Through an automated process, the Oklahoma-based health system is generating 20,000 pre-service estimates monthly for patient out-of-pocket costs, and banking higher point-of-service collections.
Pressure is mounting on healthcare providers to establish price transparency for medical services, with high-deductible health plans driving heightened consumer savvy among patients and Trump administration advocacy.
Boosting price transparency is one of the few specific healthcare reform proposals President Trump made during the 2016 election campaign, and his support ensures that efforts to achieve price transparency at healthcare providers will continue.
"Transparency in healthcare is not going away. It is not a flavor of the month," Amy Floria, CFO at Goshen Health in Indiana, told HealthLeaders earlier this year.
State efforts to advance healthcare-provider price and quality transparency have barely gained traction at the national level. Last summer, the vast majority of states received failing grades in a report card on transparency laws published by a pair of nonprofits—the Health Care Incentives Improvement Institute and Catalyst for Payment Reform.
Health systems and hospitals seeking to rise to the price-transparency challenge can look to the country's heartland, where Oklahoma City, OK-based INTEGRIS Health has developed robust price-transparency capabilities.
INTEGRIS, which is The Sooner State's largest health system with seven acute-care hospitals and a women's hospital, was the star of an educational session on price transparency at last summer's Healthcare Finance Management Association-ANI conference.
Greg Meyers, who was system vice president of revenue integrity at INTEGRIS until his retirement in December, said the health system's successful price-transparency journey began with setting a fundamental goal. "One of the objectives early on was to establish how much services would cost for the patient."
Over the past decade, INTEGRIS has perfected the generation of accurate out-of-pocket cost estimates for patients:
The health system began offering out-of-pocket charge estimates to patients in 2006 through the organization's "Consumer Priceline" program.
The program has expanded from 900 cost estimates per month conducted manually to about 20,000 estimates per month conducted through an automated process.
Point-of-service collections from patients have skyrocketed since INTEGRIS launched the health system's price-transparency initiative, rising from $900,000 in 2007 to $18 million in 2015.
"Our biggest measure of success is point-of-service collections. We're going to hit the $20 million mark," Meyer said.
At INTEGRIS, patient cost estimates are generated during the scheduling of medical procedures, which is an effective time to start engaging patients as financial partners, he said. "It's important for patients to understand their financial responsibility as soon as possible."
The ability to give patients accurate out-of-pocket cost information upfront has been a powerful market differentiator for INTEGRIS in recent years, Meyer said. "It's the value that we provide to the consumer more than the price."
Four of the state's 14 acute-care hospitals are participating in the new statewide accountable care organization, contracts have been cut with Medicaid and Medicare, and negotiations are underway with BlueCross BlueShield.
Six months after Vermont got federal approval to form an all-payer accountable care organization for more than three-quarters of The Green Mountain State's population, providers and payers have made the first steps in launching the ACO.
"We haven't arrived at the new payment models yet, but we are transforming," Judi Fox, CFO/vice president of finance and revenue cycle at Rutland Regional Medical Center (RRMC), said during her HFMA-ANI conference presentation this week in Orlando, FL.
The Vermont All-Payer ACO has "four steps to get us to risk," she said:
Step 1: Approval of the All-Payer ACO's Medicaid 1115 waiver by the Centers of Medicare & Medicaid Services (CMS) in November 2016
Step 2: The ACO has cut deals with two of its three primary payers—Medicaid and Medicare. Negotiations are underway with BlueCross BlueShield of Vermont. Together, these payers account for about 82% of the state's beneficiary lives. The population of Vermont is about 625,000.
Step 3: Hospitals take the lead in taking on risk in Vermont All-Payer ACO. In the first year of the initiative, which began in January, four of the state's 14 acute-care hospitals are actively participating in the ACO. The next ACO sign-up date for hospitals is Jan. 1, 2018.
Step 4: Setting and operationalizing strategies for success. RRMC is not participating in the All-Payer ACO this year, but the 133-bed facility is modeling what its performance could have been in the ACO, Fox said. "For us, there are a few pieces to the strategy. The first is negotiating a contract with the ACO, then ensuring our systems internally and with the care providers in our area are in place to make sure we can manage ACO care."
With hospitals bearing the most healthcare-provider risk in Vermont All-Payer ACO, RRMC is poorly positioned to participate in the initiative this year because the hospital does not employ primary care physicians, she said. "We need to enter into the risk with them. We can't do it without them. If primary care does not go in with us, we would only have about 1,000 lives, which is not big enough [to assume risk]."
Establishing contractual relationships with primary care physicians is a top goal at RRMC this year, Fox said.
Vermont All-Payer ACO is based on one of CMS' most advanced ACO models—Next Generation ACO. "It is built on the Next Generation ACO model, but we have slightly better financial pieces," she said.
Fox highlighted three provider "wins" from the All-Payer ACO so far:
Some relief from costs linked to prior-authorization: "This is a major win for us. The federal government said, 'You are at risk anyway.'"
$250 million in federal funding to support ACO infrastructure, including healthcare IT and bolstering of Vermont's existing patient-centered medical home program.
All-Payer ACO participation earns approval as an Alternation Payment Model (APM) under the Medicare Access and CHIP Reauthorization Act (MACRA), which comes with a 5% annual increase in Medicare reimbursement.
A half-dozen changes to the adjudication of Medicare claims-denial appeals are designed to ease a festering backlog of cases.
The new rules for Medicare claim-denial appeals feature several changes crafted to ease administrative burdens and speed reductions in a backlog nearing 1 million cases.
The new rules went into effect March 20. "This final rule streamlines administrative appeal processes, increases consistency in decision making across appeal levels, and improves efficiency for both appellants and adjudicators," a Department of Health and Human Services fact sheet on the new rules says.
Thursday afternoon, three officials at the Office of Medicare Hearings and Appeals (OMHA) led a presentation to walk healthcare providers through more than a dozen significant changes in the new rules. OMHA reports directly to Health & Human Services Secretary Tom Price, MD.
Disputed Medicare claims of more than $160 can be appealed to Administrative Law Judges (ALJs) and attorney adjudicators for reviews that can include a hearing. The last stop before federal court is the Medicare Appeals Council.
Thursday's Medicare Learning Network (MLN) presentation featured a half-dozen changes to the claims-denials appeals process at the ALJ-level that are designed to either quicken or streamline adjudication:
Attorney adjudicators are a new position at the ALJ level created this year to help clear the appeal backlog. "Attorney adjudicators are not authorized to conduct a hearing, which also means they cannot issue a decision in any case where a hearing is necessary," said Jason Green, JD, chief adviser at OMHA. "However, attorney adjudicators can issue decisions when a hearing is not required, including cases where the records support a fully favorable decision."
OMHA-100 form: This new form "is user-friendly and helps walk you through all the information required for a valid request for ALJ hearings," OMHA's Amanda Axeen, JD, said during the presentation. OMHA-100 can be used to request new hearings or review of appeal dismissals. The new form is not mandatory as long as previously required documents and information are filed.
Statistical Sampling Initiative: This new option for appeal adjudication "draws a random sample from a universe of claims and extrapolates—or projects—from the sample to the entire universe of claims," OMHA's Anne Lloyd said during the presentation. For example, she said a statistician could pick a sample of 30 claims out of a total of 1,000 for review in a ALJ hearing.
"A decision is made on those claims, and then the decision on those claims is extrapolated back to your 1,000-universe of claims that you started with," she said. Healthcare providers can't "cherry-pick" appeal cases to be included in the statistical sample, she added.
Party limit: "When multiple parties participated in the same hearing, the hearings not only took longer and were more challenging to coordinate, they also could become more adversarial," Axeen said. Under the new rules, if there are multiple entities that could be parties in an appeal, the first to file is the party of record for a hearing, with the remaining entities designated as non-party participants. However, an ALJ has discretion to allow any entity to be represented at a hearing.
Aggregating appeals: OMHA has tightened the rules for aggregating multiple appeals into one case. "In the past, appellants sometimes filed the request for hearing on one claim with the request to aggregate that claim with another claim in an appeal that had already been filed. Because of the logistics … and the appeals backlog at OMHA, this is administratively burdensome," Axeen said. Under the new rules, aggregation has to be requested at the same time appellants ask for a hearing in the claims they want to aggregate.
Dismissal authority: "An attorney adjudicator or ALJ may vacate the dismissal of a request for a hearing or a request for a review. Previously, appellants had to appeal any dismissal from the ALJ-level, which was time-consuming and inefficient," Green said.
Time or place of hearing objections: The new rules allow for "last-minute" hardships such as allowing oral rather than written notice of emergency circumstances the day of a hearing or the day before.
Healthcare providers are developing sophisticated strategies for engaging patients as financial partners.
As consumerism rises in the healthcare industry, ensuring patients know their financial responsibilities and helping them meet those obligations is becoming an essential capability at health systems and hospitals.
Health systems and hospitals must reach out early and often to help make sure patients pay for as much of their bills as possible, says Jane Berkebile.
She is the recently retired system vice president of revenue cycle for OhioHealth in Columbus. OhioHealth reported total operating revenue at $3.3 billion in fiscal year 2015.
"We're more likely to get paid if there is … at least an expectation that there is an out-of-pocket expense and we expect the patient to pay it."
Berkebile and Corey Meyer, director of strategic acceleration at Lancaster General Health in Pennsylvania, identify five elements to patient financial engagement.
1. Emphasizing Point of Service Collections
In 2015, OhioHealth posted $22 million in POS cash collections at the health system's dozen hospitals. In 2009, the figure was $9 million.
"We stress the need for communication with patients. We set targets. We track the dollars we collect," Berkebile says.
POS cash collection is a key focus for the training and education unit within OhioHealth's revenue cycle team. The training and education unit has about nine full-time staffers, and it provides instruction to revenue-cycle team members and employees outside the department who work with patients.
"It is critical that all of our physician practices know the policies for registration, point-of-service collection, and messaging to the patient."
2. Assessing Propensity of Patients to Pay
Many low-income patients benefit from the financial counseling services offered at OhioHealth, such as Medicaid enrollment facilitation.
In Ohio, the expansion of Medicaid under the Patient Protection and Affordable Care Act has been a boost for OhioHealth and the health system's low-income patients.
"That's a benefit to the patient," she says of the access to medical services that comes with Medicaid enrollment, adding that the health system's "charity care has been cut roughly in half" since Ohio expanded Medicaid to provide coverage to more low-income adults in January 2014.
3. Providing a Positive Financial Experience for Patients
Providers who fail to focus on the financial interactions with their patients do so at increasing risk, Meyer says. "In any other industry, a bad experience with the financial transaction will send the consumer looking for an alternative. Why would healthcare be any different?"
An August 2014 survey of 500 healthcare patients shows a clear link between billing experience and financial consequences, Meyer says. It found that 74% of patients who gave their billing experience a top score paid their bills in full, compared to a 33% payment rate for patients who were less than satisfied with their billing experience.
A positive billing experience also has a major impact on patient loyalty. For patients who gave their billing experience a top score, 95% reported they would return to the same hospital for another elective medical procedure.
For patients who were less than satisfied with their billing experience, only 58% said they would return.
"We are focusing on the entire financial experience from price estimation, to properly capturing insurance information, providing easy-to-understand bills, and offering multiple payment options including online payment and self-service payment plans," Meyer says.
4. Deploying Financial Advisers
OhioHealth employs dozens of financial advocates, with at least two at the health system's smallest hospitals and as many as 10 at the largest hospitals, Berkebile says. "We can really sit down with [patients] and help them understand the responsibility."
For non-elective inpatient cases, the financial advocates meet with patients as soon as possible following estimation of payer coverage and out-of-pocket costs.
Physicians are consulted to make sure patients are fit to hold a conversation. "We begin that dialogue, and we are standardized in our scripting and messaging. We keep asking for the copay and deductible until it gets paid," Berkebile says.
5. Streamlining Financial Processes for Patients
To help make elevated patient financial responsibility financially sustainable for healthcare providers, revenue cycle teams need to establish streamlined processes for patients to follow, Meyer says.
"We need make the financial experience simpler and less overwhelming for patients. Reducing surprises by explaining insurance benefits and options up front can reduce the sticker shock and can help engage patients in their care."
Mindset is a mammoth hurdle to clear as healthcare providers conduct financial conversations with patients, he says.
"Healthcare is something that no one really wants to buy. If I need a new couch or a new car, there is excitement in the purchase. Additionally, I will do some research on the item and the costs. With healthcare, it is not something that people want to spend money on or wade through cost information."
Building an expectation of patient financial responsibility can be delicate, but it is not an entirely foreign concept, Berkebile says. "It's getting patients to understand that healthcare costs money. When I take my cats to the vet, I have my checkbook out."
Bending the cost curve in healthcare requires not only developing new payment models but also using the same data-driven rigor that is applied to healthcare-provider finances to the clinical realm, Yale-New Haven Health cardiologist says.
Finance is the key to fixing what ails the healthcare industry.
"The status quo is increasingly untenable, and it is because of the finances," Harlan Krumholz, MD, director of the Yale-New Haven Hospital Center for Outcomes Research & Evaluation in Connecticut, said Monday at the HFMA-ANI conference in Orlando, FL.
"You can figure out how to make the numbers work," the cardiologist told an audience of well over 100 healthcare-finance executives.
"If the numbers don't work, nothing is going to happen. And with a sixth of the U.S. economy dependent on healthcare, how much perturbation do you think is possible without people getting in the street and saying, 'You are threatening my job. You are disrupting our local economies. You are putting our lives at risk.'"
Sound financial leadership in the healthcare industry is critically important for the national economy, he said. "The economy is intrinsically dependent on the success of the healthcare system. … There cannot be a rapid disruption in healthcare without ripple effects throughout the entire nation."
Ongoing increases in healthcare costs pose a clear and present danger to the national economy, the cardiologist and prolific healthcare researcher said. "The one fact that is undeniable is that the continuing rise in healthcare costs cannot be sustained over the long haul."
Adopting Financial Principles in Clinical Care
Fundamental principles of finance such as accountability and reliance on data for good decision-making must be applied in the clinical setting, Krumholz said.
"What is important is that the finance work does not get sequestered from the intrinsically important work in the healthcare system. For a long time in healthcare, only the finances were heavily quantified to determine whether an organization was making any money, so governing boards disproportionately worked on finances. In many places, finance became sequestered distant from the clinical enterprise. That is not going to work in the future."
As an example, the cardiologist cited research he had conducted on underutilization of beta blockers even after studies had shown the drugs to be very effective in the treatment of heart attacks.
"Every time cardiologists had given beta blockers late, they had missed an opportunity to reduce risk and to improve outcomes, and they were wasting money. … These were all good doctors who were trying to deliver the very best care, with no insight into how these opportunities were being missed. It would be like finance executives trying to do their job without spreadsheets."
To deliver valuable services to their patients, clinicians need to establish the same level of mastery over data and setting best practices as healthcare-provider finance teams have established, he said.
"Measuring performance and setting standards in clinical areas should not be that much harder than measuring performance and setting standards for finances at hospitals and health systems. … Imagine working without spreadsheets and somebody asks, 'How are you doing? How is the balance sheet?' And you say, 'I can't tell you, but we're working our *** off.'"
With more and more patients struggling financially to pay the high out-of-pocket costs associated with high-deductible health plans, clinicians need to consider the financial consequences of care decisions, Krumholz said.
Medicare's reimbursement system for physicians is emerging as a major driver of change in the healthcare industry.
The long journey to establish value-based healthcare business models has taken a giant leap forward this year.
The rollout of the Medicare Access and CHIP Reauthorization Act (MACRA), which is linking an ever-increasing share of physician payments for outpatient care to service-value rather than service-volume, is a game changer, according to the presenters of a workshop Sunday at the HFMA-ANI conference in Orlando, FL.
"The turning tide is largely driven by MACRA. It has changed healthcare significantly in terms of moving the mindset toward more value-based reimbursement," said Max Reiboldt, CPA, president and CEO of Coker Group, a healthcare consultancy based in Alpharetta, GA.
While there is considerable uncertainty over the ultimate fate of the Patient Protection and Affordable Care Act, MACRA is an example of how value-based healthcare appears destined to advance, he said.
"It has been a long, drawn-out process from March 2010, when President Obama signed the Affordable Care Act, to today. But regardless of what happens to the ACA or how the ACA changes, the concepts involved in shifting to value-based reimbursement are not going to change. MACRA illustrates the point. No one is talking about repealing MACRA."
Medicare's physician reimbursement model, which launched with performance reporting this year and is slated for full implementation in 2019, is making the shift from volume to value a real business condition in the healthcare industry, Reiboldt said.
"Everybody is now in a value-based reimbursement setting, and the reason for that is MACRA. We are all subject to MACRA."
MACRA Success Strategy: MIPS versus APMs
There are two physician-reimbursement tracks under MACRA:
In the near-term, most clinicians will be paid through the Merit-based Incentive Payment System (MIPS), which features data reporting in four performance categories that drive payment bonus and penalty mechanisms.
Clinicians participating in MACRA-approved alternative payment models (APMs) such as Medicare's Next Generation ACO can earn 5% payment bonuses.
For most healthcare organizations, MIPS is a more attractive option because it takes a blended approach to physician reimbursement based on both volume and value, said Justin Chamblee, CPA, senior vice president at Coker Group.
"It is still very much a volume-based reimbursement methodology, but it is volume-based with strings attached. It's not just how much you do, but also how well you do what you do."
From the perspective of physician financial success, the key to MIPS is a highly structured approach to balancing volume of services with quality of services, said workshop presenter William Strimel, DO, president of Mercy Physician Network, Mercy Health System in Philadelphia. MHS is an affiliate of Livonia, MI-based Trinity Health. "You need to have a robust system in place to manage quality."
Participating in an APM is potentially more lucrative for physicians. However, operating under APM contracts, which feature both significant upside and downside risk, poses more daunting challenges than MIPS, Chamblee said.
"Under an APM, Medicare is saying they will give physicians an annual 5% uptick in reimbursement for at least a few years. So, clearly there is an incentive to be in an APM, but an APM takes a lot more work. You have to be in the Medicare Shared Savings Program or some sort of innovation model to qualify for APM reimbursement."
Long-term strategy should be a prime consideration for healthcare organizations that are struggling with the decision to embrace MIPS or APMs, Strimel said. "Mercy is looking to get to full risk. So, if we are going to get to full risk, then we need to perform well in an APM. We need to build the infrastructure."
Do you lead a post-acute care facility? A $1,000 honorarium offer to help revolutionize the gathering and dissemination of your patients' medical information could come today.
Implementation of a federal law passed in 2014 to standardize patient-assessment data in post-acute care facilities has reached a key milestone, with national testing of the new data-collection methods set to begin in the fall.
The primary goals of the Improving Medicare Post Acute Care Transformation Act (IMPACT Act) of 2014 include enabling comparisons of quality across different post-acute care settings, boosting the exchange of information across post-acute care settings, and improving care coordination.
The Centers for Medicare & Medicaid Services is implementing the IMPACT Act, with the Rand Corporation serving as the initiative's primary contractor.
On June 20, CMS officials and Rand executives led a conference call update on the initiative for post-acute care providers, featuring information on the "Alpha 1" and "Alpha 2" early rounds of data-collection testing as well as plans to launch a national "Beta" testing effort in November.
The top objective of the IMPACT Act is to create a core set of standardized data at home health agencies, inpatient rehabilitation facilities, long-term care hospitals (LTCHs), and skilled nursing facilities, a Rand executive said during Tuesday's conference call.
Currently, these post-acute care providers each use their own patient-assessment methodology such as the LTCH Continuity Assessment Record and Evaluation (CARE) Data Set.
Based on an information-gathering effort Rand conducted in 2015 and 2016—including literature reviews, expert focus groups and consultations with CMS—Rand targeted five categories of patient-assessment data for standardization:
Function such as self-care ability and mobility levels
Cognitive function such as the presence of depression or dementia
Special services and treatments such as the need for a ventilator or dialysis
Medical conditions and co-morbidities such as diabetes and heart failure
Impairments such as incontinence or difficulty swallowing
The national testing set to start in November, which is designed to examine the reliability and validity of the data elements proposed for standardization, is slated to last six months. Fielding testing of patient assessments using the new standardized methodology will be conducted on computer tablets, with no requirement to enter the patient assessments in a post-acute care facility's electronic health record.
Participation in the national testing is voluntary.
CMS and Rand are seeking 210 organizations to participate in the national testing in 14 metropolitan areas:
Boston, MA
Harrisburg, PA
Philadelphia, PA
Fort Lauderdale, FL
Durham, NC
Chicago, IL
Nashville, TN
Kansas City, MO
St. Louis, MO
Dallas, TX
Houston, TX
Phoenix, AZ
Los Angeles, CA
San Diego, CA
Recruitment for national testing participants has begun through a phone-outreach campaign. This week's update conference call highlighted several incentives for post-acute care providers to participate in the testing:
Training and experience with the patient-assessment data collection methodology that could be mandated under the IMPACT Act
Opportunity to give "on-the-ground input" to CMS
Honorarium of $1,000
Internal and external publicity to show an organization's commitment to quality and innovation
Networking with peer organizations
Rand is expected to submit formal recommendations to CMS by the fall of 2018.
In proposed changes to Medicare's new value-based payment system for physicians, federal officials want to delay mandatory data reporting for another year and lower implementation burdens for small physician practices.
The 2018 proposed rule for Medicare's new payment system for physicians is consistent with the relatively flexible regulatory approach at the Centers for Medicare & Medicaid Services (CMS) under the Trump administration.
Next year's proposed changes to the Quality Payment Program (QPP), which were announced Tuesday afternoon, feature continuation of "pick your pace" for the new payment system's data reporting and expands exemption of physicians from mandatory participation.
The QPP was established under the Medicare Access and CHIP Reauthorization Act (MACRA), which gives physicians two service-reimbursement tracks: the Merit-based Incentive Payment System (MIPS) and Alternative Payment Models (APMs) such as Medicare accountable care organizations (ACOs).
"The most significant proposed changes for 2018 intend to ease the administrative burden for physicians, especially those who are in small practices and rural settings," Christopher Stanley, MD, MBA, director at Chicago-based healthcare consultancy Navigant, said this morning.
In the 1,052-page proposed rule, he says there are three prime examples of CMS regulatory flexibility, including a financial sweetening of MIPS for physicians in small practices who are struggling to adopt the new payment system:
More physicians will be exempt from MIPS as the threshold for inclusion is increased from 100 patients or $30,000 in Part B payments to 200 patients or $90,000 in payments.
Physicians will be able to participate in MIPS through Virtual Groups—working with other small practices to combine their administrative costs.
Physicians in small practices will receive extra "bonus" points within the Composite Performance Score for MIPS to recognize their value to communities where they practice.
The proposed rule eases reporting requirements significantly, but small and rural practices still face daunting QPP implementation challenges, Stanley says.
"Readiness will still require investment in technology such as healthcare IT, people such as care coordinators and data support, and process such as establishing a Virtual Group. The proposed rule does not give a pass to rural providers—it simply opens the door that they will still need to walk through."
In the proposed rule, there are several other examples of planned changes to QPP designed to give physicians more flexibility in operationalizing the new payment system:
Continuation of the "pick your pace" option for implementation of MIPS data reporting in 2018. There are four MIPS data-reporting categories: quality, improvement activities, advancing care information, and cost.
Continuing to allow the use of 2014-edition Certified Electronic Health Record Technology.
Adding the option for physicians to use facility-based scoring for facility-based clinicians such as hospitalists.
For physicians at small practices, adding a new hardship exemption for the advancing care information data-reporting category.
In a prepared statement Tuesday afternoon, CMS Administrator Seema Verma underscored her agency's commitment to regulatory flexibility during the QPP rollout.
"We've heard the concerns that too many quality programs, technology requirements, and measures get between the doctor and the patient. That's why we're taking a hard look at reducing burdens. By proposing this rule, we aim to improve Medicare by helping doctors and clinicians concentrate on caring for their patients rather than filling out paperwork."
Tom Nickels, executive vice president of the Chicago-based American Hospital Association (AHA) praised the proposed QPP changes in a prepared statement on Tuesday.
"[The] proposed rule continues the incremental, flexible implementation approach called for by hospitals, health systems and the more than 500,000 employed and contracted physicians with whom they partner to deliver care. We are encouraged by CMS's proposal for a facility-based clinician reporting option that may promote better alignment and collaboration on efforts to improve quality among hospitals and clinicians," Nickels said.
More details about the QPP proposed rule are available in a CMS Fact Sheet.
The deadline for submitting public comments on the proposed rule is Aug. 18. The QPP 2018 final rule is expected to be released in the fall.
Although nonprofit and for-profit hospitals are fundamentally similar, there are significant cultural and operational differences, such as strategic approaches to scale and operational discipline.
All hospitals serve patients, employ physicians and nurses, and operate in tightly regulated frameworks for clinical services. For-profit hospitals add a unique element to the mix: generating return for investors.
This additional ingredient gives the organizational culture at for-profits a subtly but significantly different flavor than the atmosphere at their nonprofit counterparts, says Yvette Doran, chief operating officer at Saint Thomas Medical Partners in Nashville, TN.
"When I think of the differences, culture is at the top of my list. The culture at for-profits is business-driven. The culture at nonprofits is service-driven," she says.
Doran says the differences between for-profits and nonprofits reflect cultural nuances rather than cultural divides. "Good hospitals need both. Without the business aspects on one hand, and the service aspects on the other, you can't function well."
There are five primary differences between for-profit and nonprofit hospitals.
1. Tax Status
The most obvious difference between nonprofit and for-profit hospitals is tax status, and it has a major impact financially on hospitals and the communities they serve.
Hospital payment of local and state taxes is a significant benefit for municipal and state governments, says Gary D. Willis, CPA, a former for-profit health system CFO who currently serves as CFO at Amedisys Inc., a home health, hospice, and personal care company in Baton Rouge, LA. The taxes that for-profit hospitals pay support "local schools, development of roads, recruitment of business and industry, and other needed services," he says.
The financial burden of paying taxes influences corporate culture—emphasizing cost consciousness and operational discipline, says Andrew Slusser, senior vice president at Brentwood, TN-based RCCH Healthcare Partners.
"For-profit hospitals generally have to be more cost-efficient because of the financial hurdles they have to clear: sales taxes, property taxes, all the taxes nonprofits don't have to worry about," he says.
"One of the initiatives we've had success with—in both new and existing hospitals—is to conduct an Operations Assessment Team survey. It's in essence a deep dive into all operational costs to see where efficiencies may have been missed before. We often discover we're able to eliminate duplicative costs, stop doing work that's no longer adding value, or in some cases actually do more with less," Slusser says.
2. Operational Discipline
With positive financial performance among the primary goals of shareholders and the top executive leadership, operational discipline is one of the distinguishing characteristics of for-profit hospitals, says Neville Zar, senior vice president of revenue operations at Boston-based Steward Health Care System, a for-profit that includes 3,500 physicians and 18 hospital campuses in four states.
"At Steward, we believe we've done a good job establishing operational discipline. It means accountability. It means predictability. It means responsibility. It's like hygiene. You wake up, brush your teeth, and this is part of what you do every day."
A revenue-cycle dashboard report is circulated at Steward every Monday morning at 7 a.m., including point-of-service cash collections, patient coverage eligibility for government programs such as Medicaid, and productivity metrics, he says. "There's predictability with that."
A high level of accountability fuels operational discipline at Steward and other for-profits, Zar says.
There is no ignoring the financial numbers at Steward, which installed wide-screen TVs in most business offices four years ago to post financial performance information in real-time. "There are updates every 15 minutes. You can't hide in your cube," he says. "There was a 15% to 20% improvement in efficiency after those TVs went up."
3. Financial Pressure
Accountability for financial performance flows from the top of for-profit health systems and hospitals, says Dick Escue, senior vice president and chief information officer at the Hawaii Medical Service Association in Honolulu.
Escue worked for many years at a rehabilitation services organization that for-profit Kindred Healthcare of Louisville, Kentucky, acquired in 2011. "We were a publicly traded company. At a high level, quarterly, our CEO and CFO were going to New York to report to analysts. You never want to go there and disappoint. … You're not going to keep your job as the CEO or CFO of a publicly traded company if you produce results that disappoint."
Finance team members at for-profits must be willing to push themselves to meet performance goals, Zar says.
"Steward is a very driven organization. It's not 9-to-5 hours. Everybody in healthcare works hard, but we work really hard. We're driven by each quarter, by each month. People will work the weekend at the end of the month or the end of the quarter to put in the extra hours to make sure we meet our targets. There's a lot of focus on the financial results, from the senior executives to the worker bees. We're not ashamed of it."
"Cash blitzes" are one method Steward's revenue cycle team uses to boost revenue when financial performance slips, he says. Based on information gathered during team meetings at the hospital level, the revenue cycle staff focuses a cash blitz on efforts that have a high likelihood of generating cash collections, including tackling high-balance accounts and addressing payment delays linked to claims processing such as clinical documentation queries from payers.
For-profit hospitals routinely utilize monetary incentives in the compensation packages of the C-Suite leadership, says Brian B. Sanderson, managing principal of healthcare services at Oak Brook, IL–based Crowe Horwath LLP.
"The compensation structures in the for-profits tend to be much more incentive-based than compensation at not-for-profits," he says. "Senior executive compensation is tied to similar elements as found in other for-profit environments, including stock price and margin on operations."
In contrast to offering generous incentives that reward robust financial performance, for-profits do not hesitate to cut costs in lean times, Escue says.
"The rigor around spending, whether it's capital spending, operating spending, or payroll, is more intense at for-profits. The things that got cut when I worked in the back office of a for-profit were overhead. There was constant pressure to reduce overhead," he says. "Contractors and consultants are let go, at least temporarily. Hiring is frozen, with budgeted openings going unfilled. Any other budgeted, but not committed, spending is frozen."
4. Scale
The for-profit hospital sector is highly concentrated.
There are 4,862 community hospitals in the country, according to the American Hospital Association. Nongovernmental not-for-profit hospitals account for the largest number of facilities at 2,845. There are 1,034 for-profit hospitals, and 983 state and local government hospitals.
In 2016, the country's for-profit hospital trade association, the Washington, DC–based Federation of American Hospitals, represented a dozen health systems that owned about 635 hospitals. Four of the FAH health systems accounted for about 520 hospitals: Franklin, TN-based Community Hospital Systems (CHS); Nashville-based Hospital Corporation of America; Brentwood, TN–based LifePoint Health; and Dallas-based Tenet Healthcare Corporation.
Scale generates several operational benefits at for-profit hospitals.
"Scale is critically important," says Julie Soekoro, CFO at Grandview Medical Center, a CHS-owned, 372-bed hospital in Birmingham, Alabama. "What we benefit from at Grandview is access to resources and expertise. I really don't use consultants at Grandview because we have corporate expertise for challenges like ICD-10 coding. That is a tremendous benefit."
Grandview also benefits from the best practices that have been shared and standardized across the 146 CHS hospitals. "Best practices can have a direct impact on value," Soekoro says. "The infrastructure is there. For-profits are well-positioned for the consolidated healthcare market of the future… You can add a lot of individual hospitals without having to add expertise at the corporate office."
The High Reliability and Safety program at CHS is an example of how standardizing best practices across the health system's hospitals has generated significant performance gains, she says.
"A few years ago, CHS embarked on a journey to institute a culture of high reliability at the hospitals. The hospitals and affiliated organizations have worked to establish safety as a 'core value.' At Grandview, we have hard-wired a number of initiatives, including daily safety huddles and multiple evidence-based, best-practice error prevention methods."
Scale also plays a crucial role in one of the most significant advantages of for-profit hospitals relative to their nonprofit counterparts: access to capital.
Ready access to capital gives for-profits the ability to move faster than their nonprofit counterparts, Sanderson says. "They're finding that their access to capital is a linchpin for them. … When a for-profit has better access to capital, it can make decisions rapidly and make investments rapidly. Many not-for-profits don't have that luxury."
5. Competitive Edge
There are valuable lessons for nonprofits to draw from the for-profit business model as the healthcare industry shifts from volume to value.
When healthcare providers negotiate managed care contracts, for-profits have a bargaining advantage over nonprofits, Doran says. "In managed care contracts, for profits look for leverage and nonprofits look for partnership opportunities. The appetite for aggressive negotiations is much more palatable among for-profits."
A former president of the National Association of Insurance Commissioners, who is also a former member of Congress, describes the potential fate of the bill intended to repeal Obamacare.
In Congress, sometimes a crushing legislative defeat is the clearest path to political victory.
The American Health Care Act, the Republican Party's best hope to repeal Obamacare this year, has 50/50 odds of passage in Congress and GOP lawmakers could soon be hoping their big bet goes bust, says Earl Pomeroy.
From 1993 to 2011, Pomeroy, a Democrat, represented his state in the US House of Representatives and served on the Ways and Means committee. Now, he is working in Washington as senior counsel at Atlanta-based law firm Alston & Bird LLP.
Pomeroy served as state insurance commissioner in North Dakota from 1985 to 1992. And from 1990 to 1991, he was president of the National Association of Insurance Commissioners.
In the first half of his interview with HealthLeaders, Pomeroy gave his views on the fate of the Patient Protection and Affordable Care Act. In this installment, he talks about the AHCA's prospects for passage. The transcript below has been lightly edited.
HLM: What is your prediction on passage of the AHCA?
Pomeroy: I expect the Senate will barely pass a bill, then present it to the House on a take-it-or-leave-it basis, which they will take. I give equal odds to the notion that the Senate will come up just short and can't get the votes for the AHCA, then they leave healthcare and go on to other issues.
HLM: What happens if the AHCA fails to gain passage?
Pomeroy: Failure to pass the AHCA will allow Republicans to use the Affordable Care Act for the same kind of politics they have used over the past four election cycles.
They will say, "The law is a mess, and we need more Republicans so we can get it repealed. We almost got it repealed and now we need more Republicans to get it repealed."
Voters would not be looking at the prospect of millions of people losing coverage, which is what would happen if the AHCA passed according to the CBO.
So, this is a rare case where the majority party may fair better if it fails to pass major legislation and takes the issue into the next election, than if they actually pass a bill and the consequences start to hit home.
HLM: What are the key developments to watch as the Senate tackles the AHCA?
Pomeroy: The first factor to look at is whether Senate Majority Leader Mitch McConnell is intent on passing a bill. He is intent on passing a bill—and doing it in June.
He is a very powerful leader, and he is making a sincere effort to repeal the ACA and advance the AHCA. What the majority leader sets out to do has to be taken extremely seriously.
The second question is that there are people on the far right side of the Republican caucus who don't like the bill and there are some moderates who have problems with it, so how does McConnell get to 50 votes, with Vice President Pence providing the 51st vote?
The closer the bill comes to enactment, the easier it is to settle important differences. In the end, senators are looking at whether they want a bill or don't want a bill. When you have a path to enactment right before you, it gets easier to cut the final deal.
Thirdly, can McConnell pass a bill with opposition from the right? It appears the only intransigent senator on the right is Rand Paul (R-TN).
Finally, there are the moderates. In the House, we saw the moderate Republican members folded in the end, and allowed the bill to move. It remains to be seen whether the Senate will go the same way.
In the days ahead, listen very closely to the voices in the moderate side of the caucus and the extreme right, and see whether they are saying, "My way or no way!"
At the moment, it seems most senators are satisfied to engage in bargaining to get to "yes" on the bill.
HLM: Assuming McConnell finds 50 votes for the AHCA, can the House and Senate agree on the same version of the bill?
Pomeroy: When I was a House member, the Senate always had leverage over the House in these major bills. It is entirely possible the Senate will cobble together a deal that will get just enough votes to pass. They will submit that deal to the House on a take-it-or-leave-it basis.
McConnell will tell Speaker Ryan, "This is the best that I can do, if you reject it, you are not going to get another proposal." Under those circumstances, the House usually goes along.
