The revised outlook from Moody's comes amid a larger-than-expected drop in cash flow this year and the ongoing uncertainty regarding federal healthcare policy for public and not-for-profit hospitals.
Moody's Investors Service has downgraded from stable to negative its 2018 outlook for the not-for-profit hospital sector based on an expected drop in operating cash flow.
"Operating cash flow declined at a more rapid pace than expected in 2017, and we expect continued contraction of 2%-4% through 2018," said Eva Bogaty, a Moody's vice president.
"The cash flow spike from insurance expansion under the Affordable Care Act in 2014 and 2015 has largely worn off, but cash flow has not stabilized as expected because of a low revenue and high expense growth environment," Bogaty said.
In a briefing released Monday, Moody's said hospital revenue growth is slowing and is expected to remain slightly above medical inflation, which declined to a low of 1.6% in September. Hospitals can't translate volume growth into stronger revenue growth because of the lower reimbursement rate increases across all insurance providers and higher expense growth.
In addition, rising exposure to governmental payers will dampen revenue growth for the foreseeable future due to a rapidly aging population and low reimbursement rates. Medicare and Medicaid, represent 60% of gross patient revenue in 2017, Moody's said.
Key drivers of expense growth include rising labor costs, driven by an acute nursing shortage and ongoing physician and medical specialist hiring. Technology costs are also rising as systems are upgraded and IT staff is needed for training and maintenance. While the ACA’s arrival heralded a drop in bad debt from 2014-16, bad debt rebounded in 2017 and will continue to grow at a rate of 6%-7% in 2018, Bogaty said.
"Rising copays and use of high deductible plans will increase bad debt for both expansion and non-expansion states," she said.
In the near-term, uncertainty regarding federal healthcare policy will have a marginal fiscal impact on NFP hospitals. Bogaty said ambiguity surrounding the ACA does affect the planning and modelling of long-term strategies, while recent federal tax proposals will add to rising costs for hospitals.
The outlook could be revised to stable if operating cash flow resumes growth of 0%-4%. A change to positive could result from expectations of accelerated operating cash flow growth of more than 4% after inflation, Moody's said.
Research shows opioid use on the last day in the hospital is the strongest predictor for determining how many opioid pills surgical patients would use once they got home.
Vigilant prescribing guidelines for surgeons could reduce by as much as 40% the number of opioid pills prescribed after operations, and still meet patients’ pain management needs, according to research published in the Journal of the American College of Surgeons.
“We specifically looked at the number of opioid pills that surgical inpatients took the day before discharge from the hospital, and we found that this number was the strongest predictor of how many opioid pills the patients would use after discharge,” said study lead author Richard J. Barth Jr., MD, a general surgeon at Dartmouth Hitchcock Medical Center in Lebanon, NH.
The researchers recommend following schedule for post-discharge prescription based on the number of opioid pills taken the day before discharge: No pills for patients who took no opioids the day before they left the hospital; 15 pills for those who took one-to-three pills the day before; and 30 pills for those who took four-or-more pills on their last day in the hospital.
Using phone calls and questionnaires, the study tracked 333 hospital inpatients discharged to home after six types of general surgery: bariatric procedures; operations on the stomach, liver, and pancreas; ventral hernia repair; and colon operations.
“This guideline was true for multiple different operations,” Barth said. “It didn’t matter whether someone had a colon operation, liver procedure or hernia repair; no matter what type of general surgery operation they had, this association held throughout all procedures studied. So the beauty of this finding is that one guideline would apply for multiple different surgical procedures.”
While 85% of patients were prescribed opioids after they went home, only 38% of the pills were taken. Age also influenced patient opioid use. Patients younger than age 60 averaged about 13 pills after discharge while those 60 and older averaged four pills.
The study also looked at why a small fraction of patients took more opioids than the new guidelines called for. “Over half of them were taking opioids for non-pain-related reasons, such as to sleep better, or because they felt they should take all the pills the physician prescribed and other various and sundry reasons,” Barth said.
Starting salaries of non-academic physicians in hospital/IDS-owned practices follow suit, with first-year candidates earning up to $86,000 more than their academic counterparts.
Specialty care physicians in non-academic hospitals make $122,795 more per year, on average, than their full-time, fully clinical colleagues in academic systems, according to a new survey from the Medical Group Management Association.
Under those same parameters, MGMA also found that primary care physicians in academic systems earn $57,129 less.
In addition to general salary differentials, starting salaries differences loom large. New hires, who are first year post-residency or fellowship, earned more starting out in a non-academic setting than an academic setting across the board, MGMA said.
The greatest difference was seen in primary care where the difference can be upwards of $86,000 more in hospital systems or private practice than in academic settings.
MGMA’s Physician Compensation and Production Survey compared nationwide data from more than 120,000 providers across more than 6,600 groups of various practice types.
The academic subset represents more than 17,400 providers in over 437 organizations, compared to non-academic data representing more than 96,000 providers in more than 5,000 organizations.
The survey also found that:
Specialty care, non-academic physicians report 1,200 more work Relative Value Units per year than academic physicians, namely due to academic providers reporting less billable clinical time than non-academic providers.
Specialty care physicians who are full-time, fully clinical reported earning a base compensation of $67,290 more than those physicians who were 67% or more research.
Primary care physicians who were full time, yet mostly research, reported making $9,556 more in base compensation than those physicians who were full time yet mostly clinical.
More than one-in-five physicians and advanced practitioners who practice in nursing homes specialize in nursing home care, and the trend suggests the rise of a significant new specialty in medical practice.
The number of doctors and advance practitioners in the United States who focus on nursing home care rose by more than a third between 2012 and 2015, according to a study this week in JAMA.
"We don’t know how this trend will play out in the long term, but nursing home specialists have the potential to change the way health care is delivered in this setting," said study lead author Kira L. Ryskina, MD, an assistant professor at the University of Pennsylvania’s Perelman School of Medicine.
Ryskina and colleagues used a Medicare database to analyze all Part B Medicare fee-for-service billings by generalist physicians, nurse practitioners, and physician assistants who provided nursing home based care during 2012-2015. "Nursing-home specialists" were defined as those clinicians billing at least 90% of episodes from a nursing home.
The number of these specialists rose from 5,127 in 2012 to 6,857 in 2015, a jump of 34%. Adjusted for the patient population this rise was even greater: from 3.35 nursing home specialists per 1,000 occupied beds to 4.58, an increase of 37%. During the same period, the overall number of clinicians billing from nursing homes was almost unchanged (33,218 to 33,087).
About 80% of hospital referral regions saw rises in nursing home specialists per bed, while 20% saw declines. "The variation in adoption of specialists indicates a lack of consensus regarding the benefits of specialization," Ryskina said.
Nursing home specialists made up about 21% of all nursing home clinicians in 2015, so the results may mark the earliest phase of a trend towards nursing home specialization. "The impact of that trend on patient care may already be considerable, though, because specialists provide a disproportionate share of the care," Ryskina said, adding that how this change will affect patient outcomes or care remains to be seen.
"On one hand, clinicians who practice in the nursing home exclusively could improve patient outcomes and reduce costs by leveraging expertise in nursing home processes of care, for example," she said. "But, concentrating patient care among nursing home specialists could also mean that patients are no longer seen by their primary care providers, who traditionally follow patients for years and across care settings."
Concerns over care quality have prompted the Centers for Medicare and Medicaid Services to propose a number of reforms as well as penalties for low-quality care in nursing homes. The nursing home industry may now be adapting to this stricter regulatory environment by employing physicians who specialize in nursing home care.
"Twenty years ago, the Hospitalist movement started in the same way, wherein hospitals were under pressure to reduce costs, and readmissions," Ryskina said. "We might be seeing the beginnings of a similar trend in nursing home care."
Study finds the Value-Based Payment Modifier program that ran from 2013 to 2016 failed to deliver on its central promise to increase value of care for patients, and may have made things worse.
Medicare's Value-Based Payment Modifier program inadvertently shifted money away from physicians who treated sicker, poorer patients to pay for bonuses that rewarded practices treating richer, healthier populations, according to a study this week in Annals of Internal Medicine.
In addition, components from that failed pay-for-performance prototype that do not account for patient demographics remain its successor program, and could scuttle its chances for success, researchers said.
"As long as these programs do not account adequately for patient differences, which is very difficult to do, they will further deprive practices serving low-income populations of important resources," said Eric Roberts, assistant professor of health policy and management at the University of Pittsburgh Graduate School of Public Health and lead author of the study.
The research suggests that the Value Modifier may have hit a trifecta of failure. It did not reduce the cost of care, nor improve the quality of the care, nor improve the health of the patients. In fact, it may have made things worse.
The Value Modifier was phased out in January, and was replaced by the Merit-based Incentive Payment System. Researchers said the new program likely will have no better results.
"We've gone headlong into pay for performance despite study after study showing that it doesn't improve quality or lower overall spending," said J. Michael McWilliams, MD, professor of healthcare policy at Harvard Medical School and senior author of the study. "We should expect more of the same from the MIPS because the MIPS is more of the same."
To accurately measure care delivery across different patient populations, it is important to adjust for the fact that different populations have different health outcomes depending on a number of factors, such as preexisting chronic illness and socioeconomic status. The Value Modifier adjusted for only a limited set of risk factors, researchers said.
When the researchers recalculated practices' performance measures after accounting for additional demographic and clinical differences, the performance gap between practices serving sicker or poorer patients and those serving wealthier or healthier patients narrowed by 9% to 68%, depending on the measure.
If the program had accounted for differences in patient populations, up to a quarter of practices would not have been eligible for bonuses provided through the program, while a similar proportion of practices likely would not have been penalized, the study found.
Since the program was budget-neutral, bonuses for physicians and practices that treated healthier, wealthier patients were paid for by penalties applied to those treating poorer, sicker people.
"The current pay-for-performance approach is costly, ineffective and headed in the wrong direction," McWilliams said. "If we want to improve quality, it is time to rethink our approach."
New Jersey did not follow federal regulations and CMS guidance when it developed payment rates for Medicaid school-based services that resulted in $606.7 million in unallowable or unsupported costs, according to the HHS Office of Inspector General.
New Jersey improperly claimed $606.7 million for its school-based Medicaid services, federal auditors allege, and they want a reimbursement.
Federal law requires schools to perform evaluations of children with disabilities to determine whether they are entitled to services, but Medicaid covers only those portions of evaluations that are medically necessary.
New Jersey's Department of Human Services has contested the findings in a detailed response appended to the audit.
Nicole Brossoie, assistant commissioner for public affairs for the department, said the state would rigorously contest the audit’s findings.
“It’s important to note that the report is just the first of many steps in the process of a federal audit,” Brossoie said. “The audit will go to CMS, and CMS will review the state’s response, consider the validity of documentation and make a determination regarding repayment. At that time, if the state remains opposed to the outcome, it can petition the Departmental Appeals Board. If the conclusion still is not acceptable to the state, the case can go to federal court.”
The audit by the Department of Health and Human Services' Office of Inspector General found that:
Public Consulting Group, a private company hired by the state of New Jersey to develop and submit Medicaid claims on behalf of the state, improperly altered school employees’ responses to time studies to indicate that their activities were directly related to providing Medicaid services when the responses indicated the activities were unrelated;
New Jersey improperly incorporated into its payment rates more than $400 million owed to the school employees’ pension fund despite not having made scheduled payments to the fund in nearly 20 years;
Salaries of some employees who did not provide health-related services were incorporated into the payment rates.
New Jersey did not maintain documentation related to the time studies, which it used to identify the percentage of time personnel provided particular services.
"We recommended that New Jersey refund $300.5 million in federal Medicaid reimbursement claimed based on payment rates that incorporated unallowable costs, work with the Centers for Medicare & Medicaid Services to determine the allowable amount of the remaining $306.2 million claimed for Federal Medicaid reimbursement, and revise its payment rates so they comply with federal requirements," OIG said.
Editor's note: This story has been updated to include a statement from a New Jersey Department of Human Services spokesperson.
Former general counsel was part of a scheme among top executives at WellCare in 2006 to inflate expenditures for behavioral health in the company’s annual reports to reduce payback obligations.
A fifth former executive at WellCare Health Plans has been sentenced for his role in a $35 million Medicaid fraud scheme.
Thaddeus M.S. Bereday, 52, of Tampa, FL received a six-month prison sentence this month, after pleading guilty in June to one count of making a false statement in connection with healthcare matters, the U.S. Department of Justice said in a media release.
A federal judge in Tampa also ordered Bereday to serve three years of supervised release that includes one year of home confinement and a fine of $50,000.
Bereday was general counsel at WellCare’s Medicaid HMOs StayWell and Healthease in 2006. According to a plea agreement, Bereday admitted that he and four other executives submitted inflated expenditures in the company’s annual reports to the Florida Medicaid Program that reduced the HMOs’ payback obligations for behavioral healthcare services.
In 2013, a jury found the four other executives guilty for their roles in the scheme. They are:
Todd S. Farha, former WellCare CEO, who was convicted of two counts of healthcare fraud and sentenced to three years in prison;
Paul L. Behrens, former WellCare CFO, who was convicted of two counts of making false statements relating to healthcare matters and two counts of healthcare fraud, and received a two-year prison sentence;
William L. Kale, former vice president of Harmony Behavioral Health Inc., a subsidiary of WellCare, who was found guilty of two counts of healthcare fraud and was sentenced to one year and one day in prison;
Peter E. Clay of Wellesley, Mass., WellCare’s former vice president of medical economics, was found guilty of making false statements to a law enforcement officer, and sentenced to five years’ probation.
The convictions were all upheld by a federal appellate court in 2016.
In 2009, WellCare agreed to pay $40 million in restitution, forfeit another $40 million, and cooperate with the government’s criminal investigation. The company complied with all of the requirements and the criminal information was later dismissed.
National data show a major shift in eye surgeries from hospitals to less-expensive ambulatory surgery centers where care may be delivered faster and closer to home for some patients.
The proportion of cataract surgeries performed at surgery centers increased steadily, reaching 73% in 2014, compared to 43.6% in 2001, according to a study inJAMA Ophthalmology.
Researchers from the University of Michigan Kellogg Eye Center examined claims data for 369,320 enrollees age 40 and older in a nationwide managed care network who had cataract surgery.
"The increase in utilization occurred in many U.S. communities such that in some places nearly every cataract surgery took place in an ambulatory care center," said senior author Joshua Stein, MD, associate professor of ophthalmology and eye policy researcher at the U-M Institute of Healthcare Policy and Innovation.
The reasons for the increasing popularity of ambulatory surgery centers include convenience, lower out-of-pocket costs for patients, and decreased cost-per-case for insurers. However, hospitals are better prepared than surgery centers if medical complications happen.
One analysis estimated that cataract surgeries performed at ambulatory surgery centers rather than hospitals saved Medicare $829 million in 2011.
Consumers save from the shift to surgery centers where average cataract co-pay in 2014 was $190 compared to $350 at a hospital outpatient department, authors write.
Patients were more likely to undergo cataract surgery at an ambulatory surgery center if they were younger age, had higher income, and lived in states without certificate-of-need laws. CON laws regulate the number of ambulatory care centers permitted to operate.
More affluent people were more likely to live in communities with more ambulatory care centers. This may have the indirect impact of limiting access to cataract surgery for less affluent patients.
The shift is happening beyond cataract surgery and includes cornea, glaucoma, retina and strabismus surgery.
The rate of increase in ambulatory surgery center use for cataract surgery of 2.34% a year was similar to the rate of increase for strabismus surgery and retina surgery.
The rate of increase for glaucoma surgery was faster than cataract surgery. The rate of increase for cornea surgery was slower than cataract surgery.
Review of randomized clinical trials shows potential for harm and waste in unnecessary blood transfusions, which could be reduced by 40% to 65% under new guidelines.
A study published this week inJAMA Internal Medicine endorses guidelines to reduce wasteful blood transfusions while improving patient safety and outcomes.
Researchers from Johns Hopkins, Cleveland Clinic and NYU Langone Medical Center compared liberal versus restrictive blood transfusions. Liberal transfusions are those given to patients with 9 to 10 grams of hemoglobin per one-tenth liter, or deciliter, of blood volume. Restrictive transfusions are those given to patients with 7 to 8 grams per deciliter.
Many of the clinical trials examined in the study used the number of patients who died within a 30- to 90-day window post-transfusion as a measure of patient outcome. Of the more than 8,000 patients included in eight clinical trials that were reviewed, there was no difference in mortality between liberal or restrictive transfusions.
One clinical trial found an increased mortality associated with liberal transfusion, and occurrence of blood clots was increased in the liberal cohort in a study that involved traumatic brain injury patients.
The researchers also found that the largest randomized trials reduced the amount of blood used by 40% to 65%.
"In summary, there is no benefit in transfusing more blood than necessary and some clinical trials actually show harm to patients," said Steven Frank, MD, professor of anesthesiology at the Johns Hopkins University School of Medicine. "All this does is increase risks and cost without adding benefit."
The report also provides a how-to guide for launching a patient blood management program and offered these recommendations:
Stable adult patients, including critically ill patients, with hemoglobin levels of 7 g/dL or higher should not be transfused.
Patients undergoing orthopedic or cardiac surgery, or patients with underlying heart disease with hemoglobin levels of 8 g/dL or higher should not be transfused.
Patients who are stable and not actively bleeding should be transfused with a single unit of blood and then reassessed.
"These recommendations don’t apply to patients with acute coronary syndrome, severe thrombocytopenia and chronic dependent anemia, including sickle cell, because we didn't see enough evidence for patients with these conditions," Frank said.
Earlier this year, Frank reported the results of a four-year project to implement a blood management program across the Johns Hopkins Health System, reducing blood use by 20% and saving more than $2 million on costs over a year.
"Our analysis provides the evidence to reassure providers that restrictive transfusion practice actually improves patient care quality and safety, while yielding substantial reductions in health care expenditure and increasing the blood supply for patients with life-threatening bleeding," Frank said.
Earlier this year, The Joint Commission reported that hospitals could save more than $1 million per year by eliminating unnecessary red blood cell (RBC) transfusions, according to a new study. Blood transfusions are the most frequently performed hospital procedure in the country and cost $1,000 per unit of blood. Transfusions also come with potential health risks like allergic reactions, fever, and iron overload.
A study in the August 2017 issue of The Joint Commission Journal on Quality and Patient Safety found that RBC transfusions have increased 134% between 1997 to 2011. However, 50% of them may be unnecessary, costing each hospital an average $1 million per year.
Provisions in both the House and Senate tax bills that would affect hospitals are raising alarms, as lobbyists for the hospital industry urge House and Senate leaders to reconsider.
If tax reform is a game of winners and losers, then right now hospitals – at least temporarily – occupy the losers’ column in both the House and Senate plans.
Several provisions in the sweeping tax plan approved by House Republicans this week will harm hospitals and the patients they serve, the American Hospital Association said.
The Tax Cuts and Jobs Act (H.R.1) "would eliminate hospitals' ability to access low-cost capital financing through tax-exempt private-activity bonds and advance refunding bonds," AHA said in a media release. "In addition, the bill would impose a 20% excise tax on pay for certain nonprofit hospital employees."
The bill passed 227-205 along partisan lines.
"For many communities, tax-exempt financing, such as private activity bonds, has been a key to maintaining vital hospital services," AHA Executive Vice President Tom Nickels said. "If hospital access to tax-exempt financing is limited or eliminated, hospitals' ability to make investments in new technologies and renovations in the future will be challenged."
As for the proposed 20% excise tax, Nickels said that "there is already a rigorous process prescribed by the Internal Revenue Service for setting up executive compensation."
"The process requires an impartial panel drawn primarily from the board of trustees, which is charged with setting CEO compensation based on the marketplace and documenting deliberations to attract the best talent," he said.
The House bill also strips from the tax code the ability for individuals to file an itemized deduction of medical expenses, beginning next year, and eliminate the deduction for contributions to Archer medical savings accounts.
"We are troubled that the proposal would eliminate an important deduction for people with high medical costs," Nickels said.
Meanwhile, AHA is raising concerns about the Senate Republicans’ tax bill, still in committee, which would repeal the Affordable Care Act’s mandate that individuals have health insurance.
"The Congressional Budget Office last week estimated that repealing the individual mandate would decrease the number of individuals with health insurance by 4 million in 2019 and 13 million in 2027," AHA said. "In addition, CBO estimated that premiums in the non-group health insurance market would increase by about 10% 'in most years of the decade' relative to the agency's baseline."
AHA cited CBO estimates that the repeal would save the federal government $338 billion over 10 years by cutting federal spending on Medicaid by $179 billion and cutting Health Insurance Marketplace subsidies by $185 billion.
AHA joined a coalition of health groups this week and urged congressional leaders not to include the provision in tax legislation.
"We join together to urge Congress to maintain the individual mandate," the groups wrote. “There will be serious consequences if Congress simply repeals the mandate while leaving the insurance reforms in place: millions more will be uninsured or face higher premiums, challenging their ability to access the care they need. Let’s work together on solutions that deliver the access, care, and coverage that the American people deserve."
