"If we don't get a handle on spending at some point, we will have a government-financed system," predicts the head of the Pacific Business Group on Health.
With healthcare-spending growth continuing to outpace growth of the national economy, large employers are facing a gargantuan challenge.
"It's challenging because healthcare is not their prime business. To large employers, healthcare is just one of the many suppliers they work with, and the cost of healthcare is part of the overhead of a business that is otherwise pumping gas or selling groceries, says David Lansky, PhD, president and CEO of the Pacific Business Group on Health, a nonprofit business coalition that through its member organizations, is "demanding increased value" in the healthcare system.
"So, it is going to be difficult for them to step up to an even larger degree, but it is necessary," he says.
Employer-sponsored insurance helps cover the medical expenses of about half of all Americans, according to the Kaiser Family Foundation. Despite the cost of providing this benefit to their workers, large employers are committed to the ESI market, Lansky says.
"There's an understanding that if we don't get a handle on spending at some point, we will have a government-financed system and we will look to the taxpayers to figure out how to cap total healthcare costs. Most employers don't want to see that happen," he says.
At Some Point, Healthcare 'Becomes Unaffordable'
"They think they add value by being an advocate for their employees in the healthcare system and building wellness programs, benefits programs, mental health programs, and disease management programs that ultimately are beneficial to their employees. They don't want to give that up; but at some point, it becomes unaffordable."
The double-digit pace of healthcare-spending growth seen at the turn of the century appears to be tamed, according to the 2016 National Health Expenditures Report released last month.
It forecasts that national healthcare spending will increase at an average of 5.8% through 2025. If that prediction is accurate, the healthcare sector's share of the total economy will rise from 17.5% in 2014 to 20.1% in 2025.
Over the past 20 years, U.S. economic growth has not exceeded 4.7%, according to World Bank data on annual economic growth since the country emerged from The Great Recession in 2010 at 2.1%.
Large employers will play a pivotal role in determining whether annual healthcare-spending growth can be reduced to at least 3%, Lansky says. "The way our healthcare economy is structured, a great deal depends on what the buyers of services decide to reward, incentivize or require from a contractual point of view."
He says large employers find themselves increasingly working with both Medicare and the states to try to achieve impacts as buyers.
"The purchaser community has been very fragmented over the years, both employers fragmented from each other and employers working separately from state governments and the federal government. That fragmentation has been changing, where we are seeing a lot more alignment among the buyers."
A prime example of healthcare-buyer alignment, according to Lansky, is in Arkansas, where the state's largest corporation, Bentonville-based Walmart, is participating in a Medicaid-led bundled payments program that features nearly two dozen episodes of care including heart failure.
Lansky says large employers are increasingly engaged in several other strategies to help cut healthcare spending nationwide:
Centers of excellence programs where "patients are going to get the highest quality care, which is ultimately cheaper because there are so many fewer readmissions, new operations and complications."
Reference pricing "that works through benefit design to give patients information about the cost of care and where they can get comparable quality care for lower cost."
Direct contracting with accountable care organizations, which involve large employers picking high-value healthcare providers then rewarding their workers for seeing those providers with reduced cost-sharing. "Then you work with that care system to continuously improve what they do, to become more efficient, and ultimately lower costs."
"When you look at these strategies, what many of them have in common is ensuring that patients get into the hands of the highest performing providers and services; so we are rewarding the low-cost, high-quality provider with more business, and we are informing patients where they can go to get that care," he says.
More than three dozen top healthcare finance executives share insight and strategies for tackling their toughest business challenges.
Participants at the 2017 HealthLeaders Media CFO Exchange in Coeur d'Alene, Idaho last week said they are generally optimistic about weathering the storm of regulatory changes, new payment models, and shifting market forces buffeting their organizations.
The finance executives at the invitation-only event also shared many mutual concerns such as offsetting traditional revenue-stream declines at hospitals and assessing the appetite to adopt value-based care models in their markets.
Here are 10 of the most insightful comments from the gathered finance leaders:
1. Stephen Allegretto
Vice President of Strategic Analytics and Value Innovation
Yale-New Haven Health
New Haven, CT
"We treat about 100,000 patients a year. Seven percent of our patients have a complication or quality variation in care. Those patients stay three time longer and their costs are four times higher. As we are looking to produce value, if we can reduce that variation for those patients and improve the outcomes of those patients, we will not only improve their health, we will also improve our financial picture."
2. Mike Browning
Chief Financial Officer
ProMedica
Toledo, OH
"You have to be optimistic, because if you're not, you're just willing to fade away or settle for status quo, and those who we serve deserve more. You have to have optimism; the question is where are you going to find it?"
3. Michele Cusack
Senior Vice President of Finance
Northwell Health
Great Neck, NY
"Where we try to capitalize is on the physician alignment, not only among the employed physicians but also with voluntary providers at jointly owned ambulatory surgery centers and other partnerships to get them aligned with us. Even if they are not completely in our facilities, there is the potential for increased financial benefits and volume."
4. Mary Ann Freas
Senior Vice President and CFO
Southwest General
Middleburg Heights, OH
"We divested our skilled nursing and some of our other less profitable programs. But what we have tried to do is build or open new programs—general psychiatry, pain management, maternity and fetal medicine; grow our strength programs—orthopedic surgery and cancer; and bring on new physicians—particularly those who have an existing patient base."
5. Scott Hawig
Chief Financial Officer
Froedtert Health
Milwaukee, WI
"The most successful initiative for us has been on the pharmacy side—both in retail pharmacy and expanding some of our mail order and specialty pharmacy. We even have a little bit of compounding and potential manufacturing."
6. Tom Lowry
Vice President of Finance
Dignity Health Provider Resources
Rancho Cordova, CA
"Finding good talent in case management for bundled payments like CJR [Medicare's Comprehensive Care for Joint Replacement program] is very hard to do. It's a skill set that is not part of what they taught RNs in nursing school."
7. Christian Pass
Chief Financial Officer
John Muir Health
Walnut Creek, CA
"Sometimes we launch initiatives that are defensive in nature. It's challenging because there's always a race to have new technology and equipment. It could be a surgical robot. If someone's going to put a surgical robot near one of our facilities, and we don't put a robot in, will our surgeons will go to the competitor?"
8. Cheryl Sadro
EVP, Chief Business and Finance Officer
University of Texas Medical Branch
Galveston, TX
"The big thing that we all have to be thinking about is how do we use traditional analysis and make sure it is going to fit in the new payment models? How do we take the traditional analytics from fee-for-service medicine and look at it from a bundled perspective? Are we really capable of handling that payment initiative?"
9. Bob Shapiro
EVP and Chief Financial Officer
Northwell Health
Great Neck, NY
"If you go into the insurance business, it can make you, or it can break you... We did not try to hit a grand slam. It was a matter of building loyalty in areas where we already had patients who were loyal to us."
10. Kyle Wilcox
Vice President of Finance and Business Development
Grinnell Regional Medical Center
Grinnell, IA
"For any of you who have small markets, I recommend a revenue cycle strategy of being nice to your patients. You will find the majority of individuals in small towns are good people who, given the chance, will pay their bills."
How rural healthcare organizations are faring in non-Medicaid expansion states.
This article first appeared in the July/August 2016 issue of HealthLeaders magazine.
Hospitals in rural areas of the country are feeling a sharp financial pinch in states that have not expanded their Medicaid programs under the Patient Protection and Affordable Care Act.
Community hospitals in rural counties of Tennessee, one of the states that have opted not to embrace Medicaid expansion, are facing financial pressure that could be relieved if more of their low-resource patients had Medicaid coverage. "In our health systems, they manage it. They have figured it out. Where it's really hitting is our rural hospitals," says Craig Becker, president of the Tennessee Hospital Association. "We've lost six rural hospitals in the last year, and we're going to lose another one this year."
In economically disadvantaged Tennessee communities, many nonelderly adults are either reliant on Medicaid for their health coverage or fall into the "self-pay" category, Becker says. "We only get about 5% of payment for self-pay patients."
Medicaid is a public form of medical insurance jointly funded by the states and the federal government. Under the PPACA, states can expand their Medicaid programs with federal financial assistance to include all adults in families with incomes below 138% of the federal poverty level.
As of this year, 31 states including the District of Columbia have expanded Medicaid through provisions of the PPACA. Nineteen states have not expanded Medicaid under the federal law: Alabama, Florida, Georgia, Idaho, Kansas, Maine, Mississippi, Missouri, Nebraska, North Carolina, Oklahoma, South Carolina, South Dakota, Tennessee, Texas, Utah, Virginia, Wisconsin, and Wyoming.
Failure to expand Medicaid pushes rural hospitals to brink
The absence of Medicaid expansion played a role in this year's closure of McNairy Regional Hospital in Selmer, Tennessee, says Wayne T. Smith, chairman of the board and CEO of the facility's parent company, Franklin, Tennessee–based Community Health Systems. The 45-bed acute-care hospital closed in May.
"Several factors impacted the decision, primarily the unforeseen and significant repairs to the hospital's plumbing system and a steady decline in patient use. As a rural hospital, McNairy Regional was also challenged by cuts in federal reimbursement for services as part of the Affordable Care Act. The reimbursement changes were predicated on more people having insurance, whether through Medicaid expansion or insurance exchanges. The lack of Medicaid expansion—to date—has left many of the state's most vulnerable citizens without access to health insurance, leaving hospitals to address the unsustainable burden of uncompensated care," Smith says.
Community Health Systems owns, leases, or operates 159 hospitals in 22 states. For 2015, the health system posted net operating revenue of about $19.4 billion.
Rural hospitals in Tennessee and other non-Medicaid-expansion states are in a fundamentally weak financial position, Smith says. "Rural areas tend to have higher unemployment, more uninsured individuals, and a greater percentage of patients on Medicare and Medicaid. Many of the more rural communities where CHS-affiliated hospitals are located in Tennessee are facing these same challenges. Hospitals in states where Medicaid expansion has stalled have been left to absorb reimbursement cuts—estimated at more than $7 billion over 10 years for Tennessee hospitals—as well as increases in bad debt and uncompensated care, with very little of the off-setting revenue that would result from expansion.
"In addition to providing uninsured patients with access to care, Medicaid expansion would reduce the charitable care and bad debt costs that are spread throughout the system. According to a report from the Boyd Center for Business & Economic Research at the University of Tennessee, Tennessee hospitals spent $1.1 billion on charitable care and bad debt in 2014."
Medicaid expansion would provide health coverage to thousands of poverty-stricken adult Tennessee residents, which would improve their lives and ease financial pressure on hospitals, Smith says.
"More than 200,000 Tennesseans with annual incomes less than 138% of the federal poverty levels could benefit from expansion. There has been a focus on the financial implications of not expanding Medicaid, but the impact it has on individuals is significant. Every day, people come to our emergency departments with conditions that, in many cases, could have been avoided if these patients had access to primary care services. From our perspective as a healthcare company, we want patients to receive the care they need, particularly preventive services that could delay or prevent the onset of chronic diseases, which is why we encourage every state where we operate affiliated hospitals to expand Medicaid.
"In Tennessee, the number of uninsured patients seeking care at our hospitals has decreased slightly but not at the same rate as in states that have expanded Medicaid. This is occurring as hospitals are experiencing significant Medicare payments reductions—in part to pay for expansion—as well as other significant issues, such as meaningful use, value-based purchasing, and soaring drug prices."
Local taxpayers help rescue hospital
Houston County is a rural area at least an hour's drive west of Nashville with about 8,300 residents and one hospital, which has been teetering on the edge of financial disaster since declaring bankruptcy in 2008. In March 2013, the county commission bought Houston County Community Hospital for $2.4 million.
"I've learned more about healthcare in the past three years than I ever wanted to know," County Mayor George Clark says of his ownership role for the 25-bed hospital. "I'm not there every day, but I get a report from them every day."
In 2013, the reports Clark was receiving from HCCH were grim. "They were having a census of 0 to 1 patients a day," he says.
In fall 2014, HCCH was reeling, with hundreds of thousands of dollars in bad debt inherited from the previous owner and an equally daunting gap between costs and revenue. To keep the hospital afloat, the Houston County Commission approved a 60-cent increase in the local property tax rate to raise about $700,000 for the facility the following year. "It's the largest tax increase I've ever had to do," says Clark, who has served as the county's mayor for more than three decades.
"We were looking at losing a hospital. It would have affected everything," he says, noting a 1,500-bed nursing home in the county was one of the dominoes that local officials feared would fall if HCCH closed its doors. "Economically, it would have been a big impact to us."
Lives were also at stake if the hospital shut down, Clark says. "Our county is long and narrow. If I had a situation in the western half of our county, it would take an hour to an hour and a half to get to a hospital.…Without this hospital, people could die, and how do you put a price on that?"
C. Timothy Gary, CEO of Nashville-based DW Franklin Consulting Group, has been helping to lead HCCH's financial revival efforts. The strategy features both cost-cutting and garnering new revenue, he says. "You can't cut your way to prosperity. You also have to generate revenue."
To decrease costs more than $2.5 million annually, HCCH has renegotiated contracts with vendors, reduced staffing, and cut supply expenditures, Gary says. Slashing the hospital's full-time equivalent labor budget from about 95 employees to 65 was a painful process, he says. "That's a discipline that a lot of hospitals are not used to. … They had three nurses on staff with two or three patients in the hospital. They've gone from that to a minimal staffing pattern. Reductions were across the board, as the entire staffing model really didn't take into account the changes in the market realities. However, the nursing staff was the area that required the most attention."
For some senior executives, the pain was too much to bear. "Some of the longtime management understood it, but they couldn't get there, so we had some retirements," Gary says. "We had to bring in some folks who understand that you manage to a budget or you don't have a hospital."
Supply chain savings from changing HCCH's group purchasing organization have been less dramatic but significant nonetheless, Gary says. "They were spending about a half million dollars on supplies. We cut $100,000 per year out of their spend. That's two people we were able to save with that kind of a change."
One of the ways HCCH has increased revenue is by boosting the capability to perform ambulatory surgical procedures, he says. "We partnered with a surgeon who does arthroscopic surgeries. He works for three facilities."
The partnership with the arthroscopic surgeon is part of a broader strategy to boost the hospital's image in the county and draw more inpatient cases, Gary says. "The ambulatory services that we added are almost exclusively outpatient. However, offering those services has raised the profile of the hospital in the community, which has resulted in greater utilization and an increase in the inpatient census."
By adding the arthroscopic surgeries, the hospital has boosted its daily inpatient census to about six, Clark says, noting there are plans to add gastroenterology services soon. "Our business is growing. We're bringing the hospital back to where it needs to be."
The county mayor says 10 is the magic number for HCCH's inpatient census. "That's where we can get to breaking even. We're not there yet, but we're getting there."
The hospital has also increased revenue through one-time infusions of cash, such as grants and federal meaningful use payments linked to investments in electronic medical record technology. Last year, HCCH received a $1 million payment from the meaningful use program after spending $200,000 on EMR upgrades, Gary says. This year, the hospital is expecting a $700,000 net gain from federal payments tied to EMR upgrades, he says.
HCCH is showing financial improvement, according to annual auditor reports.
For the year ending June 30, 2014, HCCH posted total operating revenue at $4.2 million and an operating loss pegged at $1.8 million. For the year ending June 30, 2015, HCCH posted total operating revenue at $5.2 million and an operating loss pegged at $464,000.
'The problem is systemic and cumulative'
In Missouri, hospitals have been struggling financially from the absence of Medicaid expansion in ways that mirror the experience in Tennessee, says David Dillon, vice president of public and media relations for the Missouri Hospital Association. Failure to expand the program has played a role in the closure of four hospitals in the Show Me State, including two rural hospitals, he says.
"Although there has not been a hospital closure exclusively due to the lack of Medicaid expansion, it has been a significant contributing factor in every Missouri hospital closure since ACA implementation. Moreover, the lack of expansion has reduced investment in hospital services, staff, facilities, and community-based programs throughout the state. The problem is systemic and cumulative."
Missouri-based health systems also are feeling the non-Medicaid- expansion-state financial pain, says Kris Zimmer, senior vice president of finance at St. Louis-based SSM Health.
For 2015, SSM Health posted total operating revenue at $5.4 billion. The health system operates 20 hospitals in a Medicaid expansion state—Illinois—and three states that have not expanded the program—Missouri, Oklahoma, and Wisconsin. In the non-Medicaid expansion states, SSM is enduring a significant financial drain, Zimmer says. "When the ACA was originally proposed, we understood that much of it would be funded by reducing Medicare reimbursements for hospital services. As it has rolled out, we continue to feel the impact of these reductions, especially as three of the states we serve have not adopted Medicaid expansion. We have been able to overcome these challenges by reducing costs in several ways, including revenue cycle improvements, centralizing and standardizing support services, and renegotiating supply and vendor contracts."
A pilot program at two Scripps Health hospitals is using data analytics to generate $1 million in annual spending reductions on prescription drugs.
Scripps Health is banking on data analytics to help contain spending on prescription drugs.
In a pilot program launched this year at a pair of Scripps Health hospitals (684-bed Scripps Mercy Hospital San Diego and 183-bed Scripps Mercy Hospital Chula Vista, CA), the health system is expecting to generate annual cost savings of about $1 million in 2016 and 2017 mainly from purchasing medications from low-cost sources.
Kenny Scott, executive director of pharmacy operations at Scripps Health, says "It has helped us a great deal in terms of identifying potential opportunities just in the early stages of using the new system."
San Diego-based Scripps Health operates five acute-care hospitals, with a total of 1,495 licensed beds. For the fiscal year ending September 2015, the system posted total annual operating revenue at $2.8 billion, with patient services accounting for $2.2 billion of the health system's revenue.
It generated a $143 million positive operating margin in FY2015.
Now, with help from a third-party partner, Scripps Health is starting to compare the organization's internal database for prescription drugs against a broader set of potential sources for purchasing medications
"In healthcare," says Scott, "everyone is very concerned about costs and trying to get their arms around costs. Scripps has "been challenged with our data system in terms of being able to extract data" that would lead to opportunities for cost reductions.
Sentry Data Systems has helped Scripps Health identify at least $1 million in annual savings from optimized purchasing of prescription drugs, he says.
"We have identified the drugs that we had opportunities to purchase at a lower cost—there were opportunities to improve that in terms of looking at the charge master that we were using within our database compared to what Sentry had," says Scott.
By applying data analytics to examine prescription-drug spending and utilization, Scripps has been able to:
Understand what's being purchased versus what's being used.
Look at variation in terms of utilization by physician.
Make sure it is purchasing drugs at the lowest price possible.
The tool helps Scripps know "fairly easily where the opportunities are from procurement, to prescribing patterns, to utilization within the hospital, and also making sure those drugs will be administered in the most appropriate site," says Scott.
Care Setting Affects Drug Costs
"When a patient receives oncology agents in the hospital, it's at a higher cost; but if we have that patient receive the medication in the clinic setting, the costs of the setting would be less as well as the fact that we can leverage the 340B program and get a 35% to 50% reduction in the cost of the drugs," he says.
Scott says harvesting data and sharing the bounty with clinical teams has reduced intravenous acetaminophen use at Scripps Health hospitals.
As a result of the work of the Scripps' newly formed system-wide pharmacy and therapeutics council, "which used the data and analysis to reduce the utilization of IV acetaminophen," improvement was seen.
Under a new population health program, CMS will pay providers to reduce the absolute risk for heart disease or stroke among high-risk Medicare beneficiaries.
With the help of 516 inaugural participating healthcare providers nationwide, federal officials are harnessing data to rise to a pair of crucial population health challenges: reducing rates of cardiovascular disease and stroke.
Launched on July 21, the Million Hearts Cardiovascular Disease Risk Reduction Model is a data-driven effort designed to reduce the risk of cardiovascular disease and stroke among Medicare beneficiaries, federal officials said in a statement.
Participating providers will work with Medicare beneficiaries individually "to identify the best approach or approaches to reducing their risk of having a heart attack or stroke." Factors that will be considered include smoking cessation interventions, blood pressure management, and the use of cholesterol-lowering drugs or aspirin.
"Each beneficiary will receive a personalized risk modification plan that will target their specific risk factors. Organizations in the intervention group will be paid for reducing the absolute risk for heart disease or stroke among their high-risk beneficiaries," according to CMS.
The Million Hearts Campaign aligns well with the population health goals at Danville, PA-based Geisinger Health System, says Sanjay Doddamani, MD, system director of advanced cardiac disease and heart failure.
"We have gone from Baby Boomers, to Generation X, to Millennials carrying modifiable risks for heart attacks and strokes. As a steward for healthcare in the communities we serve, we are interested to see that our communities are smoke-free, physically on the move, eating right, and controlling blood pressure and cholesterol and lipids by diet, exercise, and medications. The Million Hearts initiative aligns well with these goals," he says.
Cardiovascular disease and stroke are among the most deadly ailments in the country, according to a Centers for Medicare & Medicaid Services factsheet, that lists heart attacks and strokes as the first and fifth leading causes of death, and major contributors to disability, in the United States.
Identifying Medicare beneficiaries who are at highest risk for having a heart attack or stroke is a key goal of the Million Hearts initiative's risk stratification effort.
Risk is measured using age, race, cholesterol levels, systolic blood pressure, and the use of statins, antihypertensive medication, or aspirin therapy. Smoking history and diabetes status are also risk factors
"The Million Hearts CVD Risk Reduction Model is a randomized controlled trial that seeks to bridge a gap in cardiovascular care by providing targeted incentives for healthcare practitioners to engage in beneficiary CVD risk calculation and population-level risk management. Instead of focusing on the individual components of risk, participating organizations will engage in risk stratification across a beneficiary panel to identify those at highest risk.," according to CMS.
Payment Incentives for Providers
To help pay for the Million Hearts Risk Reduction Model, healthcare providers can earn per-member-per-month payments as high as $10 to help pay for the care management of high-risk cardiovascular disease patients.
Payment incentives are essential to help providers transition to value-based care, Doddamani says. "Providers and systems are often challenged in terms of resources to engage with the community to create awareness and improve understanding, especially in vulnerable groups where economic challenges are accompanied by smoking and poor dietary choices. Enhanced payments for better outcomes is a way of paying for value in healthcare."
Nearly 20,000 healthcare practitioners and more than 3 million Medicare beneficiaries are expected to participate in the five-year model between September 2016 and August 2021.
Home health is playing a significant role in reducing hospital readmissions and total cost of care at Florida's Lee Memorial Health System.
Investing in home health capabilities has become a cost-effective element of the population health strategy at Fort Myers, FL-based Lee Memorial Health System.
"Having home health capabilities allows patients to be discharged from the hospital sooner and receive a higher level of care without having to go to a post-acute facility all of the time," says Joby Kolsun, DO, clinical integration medical director at Lee Physician Hospital Organization.
"Owning the home health resource reduces unnecessary testing by allowing the complete record to be available to the nurses, as they share the same electronic record system."
Lee Memorial has a total of 1,423 licensed beds distributed across four acute-care hospitals, a rehabilitation hospital, and a children's hospital. In 2015, the health system posted patient service revenue of $1.4 billion.
Thomas "TJ" Pennsy, MBA, RRT, is executive director of home health services at Lee Memorial. He says there are several elements to investing resources in home health and achieving a return on investment.
"The major investment is clinical expertise in the form of nursing, nurses' aides, medical social work, and physical, occupational, and speech therapy, at a minimum."
"As more clinically complex patients are sent home," he says, "the level and cost of clinical expertise will rise. Additionally, the growth of in-home technologies has led to a greater use of telehealth and telemedicine to connect physicians to the clinicians and the patient in the home. The investment can be quite expensive, but may be offset by reduced readmissions back to the hospital and the corresponding costs incurred in that setting by addressing and treating possible emergent situations at home," Pennsy says.
Significant Cost Impact
The potential for home health programs to reduce total cost of care at Lee Memorial is significant.
"The average variable—labor and supplies—cost for a heart failure patient readmission within 30 days is $4,700," he says. "The total readmission cost is $9,800 and is more than $1,100 higher than the first admission.
"Taking into consideration the cost of readmissions and readmission penalties, hospitals may find it is cost-effective to use home health resources as a component to reduce readmissions in coordination with the patient's primary care physician."
Lee Memorial's home health program has made an impact in reducing hospital readmissions, Pennsy says. "Our overall return-to-acute for all home health admissions dropped from 15.9% in fiscal year 2015 to the current 14.9% in fiscal year 2016."
Readmission rates are a key financial metric for the home health program at Lee Memorial and other nonprofit healthcare providers.
"Success," he says, "is dependent upon solid operations and a favorable patient payer mix. The not-for-profit, hospital-based [home health] agencies usually receive all patients regardless of payer, and their success is measured by limiting and reducing return-to-acute and the emergency room while maintaining lower operating costs."
At Lee Memorial, home health is part of a broader commitment to population health in southwest Florida. Kolsun says the health system is investing in:
Case managers "to handle complex, high-utilization patients and help them reduce their use of expensive health resources.
Data and analytic systems "to allow us to better manage our populations"
Awareness and education "in our community in regards to health and wellness, including inviting national speakers on the benefits of proper nutrition"
The health system is using several metrics to gauge the performance of its population health-oriented programs. "Currently, we use our total cost of care for our value-based contracts to gauge how we are performing financially. We also use a number of quality measures that let us track improvements in care that are related to our population health initiatives," Kolsun says.
Investing in population health capabilities appears to be sustainable at Lee Memorial. "Overall, I would say we are about neutral," Kolsun says of the financial impact of the organization's population health programs so far.
The North Carolina-based health system has adopted billing and other strategies to boost patient satisfaction.
The Consumer Age is dawning in the healthcare industry, and Novant Health has seen the light.
April York, senior director of patient financial services at the Winston-Salem, NC-based health system, says Novant is committed to engaging its patients as financial partners.
"Patients are becoming savvier and much more engaged in shopping around for affordable healthcare, and they also have a better understanding of their insurance plans than in the past," she says.
"We have an obligation to further invest in their healthcare and help educate patients about the financial aspects of healthcare, including the unseen costs of care and how care setting affects cost. Ultimately, our goal is to ensure our patients have a remarkable experience, and we strive to retain each patient as a lifetime partner by minimizing the stress of financial obligations," she says.
Novant, which posted 2015 patient service revenue of $4.06 billion, has launched several patient financial engagement initiatives in recent years, including charge master standardization, development of a patient cost estimator tool, and the ability (through a third party) to allow patients to pay off medical bills with monthly payments.
The nonprofit health system has also developed consolidated statements that display both hospital and physician charges.
But sending out "single bills" for all patients poses significant challenges, York says. "All data for services provided by Novant Health ambulatory and acute locations are housed together, which makes it relatively easy to navigate in billing."
For services initiated beyond the health system's ambulatory and acute locations, "it's much more challenging to consolidate billing because each provider utilizes independent systems."
As a result, she says, the organization is "unable to include those providers, such as radiologists, anesthesiologists, and emergency room staff, on a single bill. We are currently exploring possibly utilizing a third-party vendor partner for bill consolidation in the long-term."
Novant surgeons perform more than 120,000 procedures annually, and there are 4 million patient visits to the health system's physician practices each year. For large health systems such as Novant, the most daunting challenge in engaging patients as financial partners is crafting engagement approaches that accommodate the diversity found in large patient populations, York says.
She says the biggest challenge is understanding how each segment group wants to be engaged, since different patients want to be involved in their billing process at different levels.
"While one patient may want a quick notification of any updates, another may require constant contact with one of our financial navigators. We want to be sure to respond accordingly, " York says.
One of Novant's strategic imperatives is "focused on the human experience. To strengthen our patient partnership efforts, we collaborated with our marketing team to see how best to address the needs across our diverse patient segments, and we hired an external firm to support this work within our revenue cycles," she says.
Patient loyalty metrics show that the health system is already generating tangible results from its patient financial engagement initiatives, York says.
"In a survey of more than 540 patients, 92% of those surveyed indicated they were likely to choose Novant Health for their healthcare needs due to our zero-interest loan program for services provided by our acute facilities. In addition, 86% said they would recommend Novant Health to family and friends."
The majority of the sessions at this year's HFMA-ANI conference reflect the quest for high-yielding billing processes and strategies to navigate the shift to value-based healthcare.
A pair of sessions on the first day of the Healthcare Financial Management Association's Annual Meeting in Las Vegas exemplified the event's thematic duality.
The unofficial high temperature in Las Vegas Sunday was 109F.
Fittingly, sweating the details was the primary message of "Creating Pristine Claims—Essential Practices for Revenue Cycle Success," held on HFMA's first morning of sessions.
"The most important process in the business office is billing," said Pamela Fell, corporate director of the central business office at Miami, FL-based Jackson Health System.
JHS is a public hospital system with a total of 2,101 licensed beds in three acute-care hospitals, a children's hospital, a rehabilitation hospital and a behavioral health hospital.
In 2014, total patient service revenue was posted at $866 million. The system reported record profit in 2015.
To that ensure claims for reimbursement are paid, every detail matters, Fell said. "You have got to have everything; everything has just got to be perfect."
"Everything" includes registration information such as health plan data, as well as payer authorization, clinical coding, and revenue codes, she said.
The registration system is usually different than the revenue cycle system. It's very important to get information right on the front end—in the registration system, " Fell said. Otherwise, it can create a problem "every time a patient comes in."
Making sure physicians are preparing clinical documentation accurately is another key to billing success, she said. "They need to know what they are documenting and how that affects whether you get paid."
Clinical documentation is mainly a generational challenge, which is becoming easier to address over time as the importance of accurate clinical documentation is more widely expected and accepted.
"The younger doctors are much more receptive to this," Fell said.
"Thirty year ago, no one would have approached a doctor to talk about this, but payers have changed and the doctors have changed. This is just part of the landscape now."
Out-of-Pocket Estimates Boost Collections
One of the value-based healthcare sessions on Sunday focused on transparency and featured revenue cycle executives from a half-dozen health systems, including Greg Meyers. He is senior vice president of revenue integrity at Oklahoma City, OK-based INTEGRIS Health, which operates seven acute-care hospitals and a women's hospital.
INTEGRIS began offering out-of-pocket charge estimates to patients in 2006 through the health system's "Consumer Priceline" program, Meyers said.
The program has grown from 900 cost estimates done monthly through a manual process to 20,000 done monthly through an automated process.
Since launch, point-of-service collections have skyrocketed, rising from $900,000 in 2007 to $18 million in 2015, he said. "Our biggest measure of success is point-of-service collections. We're going to hit the $20 million mark this year."
The vast majority of the sessions at this year's HFMA-ANI conference reflect the quest for detail-oriented billing processes and strategies to navigate the shift to value-based healthcare.
The billing-related sessions include focusing on generating positive return on investment, optimizing clinical documentation improvement programs, engaging physicians to support strategic service lines, and leveraging clinical insights to drive cost savings.
The value-based healthcare sessions address a variety of topics, including consumerism, helping physicians to deliver value-based care, harnessing data analytics, engaging patients as financial partners, and developing a telemedicine strategy.
The conference is scheduled to conclude on Wednesday.
Hospital associations and trade groups are lobbying federal officials to account for how "the disease of poverty" impacts the health of patients—and costs hospitals.
The Missouri Hospital Association (MHA) is in the vanguard of a lobbying campaign to convince Congress and the Centers for Medicare & Medicaid Services to risk adjust hospital readmissions penalties for the socioeconomic and sociodemographic status of patients.
MHA has developed an augmented version of the CMS risk-adjustment model for the Hospital Readmissions Reduction Program (HRRP) to give greater weight to factors associated with a patient's economic resources and the poverty level in a patient's neighborhood.
The MHA's augmented risk-adjustment model shows that 43% to 88% of variation in quality measures between Missouri hospitals is tied to Medicaid status and the communities where patients live.
The financial stakes are high.
Last year, the 30-day readmissions penalty totaled $420 million, with the Medicare reimbursement reduction spread across 2,592 hospitals.
Pressing CMS and Congress to change the risk-adjustment model for HRRP is a top priority at MHA this year, President and CEO Herb Kuhn says.
"When we launched this effort in February, we had letters of support for our initiative from the American Hospital Association, the Association of American Medical Colleges, the Catholic Health Association, and the Federation of American Hospitals."
Since that time, "we have had a number of really good conversations with a number of our colleagues at state hospital associations across the country who are looking very aggressively at this in their own states—states like Ohio, Pennsylvania, Massachusetts, Maryland and many others."
Modest Results So Far
On June 7, the House of Representatives passed the Helping Hospitals Improve Patient Care Act of 2016 (H.R. 5273). A section of the legislation gives the secretary of the Department of Health and Human Services authority to revise the CMS risk adjustment model for hospital readmission penalties.
"We view it as a good first step. It is not as robust as we would like it to be; but, finally, we are seeing a recognition in Congress that we have to move in this direction," Kuhn says.
Mat Reidhead, vice president of research and analytics at MHA, says the hospital association's augmented risk-adjustment model for HRRP gives a much more accurate reflection of the costs associated with treating economically disadvantaged patients.
"Our model differs from the CMS models in two key characteristics. First, in addition to all of the patient's clinical history, we also risk adjusted two sociodemographic factors: whether the patient qualifies for Medicaid and the poverty rate in the patient's neighborhood."
"The second key difference, is that we nest our model at the patient's neighborhood level in order to capture community-level effects that in most cases are far outside of a hospital's traditional sphere of influence."
"By doing this," Reidhead says, "we are attempting to capture effects that might influence the patient's risk of readmission that are attributable to their neighborhood, like whether the patient lives in a neighborhood with access to healthy food, whether there are social support systems available to the patient, whether there is reliable transportation for follow-up care and transitional care opportunities, and the list goes on and on."
Hospitals Penalized
HRRP is unfairly punishing hospitals, particularly safety net hospitals, Kuhn says.
"What we see, and what the growing body of evidence shows, is that hospitals are being penalized for treating and caring for socially complex patients. The risk models don't risk adjust for the patient's community or the disease of poverty."
Developing accurate risk-adjustment models is crucial to the success of shifting from fee-for-service delivery of medical services to value-based reimbursement, he says.
"The disease of poverty is real, and it has a real impact. As we continue to move more of our payment system to value-based payment, it is incumbent upon us to make sure that the risk-adjustment models are as accurate as they possibly can be."
"A lot of money is being put behind these programs. And with the era of transparency, we are creating impressions about good hospitals vs. bad hospitals. We've got to have risk adjustment as accurate as possible," Kuhn says.
Care coordination and bundled payments are cost-lowering drivers. "It's not savings to the hospital," says one executive. "It's avoided medical cost."
This article first appeared in the June 2016 issue of HealthLeaders magazine.
With prodding from federal officials and an industrywide shift toward delivering services based on value rather than volume, healthcare providers are making progress on reducing hospital readmission rates, federal statistics show.
From 2007 to 2011, the all-cause 30-day hospital readmission rate for Medicare fee-for-service beneficiaries held steady at about 19% to 19.5%, according to the Centers for Medicare & Medicaid Services. But those rates fell to 18.5% in 2012 and 17.5% in 2013, CMS reports.
"We've seen amazing results already," says Brian Holzer, MD, MBA, senior vice president for home and community services at Pittsburgh-based Allegheny Health Network, which has expanded postacute care services and partnerships dramatically over the past two years. In 2014, AHN—an integrated system that reports $2.4 billion in revenue and 82,000 annual discharges—purchased four companies to establish a full suite of home health services: nursing, home medical equipment, home infusion, and hospice. Compared to 2014, AHN posted a 5% decrease in all-cause hospital readmissions last year in the health system's home-health service line, mainly on the strength of its home-health business unit, Healthcare @ Home, and improved care coordination with skilled nursing facilities, he says. The estimated cost avoidance resulting from the lower readmissions rate among AHN's home-health patients last year is $4.5 million.
While cost avoidance for patients and payers is a step forward in value-based medicine, financial incentives aligned with the new care models that drive down hospital readmissions are needed to expand and sustain value-based delivery of services, he says. "This isn't savings to the hospital. This is avoided medical cost. Until we align the financial incentives, you can understand the complexity of a health system going all-in when they are not really all-in. We are doing the right thing for the world that we believe we will be in shortly."
For the fiscal year ending in December 2014, AHN reported an operating loss of $37 million, but the setback was a $365 million improvement over the previous year's bottom line. Highmark Health, AHN's corporate parent, posted total revenue for 2014 at $16.8 billion.
Since 2012, CMS has launched several initiatives that are targeted in full or in part at hospital readmission rates, including payment penalties for a handful of conditions such as heart failure and pneumonia in the Hospital Readmissions Reduction Program, the Partnerships for Patients care transitions program, and public reporting of readmission rates on Hospital Compare.
The HRRP penalties have spurred change, says Jeffrey Brenner, MD, executive director of the Camden Coalition of Healthcare Providers, a nonprofit organization working to improve population health and develop value-based care models in one of the most economically disadvantaged communities in New Jersey. "This is the most exciting moment of my career. Partly because of readmissions penalties, people are having discussions they have never had before," he says.
For the federal fiscal year ending this September, CMS estimates the total payment penalty for hospitals with high readmissions rates will be $420 million.
"When everything is said and done, the whole health system is going to look different," Brenner says of initiatives such as HRRP that are accelerating efforts among healthcare providers to build more seamless care continuums, improve care coordination, establish community partnerships, and engage patients to set and achieve their health goals.
Efforts to reduce avoidable hospital readmissions reflect the kinds of fundamental changes that are beginning to take hold in the healthcare industry, Brenner says, noting most care coordination models have nurses and social workers playing the role of quarterback for patients rather than doctors. "We're at step one of 10 steps; and by the time you get to step 10, step one won't even be recognizable. Steps one and two are going to be painful: New roles for staff, new ways of getting paid, and less prestige for doctors."
Bundled payments drive change
In Madison, Wisconsin, UnityPoint Health Meriter Hospital is using bundled payments for hip and knee procedures as a springboard to quicken the organization's adoption of value-based care and to reach beyond the hospital walls to establish better relationships with patients and community partners.
Meriter, a member of Iowa-based UnityPoint Health and 448-bed community hospital, started performing knee replacement procedures under bundled payments in 2012 and contracted with CMS to perform hip procedures through the agency's Bundled Payments for Care Improvement program in 2014.
For the fiscal year ending December 2014, UnityPoint Health posted net revenues at $557 million. Meriter was UnityPoint Health's strongest subsidiary in 2014, posting net revenue at $405 million.
Readmissions reduction is one of the primary goals in Meriter's approach to bundled payments, says Philip Swain, director of orthopedics and rehabilitation at the hospital. "Our bundled payment program would fail if we had high readmission rates. Our bundled payment program would fail if we had postacute care usage too high. Our readmission rates are down 60% since before we started bundles," he says of the drop in joint replacement procedure readmissions from 2012 to last year. "It's had a halo effect over all of our joint-replacement patients. The commercial payers have also seen [that we are achieving] reductions in readmissions."
Meriter's bundled payments model has key elements inside and outside the hospital.
At the hospital, care navigators play a crucial role for patients in the bundled payment program, Swain says. "They hold the hand of the patient all the way through the care continuum. They look proactively at risk factors. They start mitigating those risks before the patient even goes into surgery."
The care navigators are part of the patient discharge process and stay in touch with patients through phone calls after they leave the hospital. "They make sure the patient's medication is managed properly. They eliminate as many pitfalls as possible," he says.
Care navigators serve as an essential point of contact for patients before, during, and 90 days after a hip or knee replacement procedure, says Pamela Dahlke, RN, BSN, MBA, Meriter's director of care coordination. "We follow those patients through a more extended period of time."
Care navigators play a pivotal role in the postacute care setting, she says. "High success comes with connecting patients with providers who they can get to."
When care navigators began reaching out to community partners, Dahlke says local skilled nursing facilities were "skeptical at first," chafing in particular over the drive in bundled payment contracting to shorten length of stay at hospitals and postacute care facilities. "In this journey, we are all in it together; but when you talk about length of stay, it's a difficult conversation to have."
Meriter has established informal relationships with several SNFs and is working on creating formal partnerships in the near future, Swain says.
"Our approach is twofold. Our first priority was just to get out to our nursing homes and meet with them," he says, noting many local SNFs had never worked with bundled payments, which require lower lengths of stay, higher-quality care, and reduced readmission rates to be successful. "Our second goal is to develop more formalized relationships with skilled nursing facilities. We can't steer patients—they have choice. But you can share objective quality information with patients that can help them with their decision making. … Any relationship we make with a nursing home has to be a two-way street. We ask what we can do to help reduce length of stay. We ask how we can work together to meet goals."
A robust home-health capability also is an important component of Meriter's model for bundled payments. Home health nurses are the frontline staff members for the hospital's care transition program, which features home visits and an average of five check-in phone calls in the 30 days following hospital discharge, says Mandy McGowan, clinical manager at UnityPoint Health-Meriter in the home health unit in Madison. "We can help get patients out of the hospital and prevent readmissions. Keeping the care at home—safely—will drastically reduce cost of care to the system."
Meriter's integrated electronic medical record system includes home health nurses, which boosts care coordination and eases the hospital discharge transition, McGowan says. "The discharge goes much smoother. We have what we need. We work with discharge planners in the hospital. They speak with us several times per day."
The communication between hospital staff and home health nurses is a key to postacute care success when treating high-risk patients, she says. "We have built up the comfort level of discharge planners so they can talk with patients about postacute care options. All discharge planners spend at least one day training with home health."
Meriter's care transitions program involves an intense level of patient engagement, McGowan says. The home health staff calls patients in their hospital rooms the day of the discharge to outline the discharge process. Depending on the risk level for complications, home health nurses visit or call patients at home on the day after discharge to review care plans, check medications, urge follow-up visits with healthcare providers, and make sure patients are prepared to recover at home.
"We talk with them about their diagnosis and what happened during their acute episode. We ask them what they were feeling the day when they needed to go to the hospital, so they don't panic if that takes place again. They have a plan in place."
After the day of discharge, patients in the care transitions program receive a phone call three days later, then weekly for 30 days.
In terms of bottom-line calculations of cost and revenue, Meriter's home care transitions program is having a neutral financial impact on the organization, but the effort is clearly helping to avoid unnecessary medical spending, McGowan says. "We can avoid observation readmissions to the hospital. There are things we can do outside of the hospital at follow-up that can help keep patients at home rather than in a skilled nursing facility, which is a tremendous financial benefit to patients."
Demolishing silos and investing resources
Healthcare providers have developed several strategies to reduce hospital readmission rates, but integrating these new strategies across organizations and demolishing the walls that have divided sectors of the healthcare industry for decades remain huge challenges, says Mary Naylor, PhD, RN, a professor at the University of Pennsylvania School of Nursing.
"Transitional care will be effective if it is well-integrated into a whole delivery system. It has to be connected. It can't be outside. What we absolutely don't want is someone leaving the hospital and no one follows up with them. We need to make the journey for patients much more seamless. Transitional care shouldn't be a standalone. It should be a standard way of delivering value for all high-risk populations."
The transitional care model Naylor helped develop at UPenn features advanced practice nurses serving in the role of care-coordination quarterback. In California, Irvine-based Global Transitional Care began serving patients in July 2015 through Medicare to provide transitional care services using the UPenn model. As of April of this year, GTC had provided such services to 250 patients without a single avoidable hospital readmission, CEO Rani Khetarpal says, noting five GTC patients had experienced unavoidable hospital readmissions.
GTC is gathering 450 fields of data on each patient to determine the primary drivers of hospital readmissions, she says. "We are trying to determine why these patients go back to the hospital. So far, what we have seen is that there is no one answer to that question. It's a much more complex outcome than just preventing the readmission. There's just simply a lack of resources for most of these patients. Even with Medicare reimbursement, the patients who are being readmitted are the patients who can't get back to the doctor in seven to 10 days for their follow-up appointments."
As more resources are applied to building seamless continuums of care, more success in readmissions reductions and other value-based propositions should be expected, Khetarpal says. "We're not the only solution. We can't take every patient. But this is the norm now, not the exception."
