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The healthcare industry has undergone remarkable changes over five years. Many things have impacted the financial health and stability of hospitals across the United States during this time, including the implementation of the Affordable Care Act (ACA) with the concurrent expansion of Medicaid in some states, the push to reward and penalize based on value, migration of inpatient services to the outpatient setting, and ongoing mergers and acquisitions.
Truven Health Analytics, part of the IBM Watson Health business, has analyzed regional trends in profitability, liquidity, uncompensated care, and collections and reimbursement to study how this period of great change may have impacted financial indicators of hospital performance across the United States. There are striking differences between some regions, potentially indicating the impact of Medicaid expansion, the ACA, and regional patterns of charge structures.
The American Health Policy Institute (AHPI)1 defines high-cost claimants (HCC) as those patients who cost $50,000 per year. In a 2016 study of 26 large employers, AHPI found that HCCs cost an average of $122,382 annually, and that they comprised 31% of total spending. Both payers and providers are concerned about the etiology behind the cost of care for these patients.
Payers are putting pressure on providers to take on greater risk and mitigate cost as they move to value-based care and better outcomes. Payers faced with increasing healthcare costs are looking to consumers to become more engaged from both a financial and care perspective.
Hospitals and payers are focused on preventing and reducing the health and cost consequences of the adverse events so starkly highlighted by the Institute of Medicine’s 1999 seminal report on patient safety, To Err Is Human.
Adverse events are defined as either the failure of a planned action to be completed as intended, or the use of a wrong plan to achieve an aim. In 1999, the total cost of these events, including indirect costs, was estimated to be as high as $29 billion a year. In the United States, patient safety continues to be a priority, as part of a drive toward value. Patient safety events can directly impact hospital revenue. CMS’ Hospital-Acquired Condition Reduction Program penalizes reimbursements by 1% for hospitals achieving the bottom quartile in performance scoring.
This study presents the incremental consequences of selected inpatient medical injuries as identified by the Agency for Healthcare Research and Quality (AHRQ) Patient Safety Indicators (in terms of mortality, length of stay, and total hospital cost per case among national U.S. inpatients), and quantifies the estimated overall impact of such events at the national level.
With premiums on the rise and commercial payers interested in increasing the value return on their healthcare investment, more payers are considering value-based care arrangements.
While CMS has led the charge to use bundled payments for joint replacements through the Bundled Payments for Care Improvement (BPCI) and Comprehensive Care for Joint Replacement (CJR) program, there is increasing interest in these arrangements from the payer market.
As payers and providers begin to anticipate and plan for the change,it’s important to study bundled payments from a variety of angles looking at cost variations by region, market, provider type, and payers.