increased 1.1%
Same facility admissions increased 0.7%,
Same facility revenue per equivalent admission increased 3.4%;
Cash flows from operations increased $245 million, up $900 million from $655 million
Not surprisingly, HCA Chairman/CEO Richard M. Bracken said in prepared remarks that he was "pleased with the results of the third quarter." He credited the company's "many clinical and operating initiatives continue to position our facilities to effectively compete in this changing healthcare environment."
HCA reported that revenue per equivalent admission increased 3.9% in the third quarter of 2013—a 3.4% increase on a same hospital basis, reflecting increasing acuity and changes in payer mix. Same facility inpatient surgeries increased 2.9% while same facility outpatient surgeries increased 0.4% compared to 3Q 2012.
Operating expense per equivalent admission increased 3.1% from 3Q 2012, with a 1.9% increase on a same hospital basis. During the third quarter of 2013, salaries and benefits, supplies and other operating expenses totaled $6.9 billion, 82% of revenues, compared to $6.6 billion, or 82.7% of revenues, in 3Q 2012, HCA reported.
HCA is the largest investor-owned hospital corporation in the nation and owns and operates 162 hospitals and approximately 114 freestanding surgery centers in 20 states. It also has operations in the U.K.
Sheryl R. Skolnick, managing director and co-head of research at CRT Capital, says HCA's results were "very strong" and demonstrate that the corporation has found the right formula to improve inpatient admissions in an industry that has largely seen fewer heads in the beds.
"HCA positions itself to be dominant in certain service lines that are growing and necessary, like stroke—not elective—and they are dominant in markets where the population is growing. It's the 'where' and the 'what,'" Skolnick says.
"They continue to have volume increases when everybody else doesn't or their volume increases are better than others. A lot of that has to do with the strength of their networks, the positioning in faster growing markets and the work that they've done to be very important for certain types of care in their communities."
Tenet Earnings
Also this week, Dallas-based Tenet Healthcare Corp. [PDF] reported an 8.4% increase in net operating revenues for the third quarter 2013, fueled in part by a 3.5% increase in outpatient visits, and a 3.1% growth in emergency department visits, that helped offset a 0.5% decrease in admissions.
Total net patient revenue per adjusted admission was $11,928, an increase of 3%. Tenet reported adjusted EBITDA of $288 million, an increase of $19 million, or 7.1%, as compared to $269 million in 3Q 2012.
"We achieved another solid earnings increase in the third quarter as we continued to control costs and drive significant revenue growth," Tenet CEO/President Trevor Fetter said in prepared remarks. "We delivered strong growth in outpatient visits, emergency department volumes, and total surgeries in the quarter, all of which are areas of strategic focus."
Fetter noted that Tenet's Conifer Health Services consultant arm reported a 50% increase in EBITDA compared to 3Q 2012. Conifer recorded revenues of $225 million, an increase of 84%.
"On Oct. 1 we completed our acquisition of Vanguard Health Systems, which further strengthens our competitive position for future growth. The integration of Vanguard's operations is proceeding smoothly and we are excited about the additional strengths this acquisition brings to our Company," Fetter said.
Skolnick said Tenet's results for the third quarter "were OK. They certainly weren't as impressive as HCA's."
"They did have volume decline on the inpatient side and flat-ish volume for outpatient," she says.
"The story there is that they have been growing their outpatient surgery center capacity and that has been helping them an awful lot. It has been the application, their capital spending discipline to get growth in markets that offset the natural attrition of patients and population changes as well."
Challenging Markets
Skolnick says other investor-owned hospital chains such as Community Health Systems and LifePoint Hospitals are also experiencing problems with operations in challenging markets. "They both suffered from markets where their populations are declining. Admission volumes grow in lockstep with population, so if you are in a declining market you really don't have a choice but to show these kinds of results," she says.
Skolnick says investor-owned hospital corporations such as HCA and Tenet are surviving if not thriving in a tough healthcare economy because "cost discipline remains a laser focus of every single publically traded company with the possible of exception of (Naples, FL-based Health Management Associates, Inc.) because they are in somewhat disarray right now."
"For Tenet and HCA it has certainly helped them in the quarter. I'd argue that for HCA, it probably helps them a little bit more and you see a little bit more because they have more heads in the beds."
In the news: Enrollment in medical schools has hit record levels. Not-for-profit small hospitals' median financial ratios were mixed in 2012, and research finds that older cancer survivors in rural areas are more likely to forgo medical care for financial reasons than their counterparts in urban areas.
A lot of interesting news items cross my desk, but don't make onto the Web site because I simply lack the time to get to them all. Today I'll play catch up by offering quick takes on a handful of recent such stories.
Med School Applicants, Enrollment Reach New Highs
For all the talk about physician job dissatisfaction, there appears to be no shortage of people who want to attend medical school. The American Association of Medical Colleges reports that a record number of students have applied to and enrolled in medical schools in 2013. This is especially good news for rural and exurban hospitals and health systems, which have been particularly hard hit by the physician shortage.
AAMC says the total number of applicants to medical school grew by 6.1% to 48,014, surpassing the previous record set in 1996 by 1,049 students. First-time applicants, another important indicator of interest in medicine, increased by 5.5% to 35,727. The number of students enrolled in their first year of medical school exceeded 20,000 for the first time (20,055), a 3% increase over 2012.
"At a time when the nation faces a shortage of more than 90,000 doctors by the end of the decade and millions are gaining access to health insurance, we are very glad that more students than ever want to become physicians," AAMC President/CEO Darrell G. Kirch, MD, said in prepared remarks. "However, unless Congress lifts the 16-year-old cap on federal support for residency training, we will still face a shortfall of physicians across dozens of specialties."
"Students are doing their part by applying to medical school in record numbers. Medical schools are doing their part by expanding enrollment. Now Congress needs to do its part and act without delay to expand residency training to ensure that everyone who needs a doctor has access to one."
AAMC credits the overall growth in medical student enrollment in part to the creation of new medical schools as well as existing schools' efforts to expand their class sizes after the AAMC, in 2006, called for a 30% increase in enrollment to avert future doctor shortages.
In 2013, 14 medical schools increased their class sizes by more than 10%. Four new medical schools welcomed their first classes this year, contributing to about half of the overall enrollment increase. Since 2002, medical schools have increased the number of first-year students by 21.6%.
Small Hospital's Financial Ratios Show Effects of Industry Reforms
This may sound obvious, but Standard & Poor's Ratings Services is reporting that not-for-profit small hospitals' median financial ratios were mixed in 2012, in alignment with the degree of success these hospitals have had in responding to sweeping reforms in the healthcare industry.
S&P credit analyst Avanti Paul said in the report that median revenues, cash flow, and other measures of financial health reflected two diverging trends.
"Some hospitals were able to improve their margins and maintain balance-sheet flexibility despite their limited revenue base while others have been unable to cope with volume declines, physician turnover, or the costs of implementing electronic health records," Paul said.
S&P reports that higher-rated hospitals' financial profiles are getting stronger, while lower-rated hospitals are weakening. "We expect this trend to continue in the next two years if, as we believe, incremental credit pressures, such as continued volume declines and reimbursement constraints will continue to build and as a result test hospitals' performance, and likely lead to more mergers," S&P said.
Older, Rural Cancer Survivors Face Financial Woes
A new report shows that older cancer survivors in rural areas were much more likely to forgo medical and dental care because of financial concerns compared with older cancer survivors living in urban areas.
The study published in Cancer Epidemiology, Biomarkers & Prevention, shows that cancer survivors in rural areas age 65 or older were 66% more likely to forgo medical care and 54% more likely to forgo dental care because of cost, compared with their urban counterparts.
Study author Nynikka Palmer with the Department of Social Sciences and Health Policy at Wake Forest School of Medicine in Winston-Salem, NC, says the research found a wide disparity among older survivors "for whom health insurance coverage through Medicare is almost universal, while no disparity was found for younger survivors after controlling for various factors. This suggests that health insurance coverage alone may not ensure equal access to health care."
Palmer says older cancer survivors in rural areas may have to travel farther to reach a medical provider, causing them to incur greater out-of-pocket costs associated with travel and lost wages. They may also face challenges with social support and transportation issues if younger family members leave rural areas for better economic opportunities in cities.
"While insurance coverage may not have fully explained rural-urban disparities in older survivors, we did observe strong associations between health insurance and forgoing care," Palmer said. "With the expected changes in health care policies in the forthcoming year, it will be important to assess the impact on rural and urban cancer survivors."
Nobody had ever heard of a hospital having a chief experience officer until just a few years ago. Now qualified clinician-executives are at a premium. So are chief strategy officers, familiar in other industries, but new to healthcare and hospital administration.
Healthcare reform and its many permutations are creating new and more specialized leadership roles into the C suite.
Nobody had ever heard of a chief experience officer until Cleveland Clinic coined the phrase just a few years ago. Now qualified clinician-executive candidates for the post are in high demand, says Travis Singleton, senior vice president at Irving, TX-based physician recruiters Merritt Hawkins.
"It's an example of a provider executive that didn't exist two years ago [or] maybe even one year ago, and now it is one of the best paid, most common, and popular executive positions—and necessary—in this new environment," Singleton says.
"Those infrastructure C-level positions get more into the profit center management and it's highly complex. You may have had a large health system two and three years ago, but it only employed 10% to 15% of physicians, whereas now they can employ 70% to 100% of physicians. That brings on a whole other realm of experience, management oversight, compliance, and integration."
Singleton says the chief experience officer looks at hospital operations "through the patients' eyes," managing flow and care contact points.
"They are going to be centered around things like patient satisfaction and HCAHPS scores," he says. "For example, these large academic medical centers are grappling with the fact that nobody wants to drive 45 minutes into town, spend 20 minutes parking, go through the maze of hallways and floors when you can be seen in a tertiary or regional type system. They are competing now for that experience."
In addition, these chief experience officers are dealing with healthcare metrics in the age of transparency with the government, the public, and competitors.
"You have this information so readily accessible and so open—at least it will be—as far as what these patients are encountering," Singleton says. "I know we are only at 1% but that is soon going to rise to 3% on readmissions. These are real dollars now. These are potentially tens if not hundreds of millions of dollars that these health systems will face. You not only need an executive in place to manage the process, you also need someone with provider experience, management experience, and infrastructure experience. All of those things."
Physicians First
Right now qualified chief experience officers are at a premium, and Singleton says he doesn't see that changing anytime soon. So, where are these new chief experience officers coming from?
"There is a renaissance of physician leadership we have seen over the last two or three years," Singleton says. "It used to be a small segment of the market with providers that usually came up through academia. They were usually deans and vice chairs and they would go on to manage health systems in some cases. The other cases would be physicians who worked their way up."
"Now we see physicians who understand the need for additional schooling," he says. "They are going back to get their MBA, their MHA. They are going to get specialized training on how to run these clinical networks. They are going through apprenticeships. There are now career tracks that are almost explicitly nonclinical that these physicians are recognizing. There is more of a systematic way to prepare them for it. It's a growing candidate segment, but I would be lying if I said there are enough of them out there. There aren't. They are hard to find."
Revenue Finders Wanted
Another up-and-coming C-suite title in healthcare is the chief strategy officer. That position has been around for decades in other industries, but has only recently gained a broader beachhead in healthcare and hospital administration.
Rachel Polhemus, a senior partner at the executive search firm Witt/Kieffer, says CSOs are rapidly becoming key players at the highest levels of hospital leadership as health systems become more complex and competitive. "You are not getting the same types of revenues you once did on fee-for-service model in a bricks-and-mortar hospital setting," Polhemus says.
"Finding new ways of generating additional revenue is a huge factor. If it's no longer about bricks and mortar, maybe it's about building a physician enterprise, or a post-acute care service line, or affiliations and joint ventures, staying competitive, having that market advantage over your competition, and looking at the health plan side of things, the risk side of things, and driving innovation."
Polhemus says many of the CSO are coming to healthcare from outside industries and are not afraid to challenge basic assumptions and standard operating procedures. "They have much more of a for-profit mindset as far as what is true strategy," she says.
"They don't understand healthcare and so they are able to ask questions and poke holes and look at things differently where healthcare leaders traditionally have not."
Polhemus says C-suite status is critical for the success of a strategy executive. "They should be the CEO's right-hand person because together they are helping to drive innovation and growth and where the organization is going in the future," she says. "So to be a few layers down wouldn't have that influence."
Experience Matters
Chief experience officers usually have a clinical background, which winnows the selection process considerably. However, Polhemus says many CSOs come are MBAs and MPHs who come with backgrounds in consulting.
"But it's not necessarily about the credentials or education. It's about the experiences they have had and the organizations they have been a part of and whether or not the organization they are looking to move to values what knowledge and skills and experience they have," she says.
The need for big changes driven by healthcare reform brings tremendous opportunities for community hospitals to play an even greater role in the health and welfare of the people they serve. Having a leadership strategy is crucial.
Hospital and physician leaders across the country have expressed legitimate concerns about the population health movement and their responsibilities for controlling health outcomes that are almost entirely determined by what happens outside of the hospital walls.
Clinicians can provide the best medical care in the world and can give a patient explicit post-discharge instructions and a medication regimen only to see that patient return to the emergency department a week or so after discharge back into his reality. In the brave new reimbursement world, providers will have a financial stake in that readmission.
Fair or not, that is the new reality of healthcare reform and to their credit most hospital and physician leaders have that I have spoken with have accepted their new responsibilities.
The good news is that change of this magnitude will bring with it tremendous opportunities for community hospitals to play an even greater role in the health and welfare of the people they serve. Improving population health will require that everyone in the community play their part, and that someone takes the lead.
And there are few more-trusted or qualified people in most communities to play a leadership role than hospital executives and physicians.
If you're stuck for ideas about how you can improve your community's health, the Trust for America's Health and the New York Academy of Medicine have released a new report detailing 79 evidence-based disease and injury prevent programs from around the world that have been shown to work.
The report, A Compendium of Proven Community-Based Prevention Programs, includes peer-reviewed studies that evaluated the effectiveness of community-based programs to reduce tobacco use, injuries, asthma, alcohol abuse and sexually-transmitted infections, increase physical activity and improve eating habits.
Jeffrey Levi, executive director of TFAH, says the initiatives are designed to take place outside of the hospital walls. "That is deliberate … because we are seeing growing evidence that what happens inside the clinic has to work hand-in-hand with what happens outside the clinic."
"When you think about the biggest cost drivers for the healthcare system you think of things like obesity and diabetes. You can do the best diabetes management or prevention in a clinical setting. If you are sending someone out into a community where fresh food isn't available or it's difficult to walk you are not going to achieve those goals," Levi says. "We also know that things like a diabetes prevention program, which is a community-based activity, has been more successful than medical interventions."
"Similarly, if you have a problem with falls among the elderly, look at what happens in the community. You can do the best diagnostics in the world in the healthcare setting or you can be in the hospital dealing with the consequences of those falls, but the real prevention is going to happen in the community."
There are many good reasons to embrace these community-based initiatives. First of all, they're not a bunch of touchy-feely gobbledygook. These are concrete, common sense ideas that have been shown to work.
For example:
The Partnership for an Active Community Environment steering committee in New Orleans, LA installed a six-block walking path and school playground in a low-income neighborhood. The proportion of residents who were active increased significantly in the neighborhood with the path and playground, where 41% of those engaging in physical activity were moderately or vigorously active, compared to 24% to 38% of residents in similar neighborhoods without the path.
Nearly 300 urban, poor children with asthma from four zip codes were identified through logs of emergency department visits or hospitalizations, and offered enhanced care including nurse case management and home visits. One year of data show a significant decrease in any asthma ED visits and hospitalizations, and any days of limitation of physical activity, patient missed school, and parent missed work. There was a significant reduction in hospital costs compared with the comparison community, and a return on investment of $1.46.
The report features community health initiatives from across the United States, and across the world, including China, France, Australia, and Wales. Levi says the common denominator for all of these proven strategies is leadership.
"If you are talking about community hospitals, many of which are non-profit and have new requirements under the Affordable Care Act around community benefit this compendium is certainly a place to look," he says. "After hospitals have done their own health needs assessment and have identified a particular area where they would like to work this report is a good resource for identifying the kinds of interventions we know will make a difference."
"The only caveat I would put in there is that each of these initiatives needs to be adapted to a local community in some way. And it is important both as a direct resource and also sometimes we have to convince hospital CEOs and other leaders that actually this community prevention thing works. And this shows that there is a good deal of evidence to suggest that it does."
Even better, many of these proven strategies won't costs hospitals anything beyond time and commitment, and when they work the improved population health will be a net positive for the hospitals' bottom line.
Plus, many of these strategies involve local leaders working with one another to improve their communities. This is not about some federal mandate. This is about hospital leaders working with their local United Way and other civic leaders to provide tangible improvements to the communities they love and serve.
And finally, perhaps most importantly, many of these strategies engage the people in the community to take an active role in improving their health. Nobody wants to be morbidly obese. But if you're a low-wage manual laborer who comes home after dark to unlighted streets with no sidewalks in a crime-infested neighborhood, it is hard to muster enthusiasm for a walk around the block. Likewise, it's hard to eat fresh vegetables and other healthy food if the only nearby shopping is cans on a shelf at theKwik-E-Mart.
"Everyone wants to be healthy and sometimes it's for different reasons. But they also face obstacles. If we remove those obstacles, I think people will make the healthier choices," Levi says. "Personal responsibility is certainly paramount, but you cannot expect people to exercise that personal responsibility in an environment that doesn't support it. We need to be making the healthy choice the easy choice."
And now, more than ever, hospital and physician leaders have the opportunity to make that happen for the people they serve, their neighbors.
Despite the lukewarm climate for overall employment, healthcare job growth figures have yet to reflect any slowing demand for physicians, clinicians, and executives. Merritt Hawkins saw its physician and advanced practice recruiting assignments increase by 14% from 2012 to 2013.
Healthcare job growth held its tepid pace in September as hospitals and other providers dial back on new hires in the face of lower reimbursements, industry consolidation, the healthcare reform rollout, and myriad bottom line pressures.
Bureau of Labor Statistics job growth data for September was released on Tuesday after a two-week delayed caused by the government partial shutdown. It showed that the healthcare sector created 6,800 jobs for the month, compared with 36,600 new jobs created by the sector in September 2012. So far this year, healthcare has created 166,800 new jobs, down from the 226,400 new jobs created in the first nine months of 2012.
Travis Singleton, senior vice president at Merritt Hawkins, the Irving, TX-based physician recruiters, says nobody who's been paying attention should be surprised by the latest BLS figures.
"What you are seeing is simple action-reaction," Singleton says. "I don't mean to over simplify it, but if you cut reimbursements, you increase potential penalties that have already been and will be levied on these hospitals in the future you are going to see people react and that is through right-sizing."
"In healthcare we do this to ourselves. We create this bubble and think that no other logic applies to us, but anytime you have mass change to an industry you are going to get a reaction. And the first reaction you are going to get is around labor because it is the largest cost. So, I am not sure what people expected if they expected the healthcare job growth to keep pace, that was an unrealistic expectation, certainly when you look year-over-year."
Hospitals created only 300 new jobs in September and 8,600 new jobs so far in 2013, compared with 53,200 new jobs in the first nine months of 2013. Job growth in the volatile residential and nursing home sector was even worse, recording a net loss of 1,600 jobs in September. The sector has created 15,100 new jobs so far this year, compared with 25,900 new jobs for the same period in 2012.
So far, the job growth figures have yet to reflect any slowing demand for physicians, clinicians, and executives. Merritt Hawkins saw its physician and advanced practice recruiting assignments increase by 14% from 2012 to 2013. Singleton says he doesn't expect the demand for clinicians will abate any time soon.
"You won't see for at least the next couple of years cuts to providers. In fact, you are going to still see a pretty robust increase in providers and physicians by a large part because they hold up the walls as far as revenues," he says.
"But it doesn't stop there. It also goes to physician extenders and nursing. I expect to see huge increases in nursing over the next couple of years, primarily because of the changes they've made to quality and readmissions. So many people now have studies that directly tie a nurse-to-patient ratio with readmissions and quality components. At the end of the day they can't afford to cut in those areas. That kind of leads you back to, 'OK what can you do?' And unfortunately that gets to the support staff. So it is a right-sizing more than anything."
Rachel Polhemus, a senior partner at the executive search firm Witt/Kieffer, says that while overall healthcare hiring is slowing, the competition for executive leadership remains strong, especially as a generation of senior healthcare executives can afford to contemplate retirement.
"There was a period of time when in 2008 and 2009 and the market dipped and instead of retirements occurring, folks stayed on the job and decided not to retire and really to focus on rebuilding their nest eggs," she says. "We have seen retirements happening because those nest eggs have been rebuilt and there are folks who are much more comfortable about retiring at this point."
She says new leadership roles are being created as well as healthcare organizations learn to adapt to consolidations and restructuring.
"Much of it surrounds these physician enterprises that are being formed, with organizations employing physicians and they've had to create new leadership teams to support that," she says. "You are seeing many times the leadership in dual relationship with a physician executive and an administrator who focuses on the operations of that infrastructure."
Polhemus says the slow hospital job growth underscores a new focus away from bricks and mortar.
"It's more external," she says. "There is a big shift focusing on the post-acute world and building organizations developing post-acute care practices."
Having noticed that "the majority of tests we were ordering… really didn't impact the day-to-day care," a group of neurosurgery residents identified five lab tests that could be eliminated without affecting patient safety. They generated nearly $2 million in savings, including $75,000 in direct costs for their medical center.
Seunggu J. Han, MD, is a neurosurgeon
at UCSF
Neurosurgery residents at the University of California San Francisco Medical Center have demonstrated that a reduction by nearly 50% in the use of five common lab tests has no effect on patient care. The reductions generated $1.7 million in savings for payers in fiscal 2011–12, and another $75,000 in decreased direct costs for the medical center, according to a study in Journal of Neurosurgery.
In theone year before the project, the residents identified 45,023 of tests for serum levels of total calcium, ionized calcium, chloride, magnesium, and phosphorus in the neurosurgical service. In fiscal year 2011–2012, this number was reduced 47% to 23,660. The residents' findings were part of an in-house initiative at UCSF that encourages clinicians to identify department-specific cost savings and quality improvements in care delivery.
Seunggu J. Han, MD, a lead researcher among the 18 residents in the project and a neurological surgeon with UCSF, says it makes sense that residents would lead cost savings and quality initiatives because they're often the front-line clinicians with the most contact with patients.
"As a group of residents, we picked up that the majority of tests we were ordering on the neurosurgery service really didn't impact the day-to-day care," Han says. "No clinical decisions were made based on those lab results, whether they were normal or not. The patient's care would not have changed at all whether we had done that test or not. That was the case particularly with those lab tests that we identified."
Han says the high numbers of tests were conducted because UCSF is a high-volume tertiary referral center for neurology that sees more than 2,000 patients a year, many of whom are housed in the intensive care unit, where the assumption is that they are critically ill.
"They are in some ways [critically ill], but probably not in the typical ways that a medicine patient in the ICU would be. They don't tend to have the same gamut of medical problems that the typical internal medicine service would see," he said.
"There is a habit in the ICU setting to order a lot of labs and daily labs just to see if anything is abnormal because there is this assumption that these patients are critically ill and any number of these lab tests can go wrong at any point."
"We were looking at the numbers of labs that we were actually ordering on the service and it is quite an astounding number as a product of the ICU as well as the sheer number of patients that we actually see on the service. You can imagine that compounded with a three-day ICU stay for the typical patient who is getting daily labs. That adds up to be quite a large number," Han said.
The residents worked with an internist who coordinated care with the neurologists and they identified the typical neurology patient and the standard lab tests they'd ordered. Han says they found that the five tests they most frequently ordered came back with normal results "the vast majority of the time. Not only that, but the times they were abnormal we had a very good reason why it was expected and it didn't impact our clinical care. We identified that as a potential area where we could make a significant impact in reducing the lab tests."
Criteria for testing and quality metrics set
Han says the residents weighed the safety of the patient against the need for a test. They didn't want patient care to suffer for lack of a diagnosis. "We were being careful about ordering it on everybody, to really be smarter about who we are ordering it for and almost predicting based on the patients past medical history and their current medical condition who are the patients we should be ordering for and who has the higher likelihood of an abnormal test."
"We met with our hospitalist group and came up with criteria. If the patient meets this criteria that would be the only scenario where would order these tests. We also monitor and have a quality and safety review board that follows all of the general outcomes of these patients including readmission rates and length of hospitalization and length of time in the ICU. Those quality metrics that we followed over time hadn't changed at all throughout this period where we were implementing the new policy of reduced lab orders. We were reassured that we actually had not diminished the quality of the care that we were providing. We didn't see higher rates of complications because a lab test was missed or failed to be ordered or failed to detect an abnormal test."
High expectations vs. unknown factors
While reducing the tests by 47% is an impressive achievement, Han and his fellow residents had pledged to reduce that amount by 50%. "We were just shy of that 50% reduction and the lesson we learned was that it is hard to make changes like this. When you set a goal that takes a lot of effort and foresight and when you are trying to implement these goals there are a lot of unknown elements that you don't always know about going forward," Han says.
"As a group of residents, one of the unknown factors we encountered was there were a lot of lab orders that we don't have control over. On our service the anesthesiologists help us take care of the patients and have the ordering privileges to order any kind of labs on their patients that they deemed appropriate around the operative and perioperative care settings. All the labs they ordered in some ways counted against us but they certainly felt it was an important part of the care so we never argued. That was probably what was included still in that group of 53% of tests that were still being ordered."
Even though they generated nearly $2 million in savings, including the $75,000 in direct costs for the medical center, the residents were not awarded the $400 prize from UCSF. Nonetheless, Han says they are all "very proud of our results."
"We were actually surprised that it wound up calculating out to be a fairly large sum of money," he says. "The medical center did thank us for our efforts at the quality retreat for the medical center they gave us the award for the best quality improvement initiative initiated by physicians."
Impact beyond neurosurgery
Han believes the saving generated by the neurosurgical residents can be replicated throughout hospital care delivery, especially if hospital leaders encourage innovation and problem solving.
"Quality improvement and improving the efficiency of the hospital for every kind of service is an ongoing process. There are always areas to be improved upon and the hospital setting is such a large system and such a big machine that there are bound to be inefficiencies and areas where the quality of care being delivered that could be improved," he says.
"It is an important part of the training process, particularly for residents to get an exposure to this process early and having an eye out for recognizing where there are areas of need for quality improvement and really having the awareness of knowing how to implement a project and monitor the progress and carry it through and seeing its results."
Rates of hospital-acquired pressure ulcers vary widely in hospitals based on how the data is collected, researchers say. In one study, surveillance data identified 10 times more pressure ulcers than billing data.
Hospitals that rely on claims data to measure hospital-acquired pressure ulcers are likely under-reporting the problem and creating an inaccurate comparison with competitors for the public. A far more accurate measure uses surveillance reports by trained clinicians inside the hospital, a new study shows.
A University of Michigan School of Medicine study, which appears this week in the Annals of Internal Medicine, found that HAPU rates varied wildly in hospitals based on how the data was collected, inaccurately making some hospitals appear to be better or worse than peer institutions.
The UM study examined two million all-payer administrative records from 448 California hospitals and quarterly hospital surveillance data from 213 hospitals in that state that were publicly reported on CalHospitalCompare in 2009. The researchers winnowed the sample to 196 acute care hospitals with at least six months of claims data and surveillance data.
Jennifer A. Meddings, MD, an internist and pediatrician at UM and the leader author of the study, says researchers "looked at the same hospitals in the state of California in the same year and mapped criteria looking at the same patients as much as possible and the same severity of ulcers."
"The surveillance data found 10 times more pressure ulcers than the billing data. That is a big problem. We expected the surveillance data to be a little bit higher but not dramatically higher," she says. "The one thing we had hope for was 'are we still able to track the same hospitals that are bad performers. Are the same hospitals with high rates in surveillance data the same hospitals we would have identified by the billing data?' Unfortunately this was not the case."
Meddings says the process by which claims data is collected is not conducive to accurate reporting of HAPUs.
"Hospital coders are not clinicians and they are basically restricted by federal rules as far as what types of papers they are even allowed to look at to get the pressure ulcer diagnosis," Meddings says. "The surveillance data is quite different and generated by a team of nurses and other specialists who are trained specifically on how to examine a patient head to toe, a full skin exam to look for pressure ulcers, how to stage them correctly, how to figure out if they were hospital-acquired or not, and how to differentiate bed sores from other types of skin problems."
Specialized clinical surveillance teams in California examined every patient in the hospital at least once every quarter or more frequently and detailed their findings through a standardized public reporting process with the state.
"Not only did they examine the patients, they were allowed to look at the entire medical record, the doctors' notes, the wound care specialists' notes, the nurses' notes," Meddings says. "They had all the data and they were looking at the patients with their own eyes, which is quite different as opposed to the billing data."
The study's HAPU findings are consistent with a similar review Meddings' team conducted last year of catheter-associated urinary tract infections at California hospitals.
"We know the use of the catheters and skin conditions is much better documented in nurses' notes rather than doctors' notes because nurses are providing much of the skin care and they routinely do the skin exams and they are also the providers who place and monitor the urinary catheters," she says. "Both of these complications are essentially easy to find in nurses' notes, but very hard to find in the notes that coders are allowed to look at."
Continued use of claims data as a measure of hospital HAIs also misinforms the public. "One of our biggest concerns is that there seems to be a trend of quickly using data to publicly report because the data is available and only asking questions years later of whether or not their data is accurate. These types of assessments should have been done before the data was publicly released," she says.
"Frankly, the way the data is collected, if a physician in a hospital is actually very diligent about documenting these issues, then it is more likely to end up in the billing data, so you are actually having an unintended consequences of penalizing the hospitals that document better and reward hospitals with incomplete documentation. If you do an incomplete job of documenting these complications they will never show up in your billing data."
"The data we actually used to do this assessment was available when this policy was being implemented. These types of assessments could have been done before they chose the policy, but then it's a different approach for using the data and we prefer validating the data before using it for this purpose, rather than using it until somebody proves that it is wrong."
Meddings says Medicare and other payers need to adopt a more systematic reporting process that relies less on claims data. "We like the use of the surveillance data in California. We recognize it can be an expensive process, but probably something like a modification of what they're doing would standardize validated measures."
It shouldn't take an IOM recommendation to ban ghostwriting, and yet one-third of medical schools still allow it. Why aren't all medical colleges in compliance with the fairly straightforward clinical conflict of interest policies set forth by four prominent medical associations?
And yet a report in the October issue of Academic Medicine that examines clinical conflict of interest policies (CCOI) at the nation's medical colleges finds that while progress is being made, these hallowed training grounds for the physicians of tomorrow remain lax at teaching them about inappropriate behavior.
For example, the Institute for Medicine as a Profession review found that nearly one-third of medical colleges still have no prohibitions on ghostwriting. Nearly two-thirds of medical colleges still lack policies to limit ties to industry, including gifts, meals, drug samples, industry-funded continuing medical education, and payments for travel, consulting, and speaking.
Only 16% meet national standards in at least half of the areas, and no school met all the standards.
None.
"We actually have these standards," Susan Chimonas, lead author of the study, associate director of research at the Center on Medicine as a Profession at Columbia University, told me in a recent interview. "We've had three independent bodies of experts coming to basically the same conclusion about what these policies should look like or involve. Several years have gone by now and many schools are not coming even close to meeting those policies."
Some progress
In fairness, let's acknowledge that progress is being made and that many needles are pointed in the right direction. The survey examines CCOI policy changes from 2008–2011. As reported this week, in 2008, "no policy" was the most prevalent finding in all but one CCOI area. By 2011, the number of schools with no CCOI policies dropped from more than one quarter in 2008 to less than 2% in 2011.
Of the 12 areas examined for CCOI the survey found that the number of medical colleges in the "moderate" range more than doubled, from 14% to 30%, while the number of schools with strong policies in eight or more areas barely increased, from 1% in 2008 to 4% in 2011. Eighty-four percent of schools had substandard policies in seven or more areas.
Based on the progress demonstrated from 2008–2011 CCOI policies have gotten more stringent in the past two years that were beyond the IMAP review.
What's the delay?
While we can acknowledge successes, it is also fair to ask what's taking so long. Why aren't all medical colleges in compliance with these fairly straightforward CCOI policies? This is not a cure for cancer. It's a policy change that could be implemented with a pen stroke.
Yes, some relationships between physicians and medical device companies, pharmaceutical companies, and other businesses are legitimate and valuable and serve a public good. For the most part those sorts of relationships can be identified, defended and exempted from CCOI action.
Other CCOI practices are obviously wrong and should have been banned years ago. It shouldn't take an IOM recommendation to ban ghostwriting, and yet one-third of medical schools still allow it. Ghostwriting is either plagiarism, bribery, or both.
Accepting money or other compensation to shill for medical research that someone else did is worse than plagiarism because physicians are cashing in on their profession's hard-earned credibility and public trust to hawk a product. The actions of a few physicians who violate this public trust harm the reputations of the vast majority of physicians who do not.
Heather Pierce, senior director, science policy for the Association of American Medical Colleges, said in an email exchange with me that national transparency initiatives such as the Physician Payment Sunshine Act are spurring dialogue in medical colleges about the value of more-stringent CCOI policies.
This is encouraging. It is also unfortunate that medical schools may be motivated by fear of disclosure and public embarrassment to adopt common-sense CCOI standards and not because it's the right thing to do.
Healthcare leaders surveyed for a recent HealthLeaders Media Intelligence Report cite 30-day readmissions as the clinical quality metric that presents by far, their greatest challenge. We talk with four hospital health system leaders about their strategies for reducing readmissions.
What makes that such a tough challenge and how can leaders effectively meet that challenge?
Thomas A. Selden
CEO
Southwest General Health Center
Middleburg Heights, Ohio
On meeting the challenge:
I don't think it's our "greatest challenge." It is one we have been very successful in dealing with. We are a $300 million operation with $120 million of Medicare net revenue. Our readmission penalty in 2013 was $250,000. We have reduced that to $60,000 for 2014. Because they are grading on the curve, the winners and losers, you have to move with it or fall behind. If we had the same position on that bell curve measuring this year, it would have resulted in a penalty next year of $500,000.
On collaborative problem solving:
We take a multidisciplinary approach to solving problems. We identified components of the health system that impact readmissions and decided that we needed a seamless transition of care across the continuum. We have monthly meetings with the multidisciplinary team that reviews the strategies we have implemented and the metrics we have achieved. We implemented a care coordinator on each of the patient units who works with the doctors and nurses to ensure that the process is going smoothly and the patient is getting ready for discharge and knows what they need to know when they leave.
On collaborating with outside partners:
We serve an older population so we collaborate with area nursing homes with a monthly meeting sharing best practices, practice guidelines, and patient education information. We give them a report card on how they are doing in managing the patients pre- and postdischarge. We're trying to streamline patient information for the nursing homes so they know what is going on in the hospitals and they can pick up the chain from there.
Charles Derus, MD
Vice President of Medical Management
Advocate Good Samaritan Hospital
Downers Grove, Ill.
There is a lot we have done at our hospital to reduce readmissions rates. When we looked into it we found not surprisingly that somewhere in excess of 20% of patients discharged to a skilled nursing facility were being readmitted within 30 days. We worked with our local nursing homes, set up a skilled nursing facility council and started to share some information and best practices around reducing readmissions. We brought that rate down to 14% in a year and a half. It was just sharing information about why people were coming back.
One of my other roles at Advocate was in a multispecialty group practice. They had put together a robust ambulatory management program for people with diabetes that focused on ambulatory care and improving transition in handoffs really reduced the readmission rate in that population as well. We at the hospital are pioneering with outpatient care managers embedded in physicians' offices to try to better manage people with chronic diseases and improved transitions. We have seen some early reduction is readmissions from improving both transitions and ambulatory care.
There is also a very clear connection between complications in the hospital for surgical patients and subsequent readmissions. Although some readmissions cannot be prevented there is a sizeable number that can be prevented and we just have to do things differently.
Mina Ubbing
President and CEO
Fairfield Medical Center
Lancaster, Ohio
The toughest challenge is that the penalty goes to the hospital provider but the control over what happens to the patient is dispersed among a number of places.
We have been working closely with our local healthcare network, which includes skilled nursing facilities, home care agencies, or long-term acute care facilities, and our community health center. Some of the challenge is getting the patient seen for follow-up with a primary care physician. We have two primary care residency clinics that we make available for that patient who either does not have a primary care physician or who can't be seen in a timely manner to try to alleviate that part of the problem.
We have worked with our nursing homes, with some of the specific diagnoses that this covers but more generally to make sure that their skills and talents are optimized in the care of specific patients. We work with our emergency room physicians. We work with our hospice agency collaboratively. I have heard ideas about collaborating with ambulance companies to do some quick triage as to whether the patient really needs to come to the hospital or if there are other stabilization opportunities that can be provided.
Thomas Foster
CEO
Bucktail Medical Center
Renovo, Pa.
It is a challenge primarily because we are a critical access hospital in a very rural part of the country. Those 30-day readmission rates are the element over which we have very little control. We are the only provider of healthcare services in a 25-mile radius. We aren't subject to a punitive action at this point. It is coming. It is going to be part of our quality metrics and that piece is going to be one of those things that we have to do a better job at managing the patient outside of the facility.
We can provide the community information. We can provide all of the resources. But at times you can lead a horse to water but you can't make it drink. With those preventive programs, it's definitely going to help us head off some of this, but not necessarily be one of those things that we are going to effectively manage.
One of the things we are preparing to do is to be able to build into our contractual allowances the idea that there are going to be cases where we are not going to get reimbursed. We project reserves for bad debt and for uncompensated care and it's going to be a part of that factor. It's unfortunate, but it's just one of the challenges we are faced with.
Not-for-profit hospitals could see a migration of commercially insured patients to exchanges, where reimbursement rates may be lower, says a report from Moody's Investors Service. Commercial rates have traditionally subsidized Medicare losses and driven profitability for most hospitals.
Unanswered questions about health insurance exchanges such as who will enroll and what exchange-based plans will pay providers will create a "modest credit negative" for not-for-profit hospitals in 2014, Moody's Investors Service says.
The Congressional Budget Office has estimated that about seven million people will sign up for health insurance coverage under the exchanges. However, Moody's Associate Managing Director Lisa Goldstein says in a new report that NFP hospitals could see a migration of commercially insured patients to exchanges, where reimbursement rates may be lower.
"The exchange-related risks center on two primary issues that will largely negate the benefits of a declining uninsured population in 2014," Goldstein said in remarks accompanying the report. "These issues are the level and composition of enrollment, and how insurance exchanges exacerbate revenue pressures on hospitals."
"Providers are reporting that negotiations with exchange plans range from Medicaid rates, usually the lowest rate-per-service a hospital receives and does not cover costs, to a discount off of commercial rates, typically the highest rate a hospital receives," Goldstein said. "Commercial rates subsidize losses incurred with Medicaid and Medicare and drive profitability for most hospitals."
A Rise in Bad Debt
Another pitfall for NFP hospitals is the "timing mismatch" between the savings that hospitals should expect sometime in the future for treating fewer uninsured patients, and real reimbursement cuts that went into effect on Oct. 1 for Medicare, Medicaid, and Medicaid disproportionate share payments [DSH] for safety net hospitals.
Goldstein said bad debt likely will rise because new enrollees previously insured by a commercial insurer are likely to sign on to plans with high co-pays and deductibles, which they may ultimately be unable to pay. Moody's also expects some delays in payments and processing claims among exchange-based insurers because they will tend to be smaller and less experienced, and will take time to come up to speed.
In addition, private health insurance exchanges that are not part of the Patient Protection and Affordable Care Act are expected to become more popular with private employers looking to reduce healthcare benefits. Goldstein says reimbursements from insurers on private exchanges are expected to be lower than those from commercial insurers.
The nation's largest hospital associations have supported the PPACA, but have also raised concerns about the unintended consequences and potential financial burdens that hospitals could face during the implementation.
Rates Unknown
Xiaoyi Huang, vice president for policy at America's Essential Hospitals, says safety net hospitals don't know yet what the exchanged-based plans are going pay.
"All of our member hospitals are essential community providers and there is some language in the ACA about rates that all of the health plans have to pay essential community providers but it is very broad language," she said.
"Beyond that, it is up to the individual providers to negotiate with the plans depending upon who has the better budgeting position to figure out how much of their costs are covered through the rates. But honestly we don't know what that rate is."
"We care about whether our hospitals are included in the networks of these plans just because if you are not in the networks, you are automatically off to a disadvantage. But even for those that are included, we at this point don't have a systematic sense of what types of rates are being offered. We hope it is not as low as Medicaid because then you are just trading one form of uncompensated care for another."
Ellen Pryga, director for policy at the American Hospital Association, says hospitals are trying to predict the effects of a broad set of factors.
Data Needed
"The reality is none of us really know how it is going to shake out until we begin to get some data out of the various exchanges in terms of who is enrolling and what level plans they are enrolling in, etc…," she says.
"There are some other things that we have been looking at that we think are going to play a role too. For example, we think that some of the really heavy initial push to enroll will be for people who have pre-existing conditions. The Pre-existing Condition Insurance Program capped out and stopped enrolling people almost a year ago. So people with pre-existing conditions are likely to be some of the first in line here and people with pre-existing conditions use a lot of services."
Pryga says hospitals are also trying to figure out how insurance market rules that go into effect on Jan. 1 could affect providers' bottom lines.
"For example, one thing that goes away is the annual limits on the amount of benefits that get covered during the year. Another thing that happens is the implementation of out-of-pocket limits under all of those plans, not just in the exchanges but outside of the exchanges as well," she says.
"All of those plans, whether they are individual, small group, large group or self-insured are going to have out-of-pocket limits on cost sharing. So, the combination of the removal of the annual limits and the limits on out-of-pocket expenditures, while they differ for those groups, is going to be an effect."
Delay Sought for DSH Cuts
Huang and Pryga say their associations have been pressing the Obama administration and the Department of Health and Human Services to postpone the DSH reimbursements because of the timing lag, and also because more than 10 states have rejected the Medicaid expansion, which negates the trade-off in states that reject Medicaid expansion.
"If your income is below 100% of the federal poverty line you are not eligible for any subsidies through the exchange and in many states the Medicaid eligibility level is like 30% – 40% of the federal poverty level," Pryga says. "You can have a pretty substantial gap between the Medicaid eligibility and the eligibility for subsidies through the exchange in the absence of Medicaid expansion."
Huang says DSH payments "prop up a lot of our hospitals."
"It doesn't cover 100% of the costs but it does a really good job of offsetting some of the uncompensated care that these hospitals take on. Given all of the uncertainty we think it makes sense for the DSH cuts to be delayed until the administration has data to see what that take up looks like. Even with the data limitations it is going to be a two- to three-year lag between fiscal 2014 and when the data will actually show fiscal 2014 performance."