The nonprofit network reversed an upward trend in claims denials, with the month-to-month denial rate reduced to as little as 1%.
Since 2012, Orlando Health has conducted concerted efforts inside and outside the health system's revenue cycle team to decrease claims denials, which were trending above 5% on an annual average basis.
"It was a high-priority project because our denials were increasing," says Bridget Walters, corporate director of enterprise patient access.
The claims-denial prevention efforts, which are ongoing, have reduced claims denials significantly, with monthly claims-denial rates as low as 1%, she says, adding the average annual denial rate is about 4%.
Coordination and Accountability
One of the first claims-denial initiatives Orlando Health launched was the creation of a denials management team with existing staff members that focused on claims denials enterprise-wide, including the health system's seven acute-care hospitals.
Walters says the denials management team featured top-notch employees drawn from three areas at Orlando Health facilities: collectors, billers, and nurses.
"We had a total of 14 individuals on the team who were star performers in their areas," she says.
The primary focal points of the denials management team, which met on a weekly basis, was denials prevention and large-claim denials.
Once the denials management team started identifying trends, Walters says it took several systematic actions to prevent claims denials:
Worked with department executives to incorporate claims-denial prevention mechanisms in workflows
Conducted "road shows" to meet with nurses and other key staff members at the health system's hospitals and clinics to discuss claims-denial trends and collaborate on claims-denial prevention
Tracked claims denials as avoidable or unavoidable, then shared those categorizations with all affected areas such as coding, revenue integrity, physician practices and scheduling
Educated the clinical team on the medical necessity guidelines for inpatient admissions
With the health system's denials prevention effort matured and optimized, the denials management team has shrunk to seven members and meets monthly. The team is staffed with patient-access managers, who are not only continuing the claims-denial prevention activities of their predecessors but also closely supervising registration staff to prevent patient-access-related claims denials.
Educating the registration staff about the complete revenue cycle is crucially important, Walters says.
"We connect the dots so they understand the impact on the bottom line. Their work can affect the patient experience, the accounts receivable days of patient accounts, decreasing our bad debt, and reducing the cost to collect."
In addition to the denials management team, Orlando Health has been gathering together a broader array of executives and clinical staff to prevent claims denials. In 2012, these gatherings were called task force meetings, which were held as frequently as weekly. Currently, these meetings are held on a quarterly basis. "We review the dashboard of each facility to see their denials and what their top trends are in denials," Walters says.
In addition to the denials management team, the quarterly meeting features an array of interdisciplinary staff members, including:
Hospital CFOs
Corporate and facility revenue cycle staff
Managers from multiple departments, including case management, information technology, and rehabilitation services
Working with Payers
Thanks to this work, Orlando Health generates cleaner claims and has multiple mechanisms to hold payers accountable to process claims on a timely basis.
"We have many checks and balances for compliance, from our registration all the way through to our billing," Walters says.
One example is ensuring compliance with the Two-Midnight Rule. The Medicare regulation states patient hospital stays that span less than two midnights are generally inappropriate for categorization as an inpatient stay and payment under Medicare Part A. Some "inpatient-only" procedures qualify patients for inpatient status regardless of length of stay.
"We make sure that we educate the physicians and clinicians to understand the complete process and inpatient-only procedures," she says. "We are always making sure that documentation is getting audited."
When claims are denied, Orlando Health, which posted $2.5 billion in net patient service revenue for the fiscal year ending Sept. 30, 2016, closely examines the 835 electronic data interchange documentation from the payer. The 835 EDI provides payment and remittance advice from the payer, including billing codes.
"It takes a team effort. We will get the billing manager involved. We also have a cash receipts manager who understands the 835 inside and out, and we will bring in one of our denials experts," Walters says.
After one payer denied several emergency room visit claims, an 835 EDI review showed the payer had made a coding error, she says. Once the error was identified, the payer updated its system and reprocessed the claims.
Effective contracting forms the basis of productive and fair relationships with payers, Walters says.
For example, Orlando Health has established joint operating committees with several payers. These committees bring together Orlando Health and payer staff members for face-to-face meetings every other month to find out who is accountable for claims denials and to resolve those problems, Walters says.
The health system's representatives on the panels include patient access, patient accounting, managed care, denials management team members, a credit balance manager, and case management. Payer representatives include a director of case management, managed care, contracting officers, and analysts.
"When you sign the contracts, you need to make sure the contact mechanisms are in there. You need to have the joint operating committee meeting in there, and who is going to be present and the expectations," Walters says.
In addition to spelling out the parameters for cooperation, contracts with payers need to have provisions to compel corrective action, she says.
"Everything falls on the contract, including getting advance payments. If a payer's performance is not good, you can hit them in the pocket."
Indiana's largest health system has used a 13-fold increase in its financial-adviser staff to drive down the number of uninsured patients by helping them acquire health insurance.
IU Health has slashed the percentage of gross patient revenue that comes from self-pay patients in half over the past six years in large part by increasing the health system’s financial-counselor ranks from 12 to 158.
In 2012, self-pay as a percentage of gross patient service revenue at the
Indianapolis-based health system was 5.46%. In 2016, self-pay had plummeted to 2.85%.
In large part, the counselors help eligible patients navigate a confusing array of possibilities to find a commercial insurance product or government program for which they qualify.
"Ideally, you are reducing the number of self-pay patients and converting more to an insured product, an insured plan, Medicaid payer plans, or Marketplace payer plans," says Angie Church, program manager of individual solutions at IU Health.
At IU Health, the Individual Solutions Department is part of the health system’s revenue cycle corporate division. Its 158 individual solutions senior associates must be state-certified as financial navigators, and they work in several settings across all 15 of the health system's acute-care hospitals, including:
Emergency room and inpatient facilities
Business offices where uninsured patients are screened for coverage options prior to hospital services, with the screening conversations held via phone calls or at the business office
“Back-end” billing offices, where financial advisers help patients try to qualify for coverage after receiving services
Qualifications and Training
When hiring new individual solutions senior associates, compassion is an essential quality that candidates must be possess because the financial advisers collect sensitive personal information, Church says.
"We are getting the medical history, the household size, and family member information. To build a relationship and trust with a patient, where they want to open up to you, there is a certain type of personality that is well-suited to the position."
Communication and assessment skills also are crucial, she says.
"They need to be agile. They have to be able to quickly assess the patient's eligibility, circumstances and what the patient may qualify for."
Once financial advisers are hired, they undergo pre-certification training for the state department of insurance navigator license examination. IU Health trainers guide new hires through the pre-certification course, including about 500 pages of study material, Church says.
Consumer assistance basics such as conflicts of interest, confidentiality rules, and reporting requirements
Medicaid basics and Indiana health coverage programs, including benefit packages and available services, Medicaid eligibility requirements, and state-based assistance program terminology
Health insurance basics and the federally facilitated Marketplace, including open enrollment periods and special enrollment periods, the application process for health plans obtained through the Marketplace, and minimum essential coverage
IU Health, which posted $6.2 billion in total operating revenue for the2016 fiscal year, also trains its financial advisers to use an in-house healthcare-coverage eligibility tool.
"The tool takes the patient from initial eligibility determinations to determining their eligibility results, then takes the patient all the way through the application process, being enrolled and, hopefully, to being approved for active coverage," Church says.
Working with Patients
Best practices for having financial conversations with patients involve both preparation and good judgment, she says.
"The scripting helps start out the conversation with the patient, then the navigator uses best judgment to take it from there."
Much of the scripting is related to the different coverage plans that are available.
"We are constantly working to make sure it is up to date," she says, noting the significant effort needed to stay abreast of changes to Medicaid, Medicare and other government programs.
For hospital patients who are not seriously ill, individual solutions senior associates start conversations in a manner that helps build trust, then try to determine whether patients qualify for healthcare coverage, Church says.
These conversations begin with an introduction, with the financial adviser explaining the navigator role. Patients also are told approximately how long the interaction will take and what to expect such as the eligibility screening process.
For seriously ill hospital patients, financial advisers often enlist members of the clinical care team to help collect and process information, she says.
"We work closely with case management, care managers and social workers. For patients who have been in and out of the hospital for multiple treatments, being able to work with the case management team is beneficial because they often have an existing relationship with the patient."
Working closely with the case management team can ease the collection of documents, Church says. The case management team often helps secure physician signatures on financial forms and connects financial advisers with family members who can get copies of documents.
In all cases, financial advisers strive to improve the patient experience, she says.
"After that initial introduction, [patients feel] a sense of relief because you can help them through the process," Church says.
Dignity Health's physician group cut patient increased cash collection and cut patient bills in accounts receivable.
A revenue-cycle initiative at a California-based physician group has boosted the organization's finances, including a 20% decrease in accounts receivable over 90 days and an increase in cash collections to 108% over budget.
Dignity Health Medical Foundation’s affiliated medical groups serve as the primary employment model for Dignity Health in California, with more than 1,000 clinicians. San Francisco-based Dignity Health operates 39 hospitals in California, Arizona and Nevada.
In January, DHMF sought to reverse downward trends in accounts receivable, cash collection, and earnings before interest, tax, depreciation, and amortization. In response, the organization launched an effort that focused on accounts receivable management, charge integrity, vendor strategy, and clinical documentation.
Accounts Receivable
One of the primary goals of DHMF's revenue-cycle initiative was to improve accounts receivable performance without relying on increased effort—and expense—at accounts receivable vendors. This goal was met by increasing staff time in the DHMF central business office created mainly with overtime hours.
With the additional staff hours, AR was assessed on a weekly basis. The assessments targeted several classes of accounts that had aged beyond 120 days, including these:
Rejections of claims over $1,500 due to medical record requests
Claims rejections for surgeries and infusions due to missing information such as operative report notes
Government claims that could be collected potentially quickly, such as Medicare claims
High-dollar recurrent patients
Commercial payers with a history of paying relatively quickly
DHMF focused on accounts aged beyond 120 days for two reasons, says Diane Butler, a director at Chicago-based consultancy Navigant, which helped implement the physician group's revenue-cycle initiative. First, the difficulty of collecting accounts increases significantly after 120 days. Second, AR aged greater than 120 days is customarily "reserved," with organizations setting aside cash in the event of failure to collect and eventually transferring the outstanding balance to bad debt.
The AR effort has generated significant gains, says Christopher McGoldrick, DHMF’s chief financial officer. "When we began this initiative, approximately 50% of our accounts receivable was less than 90 days. Now, it represents 70%."
DHMF, part of a health system that is slated to merge with Englewood, Colo.-based Catholic Health Initiatives, has set a goal of 85% of AR at less than 90 days, he says.
Improved AR performance coupled with enhanced cash collections were better than budgeted levels and more than offset increased spending on CBO staff overtime, McGoldrick says.
"We had a 300% return on effort."
Charge Integrity
Before a physician's services can be billed to a payer, the charge capture process must be completed. Charge capture identifies the services rendered as well as patient-encounter information such as patient name, medical record number, date of service, and where the patient was seen.
To optimize its charge-capture processes, DHMF, whose parent company posted $12.6 billion in 2016 operating revenue, took several actions:
Developed a management report for missing and pending charges to alert clinic leadership about delays between time of service and billing of service
Modified the coding staff review process to focus on claims with higher complexity because of the proven track record of clinicians coding patient encounters with lower complexity
Decreased the time for finalization of a charge and clinician sign-off
The coding staff focused on high-complexity charges as a crucial part of DHMF's charge-integrity effort, Butler says.
"The coders were looking at every single charge that came through, which was a huge piece of business. Based upon experience, we knew that some charges did not need to be reviewed, especially [evaluation and management] codes at the lower levels," she says.
E&M codes range from Level 1 to Level 5. Butler says clinicians tend to code correctly for the lower-level codes: Level 1 to Level 3. However, clinicians have shown less accuracy when coding Level 4 and Level 5 services.
At Level 4 and Level 5, the code reflects intangible services such as medical decision-making and the complexity of the patient's status.
“Experience has shown that providers are more likely to undervalue these less tangible services and choose a code that does not accurately reflect the complexity of the patient's status or the decision-making employed by the provider," Butler says.
Vendor Strategy
"There was a dependence on vendors that had become automatic," Butler says. "What DHMF has now is a prospective look at where they have the internal talent to manage claims, and where there are claims that are so small in volume that they don't have the expertise—that's where they look to bring in vendors."
For "niche" claims with small volumes, vendors often have expertise in areas such as coding that DHMF does not have in-house.
Based on this vendor-spend strategy, DHMF renegotiated some contracts to drive cost savings, McGoldrick says.
For example, DHMF has been able to lower accounts-receivable costs by changing the timing of when some claims are sent out of the organization to a vendor for accounts-receivable management. Under one original contract, claims were placed with an external AR vendor at 120 days from the date of service. Under the new contract terms, claims are sent out to the vendor 120 days from the date of posting the charge.
This contractual change has resulted in keeping aging claims in-house about 10 days longer.
"We recognized that they were aging out and being placed with the vendor, when, in fact, we had done the lion's share of the work and all we had to do was further pursue payment," McGoldrick says.
Decreasing reliance on contract-labor coders also has generated significant cost savings, he says. "We were paying about 300% more per hour to hire contract-labor coders than to have coding in-house. So, we have an initiative to bring in many of our coders."
Clinical Documentation
Physician engagement, training and coding oversight were the main components of DHMF's clinical-documentation improvement efforts.
Financial messaging was the key element of physician engagement, McGoldrick says, with clear communication that the central business office needed accurate clinical documentation including physician charts to generate service charges and compensation for clinician services.
"For them, it was a matter of compensation. For us, it was a matter of revenue recognition."
A vendor provided peer-to-peer clinical-documentation training for DHMF physicians.
"Doctors heard from other doctors on how to code their patient encounters appropriately. They were already doing the work, and they just needed to document it in order to get the appropriate credit," McGoldrick says.
"Coder intervention" is an essential part of clinical-documentation oversight, he says. These interventions feature coders bringing a sampling of notes to a clinician, who is shown how the notes could have been modified to reflect the appropriate level of service and medical decision-making.
From March 2017 to this month, DHMF's charge-capture and clinical-documentation efforts have significantly reduced the lag between time of service and the generation of a service charge, he says.
In March, the lag was 22 days; now, the lag is 10 days.
Editor's note: This story has been updated to more accurately describe the relationship between Dignity Health and DHMF physicians.
National urology association estimates its alternative payment model could save Medicare $51 million in five-year period.
The first urology-specific alternative payment model for Medicare beneficiaries has reached a key milestone in the U.S. Department of Health and Human Services approval process.
If PTAC gives a favorable recommendation of the APM, the office of the secretary of HHS would make the final approval decision.
The payment model was crafted by the Large Urology Group Practice Association, with assistance from West Palm Beach, Fla.–based Integra Connect and Salt Lake City–based Myriad Genetics.
According to LUGPA's proposal for the APM, a key goal of the payment model is to boost financial support for active surveillance that monitors patients. Active intervention is 2.5 times more expensive on average than surveillance, with the cost difference more than $20,000 per episode of care, LUGPA says.
Active interventions for cancer localized to the prostate include radiation therapy, prostatectomy, and hormonal therapy. LUGPA says interventions put patients at risk of several negative outcomes such as diminished sexual function, urinary incontinence, bowel dysfunction, and urinary irritation.
LUGPA's APM proposal contends that the Medicare fee-for-service payment system is skewed in favor of active interventions for prostate cancer patients. "This has created a misalignment of incentives which results in decision making that promotes [active intervention] for men with localized prostate cancer—data suggests that some of these patients are appropriate candidates for active surveillance."
In 2015, about 63,000 Medicare fee-for-service patients were newly diagnosed with localized prostate cancer, and 77% of those men received an active-intervention treatment, according to LUGPA.
The LUGPA APM features yearlong episodes of care:
An initial 12-month episode of care, beginning with a prostate biopsy and a cancer diagnosis, for men receiving active surveillance or active interventions.
Subsequent 12-month episodes of care for men who remain on active surveillance at the end of an initial yearlong active surveillance episode.
The APM includes a two-part payment model:
A $75 monthly care management fee for initial and subsequent active surveillance episodes capped at $900 per episode.
A performance-based payment for enhancing utilization of active surveillance compared to a historical period.
LUGPA estimates its APM would save Medicare millions. "Medicare claims data suggest that the LUGPA APM could reduce expenditures by $138 million in five performance years, with Medicare saving approximately $51 million."
Editor's note: This story has been updated to include entities that assisted in the crafting of the payment model.
Wisconsin health system trains registration and scheduling staff to conduct sometimes-difficult financial conversations with patients.
Training physician-clinic registration and scheduling staff to have financial conversations with patients has doubled the rate of point-of-service copay collections at Froedtert and the Medical College of Wisconsin.
"It's been a big jump. From the mid-30s to almost 70%," says Jon Neikirk, executive director of revenue cycle at the three-hospital, Milwaukee-based system.
One of the first steps in the initiative was to create a new revenue cycle office, the Financial Engagement Department. The three-member team has a director of financial engagement, a project manager, and a trainer, and its annual staffing cost is about $250,000, Neikirk says.
Creation of the Financial Engagement Department was necessary because Froedtert's revenue-cycle team did not have a significant leadership role for registration and scheduling staff.
"Registration staff and clinic leaders were not well-versed in financial communication," he says. "We needed to provide support to our health system leaders who managed the staff who were going to be having these conversations."
The Financial Engagement Department plays a key role in training and supervisory support. Its responsibilities include:
Development of training material
Providing supervisory reports for registration and scheduling staff leaders
Teaching supervisors how to hold their staff members accountable
Conducting training sessions, including remedial training
Teaching Role
Training for registration and scheduling staff features e-learning courses as well as in-person instruction. The curricula was set in accordance with the HFMA Patient Financial Communications Best Practices.
Veteran registration and scheduling staff as well as new hires have been required to take as many as three financial communication e-learning courses, Neikirk says. The courses focus on the three clinical settings listed in the HFMA best practices:
Time-of-service financial communications in the emergency department
Time-of-service financial communications in settings outside the emergency department
Financial communications prior to service for scheduling staff
Role-playing is a crucial element of in-person instruction for registration and scheduling staff because it helps frontline employees develop a comfort level with financial communications, he says.
It focuses on scripting for financial conversations such as a patient's copay responsibility and the availability of financial assistance. The Financial Engagement Department's director crafted the scripting. For the role-playing exercises, the Financial Engagement Department's trainer plays the role of patients.
The most challenging role-playing scenarios include the trainer acting in the role of patients who have difficulty paying copays, Neikirk says. These scenarios include patients who say they can't pay, patients who say their insurance will pay, and patients who ask to be sent a bill rather than pay at time of service.
In addition to teaching staff members how to handle financial conversations, role playing reinforces best practices for more general communication skills.
"We want to make sure that the registration staff are not stumbling over their words and that they are making eye contact," Neikirk says.
Communicating with Patients
Registration and scheduling staff also receive training in how to use a trifold billing brochure to acquaint patients with multiple elements of Froedtert's patient financial experience. Information in the brochure includes:
Financial assistance programs
An explanation of the health system's bifurcated billing for hospital services, with hospital and physician charges appearing on separate billing statements
Billing office phone numbers
Contact information for financial counselors
Types of insurance accepted at the health system
"For registration staff, they use the brochure as a guide," Neikirk says.
Staff use the billing brochure to point out information that is most relevant to individual patients, he says. For uninsured patients, registration staff highlight the financial counseling and financial assistance information. For insured patients, staff highlight the section of the brochure that explains how there are separate billings for hospital services and physician services.
The effort to train the health system's registration and scheduling staff to conduct financial conversations is ongoing and has yet to reach the $2 billion (revenue) health system’s flagship facility, 536-bed Froedtert Hospital in Milwaukee. Rolling out the new training and supervision at Froedtert Hospital, which is set to begin in January, is a challenge because of the large staff size and multitude of leaders who supervise them, Neikirk says.
"We started with our community hospitals and moved on to our academic campus with this training” he says. “It's still a work in progress."
A Pennsylvania health system has scheduled 145,000 same-day appointments in this year’s debut of the offering, and they now make up 15% of its primary care visits.
Patients want same-day appointments. Providers resist because they replace filled appointments with open blocks. But to drive patient volume, same-day appointments work. Allegheny Health Network drove primary care volume at least 5% in a single year behind a strategy of same day appointments.
Following months of preparation, Allegheny Health Network started offering same-day appointments in January for more than 150 primary care physicians and 20 specialties including surgical practices. Since the initiative was launched, AHN has scheduled 145,000 of them.
Patients can request a same-day appointment if they call before 11 a.m.
The program gives AHN a competitive advantage and supports quality clinical care, says Kenyokee Crowell, AHN's senior vice president of clinical access.
"If you call for a same-day appointment and are a primary care patient of AHN, even if you do not see your [usual] provider, you will see a colleague of the provider who will have access to your medical records, your medical history, and your medication."
She says patient satisfaction has been high among patients booking same-day appointments, with primary care patients posting 96% satisfaction and specialty patients posting 92% satisfaction.
AHN, with eight hospitals in western Pennsylvania, is a subsidiary of Pittsburgh-based Highmark Health, with $18.2 billion in 2016 operating revenue.
Currently, Crowell says about 15% of AHN's primary care appointments are same-day and 2% to 3% of specialty appointments are same-day. She says same-day appointments are largely responsible for an increase in AHN's patient volume this year, with new patient volume up 7% and existing patient volume up 5%.
"The increase started exactly when the same-day appointments rolled out for the organization, so we feel the same-day appointments have contributed to that increase., she says.
Planning, Executing and Tweaking
Pre-launch planning was a primary key to success for the initiative, Crowell says. "We started a process of analyzing historical data in July of last year in advance of our go-live in January."
During the planning phase, she says health system officials focused data analysis on primary care because those practices had historically received the highest volume of requests for same-day appointments.
"We looked at that primary care data, we looked at Epic, and we met with each of our physicians and administrators for the different service lines to try to put together an algorithm. … It was not a cookie-cutter approach. The algorithm tended to be a little bit different depending on the specialty and, in some cases, by market."
AHN assured physicians that their appointment inventories would be handled with care, with the needs of individual physicians taken into consideration, Crowell says.
"For newer physicians in our organization, they may have plenty of availability; but for our busy providers, we had to think carefully about what the need for same-day appointments was, because we wanted to make sure we had adequate access to provide the service."
Including practices in the planning process was critically important, she says.
"That's where the magic came into play. This was not a spreadsheet exercise—the analytics are great and the numbers are great, but they only tell a portion of the story. You need to talk with the people who know their business best, which are our physicians."
She cites the example of a physician with a special clinic one day a week. If six same-day slots were needed per day at the practice, most days it made sense to deploy those slots equally among the practice's providers. However, on the clinic day when the doctor was seeing certain types of patients, fitting in his share of same-day slots did not make sense.
Tailored to Patient Behavior
Implementing same-day appointments involved technical elements and setting appointment inventory to fit patient behavior, she says.
"Once we had an idea of what we thought the need would be, we needed to take an inventory of appointment slots off-line, so they would be available for same-day appointments in the future. We worked with our IT department to create an appointment type in our Epic medical record system."
AHN's centralized scheduling center was tasked with setting most same-day appointments. For patients who call requesting a same-day appointment but have a potentially pressing clinical need, the appointment is often scheduled at a local practice.
Understanding patient behavior at the practice level was essential, Crowell says. "The inventory did vary by specialty, by geographic locations, and, sometimes, by day of the week. Anywhere from 25% to 40% of our same-day appointments for an entire week are booked on Mondays, which are by far the highest volume days for same-day appointment requests."
Spreading the Word
When AHN launched same-day appointments, the health system promoted the initiative with a "multi-channel marketing campaign," Crowell says. The effort included television, radio, print and online advertising, public transportation ads such as bus-wraps and notepads and stickers in physician offices.
After the initiative was launched, the appointment inventory at many practices required adjustment throughout the year, she says.
"The biggest lesson that we learned is that this is not a program that you can research, develop, launch and put it on the shelf. It is a very active process to continue to tweak it."
Patient-Centered Approach
With same-day appointments usually driven by convenience rather than clinical need, the initiative reflects a patient-centered approach to care, Crowell says.
Same-day appointments also exemplify a business imperative for a consumer-oriented approach to medical care, she says.
"Healthcare needs to get its act together. If there was any other industry where you had to wait days or weeks for a service, you would probably go someplace else."
The investor-service company gauges impact of new 'association' health plans, expanded short-term insurance, and elimination of subsidies on the Obamacare exchanges.
President Donald Trump's health-insurance executive actions last week are credit negative for insurance carriers operating on the Obamacare exchanges, New York, NY-based Moody's Investors Service reported today.
On Oct. 12, Trump took two executive actions that will likely undermine the insurance exchanges established under the Patient Protection and Affordable Care Act (PPACA), Moody's says:
In an executive order, the president eased regulations on "association" health plans and expanded the definition of short-term health insurance. The executive order calls for the federal departments of Labor, Treasury and Health and Human Services to expand insurance coverage for individuals such as allowing insurance purchases across state lines.
Although regulations must be put into place, association health plans will likely allow small businesses to band together to offer insurance to their employees. "Associations likely would be allowed to offer plans with lower benefits and lower costs," Moody's reported.
In a decision that did not require an executive order, Trump announced that his administration would end cost-sharing reduction (CSR) payments that subsidize the purchase of health insurance on the exchanges. The subsidies help insure low-income individuals who do not qualify for Medicaid coverage but can't afford to buy commercial insurance health plans.
This year, the federal government spent about $7 billion on CSR payments.
The executive order is expected to promote creation of skimpy health plans, which would undermine the PPACA exchanges, Moody's reported. "The introduction of lower-benefit, lower-cost plans and short-term insurance would be credit negative for health insurers that are still participating in the PPACA-governed individual market. These new plans would incentivize healthy people to exit the PPACA market, which would increase risk in the remaining pool of insureds."
The decision to stop CSR payments will also have a credit negative effect on commercial carriers operating on the exchanges, Moody's reported. This negative impact will fall particularly hard on commercial insurers that did not submit rates for next year based on the assumption that the CSR payments would be eliminated.
Health insurance rates are set on a state-by-state basis.
There could be an "offset" linked to the executive order that would soften the financial blow for commercial carriers operating on the exchanges, Moody's reported. "If the executive order succeeds in bringing more healthy but currently uninsured people into the small group or individual market, that could mitigate at least some of the order’s negative effects."
Moody's highlighted the PPACA-exchange risk exposure of four commercial carriers in today's report, which lists the companies' beneficiaries on the exchanges as a percentage of their total number of health-insurance beneficiaries:
Indianapolis-based Anthem Inc.: 2.9%
Chicago-based Health Care Service Corporation: 6.8%
St. Louis-based Centene Corporation: 9.2%
Long Beach, CA-based Molina Healthcare Inc.: 20.4%
What does innovation really mean to you? We asked the members of the HealthLeaders CFO Exchange for their innovation keywords.
Innovation has become such an overused word in healthcare leadership that leaders must further define what the term means to their organization. At the 2017 HealthLeaders CFO Exchange, members were asked to define what innovation means to them and their organizations.
Disruption: "I would use the word disruption—not in the usual sense of talking about other organizations coming into a market—but in the sense that we have to do something different," said Rick Hinds, executive vice president and CFO of UC Health in Cincinnati, Ohio.
Lacking: "We are lacking innovation as an industry," said Michael Browning, CFO of ProMedica Health System in Toledo, Ohio.
"As individual organizations, some of us are being innovative, but as an industry we tend to be more status quo. Many organizations are continuing to hold on to the historical healthcare models, and they are not taking risk and being innovative."
ProMedica has made the difficult strategic decision to invest in innovation for the long term, Browning says.
"Many people think that they cannot be innovative because it does not have an initial return on investment. Innovation can have a return on investment, but the return make take longer to materialize."
"Our board understands the importance of being an innovative organization and they support this investment. So, when you ask about margin and whether the ability to generate a margin hurts innovation at ProMedica, it doesn't. … Our board will say, 'Continue to invest even if we are running a financial deficit because we believe in the strategy and what you are doing.' They know the dollars are coming down the road."
Lean: "My one innovative word for our organization is lean," said Mary Ann Freas, senior vice president and CFO of Southwest General Health Center, Middleburg Heights, Ohio.
"It's the way we approach our delivery of services, and it applies to promoting ease of access to our services, the patient experience when it comes to access, coordination of care, and patient safety and quality."
"As we think through any improvements, we think through the process and how we can take waste out."
"Whether we are looking at how to increase access to our services or how to reduce sepsis, it really is a general concept of taking a look at the process, then finding duplication and unnecessary steps."
Passion: "We align passion behind what we are doing. We have a very disciplined, high-performance healthcare model that we follow every year on the calendar," said Randy Van Straten, vice president of business health at Bellin Health in Green Bay, Wisconsin.
"We study the voice of our customers, our patients, our physicians, our employees, and our insurers. Every year, we go through and we evaluate our mission, our vision, and our strategic objectives. Then we narrow down to focus on three breakthroughs, so we can align our resources. Otherwise there is too much competition for resources."
Risky: "There is so much innovation, especially when you look to technology. Everyone has a new technology tool coming out. But some of these technologies do not work, or some of them do not have anywhere near the effectiveness they claim that they have," said Garrick Stoldt, CFO of Saint Peter's Healthcare System in New Brunswick, New Jersey.
"For me, there are so many things that are being developed right now, and you only have limited resources; so, if you pick the wrong bets, you waste a lot of resources unnecessarily and end up with no resources for the right bet."
Risk-Tolerance: "If you pursue the idea du jour and if you are struggling with a 2% to 3% margin, if you make one mistake, you can end up upside down. It is not easy to get out once you are in—putting your toe in the water is just not doable in most situations," said Richard Rothberger, executive vice president and CFO of Scripps Health in San Diego, California.
"I am most concerned about too many initiatives, the lack of bandwidth to handle them, and picking the right one for the organization that will make a difference."
Transformational: "You have to look at everything you have done in the past and make adaptations. We have created an innovation department, and that includes investing in start-ups. We have started investing in start-ups for future growth," saidMike Simms, vice president of revenue cycle at Cone Health in Greensboro, North Carolina.
"To be transformational in revenue cycle, you must look at your technology and how you interact with patients, because they want the same experience that they have with the airlines and other industries. They want to have self-service on a web portal. They want to create payment plans on their own, and not have to call into a customer service department. You have to be transformational and willing to change."
Research released today shows that hospitals acquired in an M&A deal often struggle to generate financial gains from economies of scale in the first two years after the transaction.
A study on hospital mergers and acquisitions published today provides insights about why many acquired hospitals fail to meet their post-transaction financial goals.
The research features quantitative analysis of more than 750 hospital M&A deals from 2008 to 2014, along with survey data collected from 90 hospital-finance leaders. The study was conducted by the Westchester, IL-based Healthcare Finance Management Association (HFMA) and the Deloitte Center for Health Solutions, a division of New York, NY-based consultancy Deloitte.
"This study makes it clear that mergers are unlikely to succeed unless leaders tackle the tough decisions early on," HFMA President and CEO Joseph Fifer, CPA, said in a prepared statement. "Prospective merger partners should sit down together and figure out what the organizational structure and management team will look like after the merger. They should also recognize that it takes sustained effort to blend organizational cultures."
In the first two years after a hospital M&A deal, the research shows many acquired hospitals struggle to achieve their financial objectives.
"Acquired hospitals collectively saw a decrease in operating expenses after a transaction; however, operating revenue tended to decline at a greater rate, resulting in a decline in acquired hospitals' operating margins. These trends leveled-off two years post-transaction," the researchers wrote.
There were two primary causes of weaker-than-expected financial performance. "Survey respondents acknowledged that immediate investments and additional staffing were sometimes required to improve quality at an acquired hospital, which can impact financial performance."
About 80% of executives surveyed said there were significant capital investments after an M&A transaction was completed. "Nearly 40 percent of all survey respondents used the capital to upgrade or implement clinical information systems, the top-reported use of capital," the researchers wrote.
The motivations to seek and complete an M&A deal varied between acquiring organizations and acquired hospitals.
About 40% of survey respondents at acquiring organizations said boosting market share was the top reason to pursue an M&A transaction. "Increased market share can help a health system broaden its physician network and expand its access to patients, both critical factors for bearing increased financial risk in an evolving, value-focused healthcare market," the researchers wrote.
At acquired hospitals, nearly a third of executives surveyed cited access to capital as their prime motivating factor for seeking an M&A deal.
"Many acquired organizations were in financial distress, or required investments in staff, health information technology, physician recruitment, facilities, medical equipment, or pension funding to improve operations and quality of care," the researcher wrote.
Significant numbers of the executives surveyed said the quality of patient services improved after an M&A transaction:
27% reported increased Hospital Consumer Assessment of Healthcare Providers and Systems scores
23% reported decreased hospital readmissions
17% reported decreased physician appointment wait times
17% reported reductions in patient mortality rate
The executive survey identified eight keys to success in an M&A deal:
Developing a strategic vision for the transaction
Identifying clear financial and non-financial goals
Holding leadership accountable for integration efforts
Identifying cultural differences between acquired and acquiring organizations
Establishing transparency in decision-making
Aligning clinical and functional leadership as early as possible
Following best practices for integrating the organizations
Following best practices for project management such as tracking targets and milestones
Critics call the three-day inpatient stay requirement for patients to qualify for Medicare coverage at a skilled nursing facility archaic, irrelevant, and a threat to patient safety.
Skilled nursing facilities and their partners are pushing hard to reform a half-century-old law that requires a hospital-inpatient stay spanning three midnights to qualify patients for Medicare coverage at nursing homes.
Led by the American Health Care Association, which represents 13,500 long-term and post-acute care facilities, a coalition of nearly three dozen national organizations is seeking to change the law,, contending the three-day stay requirement is outdated and denies Medicare beneficiaries access to medically necessary services.
"On average, hospital stays are much shorter than they were in the 1960s, but the three-day stay requirement still applies to all Medicare patients. … As the hospital stays become shorter, the effect of the three-day rule is to block more and more Medicare beneficiaries from being able to access the skilled nursing facility benefit," says James Michel, senior director of Medicare reimbursement and policy at AHCA.
Under Medicare law, a patient must be categorized as an inpatient at an acute-care hospital for at least a span of three midnights to qualify for Medicare Part A coverage of SNF stays. Patients categorized as under observation at a hospital are considered outpatients under the law, and days under observation do not count toward the three-day stay requirement.
The Improving Access to Medicare Coverage Act of 2017 would allow Medicare beneficiaries to count observation days toward the three-day stay requirement. The 34-member Observation Stays Coalition includes several physician and patient-advocacy organizations, but hospital groups such as the American Hospital Association have not joined the coalition.
The legislation has 21 bipartisan co-sponsors in the Senate and 71 bipartisan cosponsors in the House.
Richard Salter, co-owner of Salter Healthcare, a Massachusetts-based post-acute care organization that operates three SNFs, says the three-day stay requirement is detrimental to Medicare beneficiaries.
"It's dramatically reducing the number of admissions to SNFs. In some cases, people are being sent home from hospitals unsafely," he told HealthLeaders recently.
In March, a new law went into effect that requires hospitals to give notice to Medicare beneficiaries on observation status that their outpatient categorization could affect Medicare coverage. The Medicare Outpatient Observation Notice is an inadequate protection for most elderly hospital patients, Salter says.
"Basically, what they get is a notice that says, 'We are going to observe you, rather than treat you, and that will affect your ability to get post-acute care in certain settings.'
One of the House sponsors of the Improving Access to Medicare Coverage Act, U.S. Rep. Joe Courtney, D-CT, recently co-authored an editorial in the Journal of Hospital Medicine calling for reform of the inpatient-stay requirement.
In it, Courtneyand his co-author, Ann Sheehy, MD, MS, claim the Office of Inspector General reported a $10,503 beneficiary out-of-pocket cost per uncovered SNF stay following an observation hospitalization in 2012.
They also say several key changes in hospital stays since Medicare was launched in 1965 make a change necessary. Among them:
Average hospital length of stay for patients 65 and older in 1965: 14.2 days
Average hospital length of stay for patients 65 and older today: 5.2 days
From 2006 to 2014, Medicare beneficiary outpatient visits at hospitals, including all observation stays, increased 44.2% nationally
The editorial also cites a research article in the Journal of Hospital Medicine that examines the potential safety threat posed by the three-day requirement. The researchers reviewed actual discharge rates from two hospitals to SNFs when hospitalists recommended that a patient receive care at a nursing home.
"Fewer than 20% of previously community-dwelling hospitalist patients followed recommendation for post-acute facility stay after observation hospitalization, and more than 40% cited financial concerns as the reason for declining. Patients recommended for SNF also were more likely to be rehospitalized in the subsequent 30 days after discharge, confirming this as a vulnerable patient population," the researchers wrote.
"The three-day rule is becoming increasingly irrelevant as a utilization management tool," Michel says. "It is archaic. It is a vestige of a Medicare program that looked very different when it was established compared to today."
Two-Pronged Effort
The Access to Medicare Coverage Act faces a daunting hurdle in Congress, Michel says. "The reality is, the three-day rule acts as a barrier to Medicare covering services for beneficiaries who might otherwise need to get care in a skilled nursing center. So, any easing of that rule is going to result in increased spending, which creates a barrier in Congress."
The Congressional Budget Office has yet to score the legislation.
AHCA is also pursuing a regulatory strategy at the Centers for Medicare & Medicaid Services (CMS), Michel says.
"The inpatient and outpatient designations were established in regulations. They were not established in statute. So, in our interpretation, CMS can define inpatient status and outpatient status however the agency likes. We are suggesting that CMS consider observation stays as inpatient stays, only for satisfying the SNF three-day stay rule, not for billing or payment."
