A controversial JAMA study faces a rebuttal from a researcher who believes readmissions policy has worked largely as intended, with no linkage between lower readmissions and higher mortality.
A study that links lower hospital readmission rates higher mortality among heart failure patients is being challenged.
The study, which appeared this week in JAMA Cardiology, estimates that as many as 10,000 heart failure patients could die prematurely each year because of well-intended but misguided efforts that keep them out of the hospital to avoid the financial penalties attached to higher readmissions.
The findings flatly contradict a July study in JAMA that reviewed more than six million hospitalizations and showed no linkage between reduced 30-day readmissions and increased post-discharge mortality.
Kumar Dharmarajan, MD, chief science officer at Clover Health and lead author of the July JAMA study, spoke with HealthLeaders Media about the conflicting conclusions. The following is an edited transcript.
HLM: These two studies attempt to answer the same question, but come up with the opposite answers. How is that possible?
Dharmarajan: Their study – and I say this with respect – is technically limited for a few reasons.
What they did, essentially, is look at 30-day readmission rates and 30-day mortality rates over time. The problem with that is, just because two things are changing over time, it’s hard to know if they’re related. As a dumb example, in the summer people swim more and eat more ice cream and there are more drownings. Does that mean ice cream causes drowning?
Their analysis is interesting, but they don’t go to the next level, which is what we did. The premise in our paper was that, if it is true that readmissions are causing greater mortality, we would expect to see that when we looked at trends, not just nationally, which is what they did, but within each hospital.
We looked at 4,000 or more hospitals in the United States caring for patients with heart failure. For each hospital we plotted that trend in readmission and mortality. If readmission declines are harming patients, we would expect to see that the hospitals with the greatest decrease in admissions would have the greatest increase in mortality. We found that there was no relationship. To the extent that there was a relationship, it was the opposite. Hospitals that were dropping readmission rates had mortality rates that were improving.
The second limitation is that they didn’t use national data. They used a heart failure registry called Get with the Guidelines that includes data from a little more than 400 hospitals. Those 400 hospitals are not randomly selected. They wanted to participate in the registry. That would be OK if those hospitals were representative of the national picture, but they are not.
They actually see that readmission declines are mostly happening after 2013. Nationally, most readmission declines in the last decade happened between 2010 and 2012 and not much after 2013. They are clearly working with a different data set.
The second thing that proves they are looking at different hospitals is that they found that heart failure admissions were increasing over time. Nationally, they’ve been declining. They’re looking at a small non-representative sample. Even if they are absolutely right – and I still have my concerns – that those hospitals are demonstrating some sort of trend of harm, we clearly know that their data is not representative of what is happening nationally.
The other thing is they are just looking at heart failure. We looked at heart failure, pneumonia and heart attacks, and the national data sets. We had 30X the number of hospitalizations in our study. What we found was consistent across all three conditions. They are more heart-failure centric as opposed to trying to understand what is happening across conditions.
HLM: It sounds like you’re dismissing this new study.
Dharmarajan: I don’t believe their findings, which simplistically plot a trend over time with readmissions and mortality. There is a real danger in looking at things like that. For every 1% decline in readmissions, they’re seeing a 1% increase in mortality! That doesn’t pass the sniff test!
Unfortunately, there is a predilection to want to believe this new finding because no one likes penalties in the first place.
HLM: Is it possible that there is something uniquely intrinsic in heart failure care that makes patients more vulnerable to readmissions reductions?
Dharmarajan: I would say those are the types of patients who benefit most from a focus on readmissions. What have hospitals done nationally in response to these penalties? They’ve improved transitions in care. They are more likely to focus on getting the medication right after discharge, and getting appointments set up when they leave the hospital and appropriate support services when they return home and coordinating with community-based organizations to help after discharge, making sure they’re seen soon after discharge in an outpatient setting. These are commonsensical things that were not a focus before these penalties came in. It hard for me to believe that things like that would cause harm.
HLM: Do you believe CMS’ readmissions policy has worked as designed?
Dharmarajan: Clearly readmission rates have declined. To the extent that the aim was to lower readmissions, they’ve had an effect there. The way that they’re being interpreted by the federal government and built into policy could be improved. Right now you have winners and losers. I would love to have a world where everyone won if the outcomes improve across the country and not so much zero sum, because people are staying healthier and out of the hospital that is going to save Medicare money and provide better care for beneficiaries. I am not sure you need to have a penalty to do that.
HLM: What about concerns that readmissions penalties harm safety nets that can’t cherry pick their patients?
Dharmarajan: It’s true that hospitals caring for vulnerable patients of low socioeconomic status are more likely to be penalized, but that is because the outcomes have been worse at those hospitals. To me the ultimate accountability is to the patient, not the hospital. There is a study that showed that readmission rate disparities between safety net and non-safety net hospitals have declined over time as these penalties have kicked in, which means that if you are patient at a safety net hospital, your improvement in readmission rates have been more marked that patients at non-safety net hospitals.
HLM: How are hospital administrators and clinicians supposed to respond to these diametrically opposed findings of these studies?
Dharmarajan: You need to do things that make sense for patients, like make sure their care transition is top notch. Make sure that they are getting great post-discharge care. Make sure their meds are correct and that they have adequate support and appointments in place. Let’s not send someone out of the hospital without having their meds checked or without setting up their discharge plan and expect a sick 85-year-old to set everything up for him or herself.
If the message from the new paper is that hospitals are keeping people out when they should be readmitted – and again I don’t believe it -- they need to stop doing that.
Specialists, particularly surgeons (85%) and Ob/Gyns (85%), were far more likely to be sued than primary care doctors. Psychiatrists (29%) and dermatologists (28%) were the specialists named least frequently in lawsuits.
More than half (55%) of physicians responding to a Medscape survey say they’ve been sued for malpractice at least once in their career, and many say that experience changed their attitudes toward their patients.
The findings represent a 15% increase in malpractice suits over Medscape’s 2013 Malpractice Report.
“We really need to do something about this,” said Hansa Bhargava, MD, senior medical correspondent for Medscape. “We’re talking about the costs of medicine, and we know how much healthcare costs per capita, but we still have this system where there are a lot of lawsuits.”
Failure to diagnose a patient’s condition or complications arising from treatment were the most common reasons that patients sued, the survey found.
Medscape received more than 4,000 responses from physicians across 25 specialties and found that specialists, particularly surgeons (85%) and Ob/Gyns (85%), were far more likely to be sued than primary care doctors. Psychiatrists (29%) and dermatologists (28%) were the specialists named least frequently in lawsuits.
Accordingly, malpractice insurance premiums range from nearly $200,000 annually for a New York City Ob-Gyn, to about $38,000 for an internist.
Being the subject of a malpractice suit took 58% of physicians by surprise and 51% said the experience changed their attitudes towards patients; 26% say they no longer trust patients or treat them differently, such as practicing defensive medicine; 6% left the practice setting, and 3% changed insurers, the survey found.
“I was surprised with how only 26% of doctors say they no longer trust patients,” Bhargava said. “Being sued, and especially since a lot of these lawsuits are either dismissed or settled out of court, can be a very scarring experience, especially if you aren’t at fault, which speaks to the fact that most physicians go into the profession because they truly want to help patients.”
Most suits were dismissed or settled before trial but the experience takes its toll on physicians, one-third of whom said they spent more than 40 hours preparing their defense. The same percentage said it took three to five years to resolve their case.
Fifty-eight percent of physicians said they were either encouraged or required to settle by their hospital or malpractice insurer.
“I could tell you stories of colleagues who have been sued and more than often the hospital or insurer just wants to settle,” Bhargava said. “They don’t want to incur charges, and it is time consuming for everyone involved.”
“The other issue is that if patient sues, the attorney will go through the chart and sue every single doctor and nurse on the chart because they want to cover all the bases,” she said. “That creates a lot of negativity toward the system and the patient.”
The majority of physicians cited better communication with patients as a way to reduce the number of malpractice suits, along with medical screening panels to determine the merits of a suit and caps on non-economic damages.
“We’re not just saying ‘doctors communicating better with patients,’ but perhaps putting less emphasis on RVUs or how many patients you see each hour or you have to document this and that,” Bhargava said. “Giving time to speak with the patient, which is so essential in healthcare, I’d like to see that more.”
That better communication, apparently, does not involve an apology. Only 2% of physicians said that “saying ‘I’m sorry’ would have made a difference.” Eighty-three percent said it made no difference.
“It probably speaks to the larger issue of the patient/physician relationship,” Bhargava said. “Physicians are feeling boxed in, especially with the requirements around documentation and billing, and that time for the patient/physician interaction has decreased. So, perhaps physicians feel there is no room to build a relationship because they don’t have time for it, so what is the point of saying ‘I’m sorry.’”
An alarming new study suggests that the emphasis on reducing hospital 30-day readmissions has inadvertently led to increased risk of death for Medicare patients hospitalized with heart failure.
As many as 10,000 heart failure patients could die prematurely each year because of misguided efforts that keep them out of the hospital to avoid the financial penalties attached to higher readmissions, according to a study published this week in JAMA Cardiology.
Study co-author Gregg C. Fonarow, MD, a researcher and professor of cardiovascular medicine at UCLA, spoke with HealthLeaders Media. The following is an edited transcript.
HLM: The implications of this study are staggering. What are we to make of them?
Fonarow: This study represents the sum of all fears. Concerns were raised about flaws in the readmission metric, flaws in the ways the penalties were being constructed and the potential and concern for unintended consequences. Now we’re seeing that.
That’s not to say that trying to reduce preventable readmissions is not important. But, it needs to be coupled with strong efforts to ensure patient safety and to reduce preventable deaths.
HLM: How many lives are we talking about?
Fonarow: If we were to extrapolate this to all Medicare beneficiaries hospitalized with heart failure, we are talking about maybe 10,000 patients a year with heart failure losing their lives as a consequence of this program. Even one patient being harmed isn’t worth any degree of readmission reduction but to have potentially each year 10,000 or more patients having been potentially impacted with increased mortality is just an absolutely devastating level of potential harm.
HLM: What’s wrong with the design of the policy?
Fonarow: The way Medicare constructed their readmission reduction program was solely focused on 30-day readmissions with strong financial penalties up to 3% of every Medicare dollar. But, when you look at what was Medicare doing to ensure patient safety and trying to incentivize around lower mortality rates, the maximum penalty a hospital could face, even with a 100% mortality rate, would be 0.2% of their total Medicare revenues. That’s sending a message 15X from a financial standpoint that it’s more important to reduce readmissions than to be focused on patient safety or mortality.
HLM: Why the focus on heart failure patients?
Fonarow: The concern was greatest for heart failure patients. This study adds very striking, statistically significant, clinically relevant evidence that risk-adjusted mortality rates for Medicare beneficiaries hospitalized with heart failure have gone up. They’ve gone up in the first 30 days and that continues on out to one year. It looks as if the hospital readmission reduction program has been associated with a serious and devastating unintended consequence of increased mortality for heart failure patients.
HLM: How does this unfold at the hospital level?
Fonarow: Part of it is the financial resources being taken away by virtue of the penalty. Those of lower socioeconomic status treated at safety net hospitals are more likely to be re-hospitalized in a way that wasn’t adequately captured in the 30-day readmission metric. Those hospitals got oversized penalties. The most vulnerable patients are treated at the most vulnerable hospital, and desperately needed resources were taken from those hospitals, for which they no longer had available for staff or programs on patient safety and key therapies that can improve outcomes.
But there are also other ways. This financial penalty and public reporting led to hospitals putting pressure on clinicians to reduce 30-day readmissions and keep patients out of the hospital. So, the clinician trying to respond to the pressure and incentive has a patient who is at home and not doing well but they’d been hospitalized 21 days before and you’re in this dilemma. The clinical situation may necessitate hospitalization. You want to do the right thing for the patient, but maybe if I can buy a little more time and leave them at home, take that little extra risk it will work out OK and if they get hospitalized beyond 30 days that is OK.
There are patients being shunted from the ER to an outpatient observation unit rather than being hospitalized because of Medicare policies. Now, that patient can no longer for qualify for home health or skilled nursing facility or other resources because they were not hospitalized.
So, there are a number of ways by which these incentives inadvertently could have led to this harm that’s been observed.
HLM: Do you believe readmissions should be a quality metric?
Fonarow: Readmission reductions in isolation is not patient-centered. It needs to be in conjunction with meaningful patient-centered metrics including their health status and patient survival and coupled with strong measures to ensure there is not gaming and not unintended consequences. In light of this data, for heart failure patients, readmissions needs to completely and immediately cease and we must find ways to mitigate the damage that has already been done before ever reconsidering that as a valid metric for heart failure patients.
HLM: What can be done to restore 30-day readmissions as an accurate metric for value-based, care coordination?
Fonarow: There are a number of measures where you can look at the processes that have been associated with outcomes, and also directly measure patients’ health status as well as, most critically, patient survival. They can be integrated into a multi-dimensional component of assessment and still incentivize that kind of quality of care and moving beyond the hospital walls and investing in heart failure disease management programs that have been shown to improve all components of care and outcomes.
HLM: What should be done with the study?
Fonarow: I would like to see immediate action taken by Medicare to convene a multi-stakeholder panel to discuss steps forward to try and modify the program, suspend it with regards to heart failure patients, and develop proactive steps to mitigate it and better understand lessons learned and how these kinds of unintended consequences can be avoided in the future.
HLM: How did this metric morph into its evil twin?
Fonarow: You can say it did reduce readmissions. It didn’t backfire that way, but it backfired in a far more disastrous way.
It’s why it’s so important, just as we not unleash a new therapy on patients without having tested it, it’s critical to recognize that policy decisions can have disastrous side effects. Major policies should be pilot tested. There needs to be proactive close monitoring for any unintended consequences.
This was unleashed with no monitoring. Here we are talking about data that took a few years to assemble, but as early as 2013-14 there was a clear increase in mortality that we are just finding out about. Now that this data has come to light, it’s critical that we act.
Although CMS sought to improve flexibility and simplicity for physicians, a physician advocacy group says the results are mixed and that more work needs to be done.
In what could prove to be time-consuming nightmare, the 2018 reporting year will require physicians to submit a full 12 months of data, instead of the three months required in 2017, according to PAI board member Matthew Katz, who is also CEO of the Connecticut State Medical Society.
Katz spoke with HealthLeaders Media about the rules change. The following is a lightly edited transcript.
HLM: What do you like about the final rule for 2018?
Katz: Let’s put aside whether we like the program itself. When it comes to the changes that came in, PAI appreciates the addition of some exemptions for the smaller practices. This final rule expanded those exemptions to cover more small practices; those that have low volumes of Medicare patients, or low dollar amounts when it comes to the amount of care they provide for Medicare beneficiaries.
It does not punish physicians who are stuck with electronic medical records vendors who have not been able to update their programs. CMS’s previous approach was going to be you had to be 2015CEHRT certified. A lot of smaller practices purchased EMRs a few years ago with the understanding that those EMR companies were going to update their systems. They never did. The doctors were going to be punished if CMS didn’t make some changes. So, they’re allowing the 2014 or 2015 CEHRT, and giving bonuses for 2015 because it doesn’t punish doctors whose EMR vendors have not been able to adhere to the requirements.
There is also some progress in the episode-based measures they’ve come up with. We would like to see that expanded. They are providing some additional bonuses to small practices, which is good. And, they are focusing more on complex patients and providing bonuses for better care for dual-eligible patients. We think that is good.
Another thing we liked, the penalties for PQRSthat were in place a few years ago, and the value modifier that were hitting doctors this year were going to be 4% and 2% in reductions. CMS did change that and make it 2% and 1% reductions, recognizing that some of the requirements may not have been the most sufficient for analyzing and having physician reports.
However, they still issued the penalties and are issuing them on Jan. 1. So, doctors will see a loss in revenues from Medicare as a result of those previous programs.
HLM: So, what’s the bad news?
Katz: It’s disappointing that, even though it is not ready for prime time, they are rolling out a cost component. No, it’s not 20% or 30% as originally envisioned, it is 10% of a physician’s score, which impacts them significantly. Even though it is not a tried-and-tested system that Medicare is rolling out for evaluating costs, they are going to make it count toward a physician’s score, which affects their payments, or lack thereof. That is problematic.
Also, some of these bonuses for small practices are good, but they aren’t going to kick in until the 2020 payment year. No one is getting them for a while.
HLM: PAI has raised concerns about new reporting requirements. Why?
Katz: A big problem we have is that in 2017 physicians only had to track quality for three months. We anticipated that CMS would continue that because they haven’t been able to tell doctors if the three months of data reporting was good, bad or indifferent. We were hoping that they were going to allow just three months in 2018. But, they are requiring a full year of quality reporting, starting Jan. 1, which gives a lot of practices less than two months, and many practices that hadn’t even started reporting for this year, a short period of time to figure out how they are going to report for next year.
HLM: Beyond the time crunch, why is this a problem?
Katz: Those practices that are reporting from this year won’t even know what CMS has valued their reporting at, good, bad or indifferent, until after they’ve started to collect. It could be six to eight months before they know. If they’re doing something wrong now they’ll be doing it wrong next year and they won’t know until the end of the year. So, we were hoping for more flexibility on the reporting time frame. We didn’t get it.
They are now requiring reporting as of Jan. 1. There is no time to reflect. No time to evaluate, and therefore no time to improve if the quality reporting itself is bad, let alone if the quality it’s purporting to measure is bad. With the reporting, you need to know if you’re doing it right. It you’ve got garbage coming in you’re going to have garbage coming out. Now they’re asking for that same garbage before they’ve evaluated it.
CMS should be rewarding those providers who are providing you with data, improving quality and reducing costs. If it’s just a reporting game in a timeframe, then no one is going to be focused on the quality improvements or cost reductions. They’re just going to focus on getting information, whatever it looks like, and however they can get it to CMS to meet those time frames.
HLM: Is there any chance that CMS will tweak this rule as 2018 unfolds?
Katz: Technically, this is the final that can’t be changed. They provide some additional comment period, and over the years CMS has made some last-minute adjustments on various components of other programs when they’ve recognized that something needed to change.
They also said that they are not finished with some parts of this when it comes to the flexibility. So, they will be putting more out.
CMS chief vows to 'turn the page on Medicaid' and grant states more leeway; pushes work requirements for 'able-bodied' adults; raps Obama Administration's 'soft bigotry of low expectations.'
Centers for Medicare & Medicaid Services Administrator Seema Verma on Tuesday lashed out at the "Washington knows best, one-size-fits all Medicaid policy" and said the Trump administration will push for more state control of their programs.
In her first major speech on Medicaid, delivered at a plenary session at the National Association of Medicaid Directors Fall Conference in Arlington, VA, Verma said the administration's "vision for the future of Medicaid is to reset the federal-state relationship, and restore the partnership, while at the same time modernizing the program to deliver better outcomes for the people we serve."
That flexibility for states is expected to include allowing work requirements for "able-bodied" Medicaid enrollees that were brought onto the program under the Affordable Care Act, a topic that Verma touched upon several times in her speech.
"The thought that a program designed for our most vulnerable citizens should be used as a vehicle to serve working age, able-bodied adults does not make sense," she said, "but the prior administration fought state led reforms that would've allowed the Medicaid program to evolve to meet the needs of these new individuals, and they did this, even when increased coverage was at stake."
"Believing that community engagement requirements do not support or promote the objectives of Medicaid is a tragic example of the soft bigotry of low expectations consistently espoused by the prior administration. Those days are over," she said. "Let me be clear to everyone in this room, we will approve proposals that promote community engagement activities."
Verma referred to "able-bodied" or "non-disabled" adults, individuals and enrollees seven times in her speech, while making the case for work requirements. Her speech included no specifics on what percentage of Medicaid enrollees were considered "able-bodied."
Critics have called claims that healthy adults are bilking the program a red herring, and studies have shown that the numbers of "able-bodied" adults who are on Medicaid are relatively low, and can be explained by other factors, such as leaving the workforce to act as a caregiver.
Verma said Medicaid spending grew from $33 billion in 1985 to $558 billion in 2016, and consumes 29% of total state spending, which she said is unsustainable. To rein in spending growth, she said CMS would restore flexibility, accountability and integrity.
That flexibility would center around 1115 demonstrations, state plan amendments, and 1915 waiver processes, and CMS will allow states to:
Request approval for certain 1115 demonstrations for up to 10 years;
More easily pursue "fast track" federal review, which makes it easier for states to continue their successful demonstration programs;
Spend time administering innovative demonstrations by reducing certain 1115 reporting requirements;
Expedite state plan amendments and 1915 waiver efforts through a streamlined process and by participating in a new "within 15-day" initial review call with CMS officials.
"We are making innovation easier. If we approve an idea in one state, and another state wants to do the same thing, we will expedite those approvals," Verma said. "However, we won't approve every idea, the law will be our guideposts, and we will also ensure that proposals will not result in additional costs for taxpayers."
As for improving accountability, Verma said CMS is in the process of developing Medicaid and Children's Health Insurance Program scorecards to track and publishing state and federal Medicaid outcomes.
"The Scorecard will allow us to demonstrate your progress to the nation and allow others the opportunity to learn from your successes," Verma said. "This Scorecard isn’t just for States, but for CMS as well, because good partners hold each other accountable."
Dakotas-based health system buys minority stake, looks to tap into groundbreaking type 1 diabetes research, stem cell therapies.
A German subsidiary of Sanford Health has acquired a minority position in ISAR Klinik II AG, which includes Isar Klinikum, a hospital in Munich.
It’s the first investment in an international hospital by Sioux Falls, SD-based Sanford Health. Financial terms were not disclosed.
Kelby Krabbenhoft, president and CEO of Sanford Health, will serve on ISAR Klinik II AG’s board of directors.
“This is another significant step in our goal to advance health care around the world,” Krabbenhoft said in a media release. “ISAR’s ground-breaking procedures and medical technology are well-known, and we are eager to strengthen our relationship with the hospital and its leaders to bring that knowledge and care to our patients.”
The founder of ISAR Klinikum, Eckhard Alt, MD, oversees The Sanford Project, an initiative of Sanford Research that is searching for a type 1 diabetes cure.
“Advancements in medicine and patient care come when knowledge is shared,” Alt said. “As we look to the future and our stronger relationship with Sanford Health, we are excited to further unite our work and spread it to more parts of the world.”
Since 2015, Sanford Health has arranged for U.S. patients to travel to ISAR Klinikum to gain access to stem cell therapies allowed in Germany. Sanford has also sent 11 physicians to the hospital to better understand the application and impact of these therapies. The physicians’ experience has contributed to Sanford Health’s FDA-approved rotator cuff clinical trial in the United States.
Sanford Health’s operations include 44 hospitals and nearly 300 clinics in nine states and four countries.
The financially troubled 378-bed Topeka hospital will be renamed The University of Kansas Health System St. Francis Campus. The new for-profit/not-for-profit joint venture pledges $50 million in investments, local control.
The University of Kansas Health System and Ardent Health Services have completed the joint venture purchase of St. Francis Health in Topeka, and its 15 medical clinics.
Ardent will own a 75% stake in the health system and manage day-to-day operations. The University of Kansas Health System will provide clinical and financial resources.
Ardent CEO and President David T. Vandewater spoke with HealthLeaders Media about the St. Francis acquisition, which is Ardent’s first property in Kansas, and its first joint venture with UKHS. The following is a lightly edited transcript.
HLM: How long have you been working with the University of Kansas Health System?
Vandewater: It started some time ago with a predecessor company, LHP Hospital Group in Texas, which we acquired in March. They had established a relationship with the University of Kansas Health System to try to buy some hospitals in the Kansas City market some time ago. That did not work out for them but they developed a relationship. When we acquired LHP we used the relationship they had with our Chief Development Officer Dan Moen and that put us in a position to create this partnership.
HLM: What attracted you to this joint venture with UKHS?
Vandewater: We had looked at Topeka in September 2016 and decided it was something we would like to own, but because we didn’t own anything else in the state we felt it was important to have a partner in the process. No. 1, we liked the hospital. No. 2, we needed to find a partner.
At the time, UK was working on something else and they didn’t feel they had the capacity to do that. We got another call from the folks at SCL Health, and the governor’s office. The folks at UK health system felt they had the capacity to do it and having us as a partner made it easier for them to participate. Everything just worked out. It’s more a case of timing than anything else.
HLM: What attracted you to St. Francis Health?
Vandewater: No. 1 we liked the facility and the asset. It’s an attractive hospital. It has a substantial service line and capabilities within the organization. It is a sophisticated facility. We felt that between Ardent and UK we could bring some additional sophistication; both through the medical staff capabilities that would be provided, as well as understanding how to operate hospitals in communities such as Topeka.
HLM: How is the joint venture structured?
Vandewater: The University of Kansas has a 50/50 split in governance. Their ownership is 25% and they named the chairman of the board, and that is Bob Page, who is the CEO for the University of Kansas Health System.
HLM: You’ve pledged $50 million in investments. When and where will those investments be made?
Vandewater: It will be over three years. It will be inclusive of the capital improvements needed to expand service lines. We’ve been a guest in St. Francis for the past five months doing due diligence. We haven’t really had the opportunity to operate it. We will continue to have discussions with the medical staff, with the employees, and we will figure out the best way to distribute the $50 million. In addition to that, physician recruitment and service line expansion will be where we will devote the capital.
HLM: Why do you think your offer was chosen by SCL Health, rather than other bidders?
Vandewater: The model that we put together with having the University of Kansas Health System as part of it, that was a key ingredient with regards to their decision about the future. Interestingly, UKHS is a remarkable story. If you go back to 1997 they went through a similar experience to what St. Francis is going through now and they came out on the other end of that and made incredible recovery. Everyone understands the significance of UKHS to the health of the state.
Vandewater: This is more the norm than the exception. We’re seeing it everywhere. If we came to the conclusion that we could not operate in states that were having challenges with regards to being able to take care of patients and pay for it from the state budget, we wouldn’t be able to go anywhere.
HLM: How will you work around the state’s refusal to expand Medicaid?
Vandewater: We will take care of the patients who come through our doors. But, our goal is to use the brand of UKHS to attract patients beyond Medicare and Medicaid. We believe the more sophisticated services we bring in, the more sophisticated physicians who are participating with us through the UK physician group will provide us with an opportunity to get more market share to use our facility.
HLM: Your press release describes St. Francis as “near closure.” What will you do differently to make it prosper?
Vandewater: First of all, we will put a lot more local leadership so they can run it from Topeka. We believe local leadership will do a number of things with regard to insuring that we keep our ears to the ground with regard to what the people of Topeka need. Again, the board that we put together is going to be more sensitive to the Topeka marketplace than the previous owner. There are some opportunities where we can demonstrate through the skill sets we’ve developed over the years with regards to how we operate facilities.
HLM: Have you named your C Suite yet?
Vandewater: We have a CFO and our CNO and our CMO, but we do not have a CEO yet.
HLM: Will your CEO be from UK or Ardent?
Vandewater: Probably not. We have people who we are talking to that we have had longstanding relationships with who we anticipate would be eager to join us.
HLM: How will care delivery change for patients in Topeka under this new ownership?
Vandewater: Going forward, I don’t think initially they are going to see a lot of difference. Our goal is to improve the quality of the services within the organizations and for our employees and associates to be very service oriented. If we do that, everything else is going to take care of itself.
Medicare ACOs generated $843 million in savings in 2016 and demonstrated strong quality scores. ACO advocates believe those numbers could improve if CMS provides some flexibility on financial benchmarks and risk.
With four years of returns in the books, Medicare’s accountable care initiative has demonstrated savings for the federal government and improved care quality for beneficiaries, advocates say.
However, the Centers for Medicare & Medicaid Services’ reluctance to tweak financial benchmarks, or adjust risk scores upward for aging beneficiaries holds ACOs to a different standard than other Medicare programs, according to the National Association of Accountable Care Organizations.
“With risk adjustment, unlike the approach CMS takes for other initiatives, including Medicare Advantage, risk scores for beneficiaries who are assigned to the ACO over a number of years are never allowed to increase. They can only go down,” says Allison Brennan, NAACOs vice president of policy.
“That holds ACOs to a much higher standard and is unfairly penalizing them for beneficiary risk scores for an aging population that often has multiple chronic conditions,” Brennan says. “It is unrealistic to expect those risk scores to never increase, and that affects the abilities of ACOs to meet their financial benchmarks.”
In addition, Brennan says ACOs are often the victims of their own success. Their efforts to reduce costs and improve care mean they set the bar higher for themselves every year, which makes identifying new savings all the more difficult.
“As ACOs continue with the program they feel more prepared to tackle additional issues which will allow them to have continued success,” she says. “However, we need to see changes with financial benchmarks for the long-term because if they keep getting progressively harder and harder there won’t be opportunities for ACOs to out-perform their previous performance.”
Despite those hurdles, ACOs in the Medicare Shared Savings Program, the Next Generation Model, the Pioneer ACO program and the Comprehensive End Stage Renal Disease Care Model are collectively delivering on the savings, Brennan says.
CMS’ new Performance Year 2016 report on ACOs that found that the average generated savings per beneficiary per year has increased from $84.61 in combined 2012/2013 to $133.53 in 2016. Medicare ACO initiatives generated $836 million in gross savings and $71.4 million in net savings for the federal government.
In addition:
73% of Innovation Center ACOs earned shared savings totaling nearly $146 million. Specifically, Pioneer ACOs earned $37 million, Next Generation ACOs $58 million and CEC ACOs $51 million.
31% of MSSP ACOs earned shared savings with payments totaling $700 million.
25% of MSSP ACOs generated savings for Medicare but did not meet the threshold needed to share those savings.
Only 18% of MSSP two-sided risk ACOs were responsible for repaying losses.
41% of physician-only MSSP ACOs earned shared savings compared to 23% of ACOs with hospitals.\
On quality metrics:
Average MSSP performance improved 15% across the 25 measures used consecutively across program years.
The MSSP ACOs subject to pay-for-performance measures earned an average quality score of 95% and 98 ACOs who were subject to pay-for-reporting earned a quality score of 100%.
Innovation Center ACOs all demonstrated very high quality, Pioneer ACOs had an average quality score of 93% and Next Generation and CEC model ACOs all had 100% in their initial pay-for-reporting years.
Brennan says “there is no one-size-fits-all approach for ACO success, but that generally speaking, ACOs that focus on improved care coordination and providing beneficiaries with the right care in the right setting tend to be more successful.”
“According to CMS’ internal analysis MSSP ACOs generating shared savings had a significant decline in inpatient and hospital expenditures and utilization and decreased home health, skilled nursing and imaging expenditures,” she says. “That’s what they were seeing in the 2016 results. It’s nice that they pointed out those takeaways in their presentation.”
Experience is proving invaluable, too. CMS data show that 42% of MSSP ACO early adopters (2012) earned shared savings in 2016, compared with 18% of MSSP ACOs that started ACOs in 2016.
“We view the future for ACOs in a positive light but we need to make sure that CMS and the administration continue to improve policies to enable ACO success,” Brennan says. “This is a long-term game. Population health and accountable care initiatives don’t always yield instant results. But, these are investments that ACOs are making that are showing benefits in the long-term.”
S&P blames the decreased enrollment on multiple factors, including reduced outreach at the federal level, a reduced broker presence in the individual market, shorter enrollment periods, and higher non-subsidized premiums.
Affordable Care Act exchanges are projected to sign up between 10.6 million to 11.4 million people during the upcoming fifth enrollment period, according to S&P Global Ratings.
"This is about 7%-13% lower than the 12.2 million that signed up during the 2017 open enrollment season," said S&P credit analyst Deep Banerjee. "We expect that most individuals who maintained ACA insurance for full-year 2017 will re-enroll (for 2018), though fewer new enrollees will enter the marketplace."
People who bought insurance on an exchange last year and paid their premiums for full-year 2017 are highly likely to re-enroll for 2018. In addition, more than 80% of this population likely receive an advanced premium tax credit, which will offset the impact of the 2018 premium increases, S&P said.
"As for new enrollees, we are forecasting fewer people signing up in 2018 than during previous open enrollments," Banerjee said.
The S&P forecast blamed the enrollment drop on multiple factors, including reduced active outreach at the federal level, a reduced broker presence in the individual market, shorter enrollment periods, and higher nonsubsidized premiums.
During the first three years of the exchange, about a quarter of the people who signed up later dropped their coverage during the year. For 2018, S&P is forecasting a similar trend. Effectuated enrollment will be between 8.3 million and nine million as of year-end 2018, which is flat to 8% lower than S&P's estimate for 2017 effectuated enrollment of nine million.
As for the exchange population beyond 2018, S&P expects enrollment again to jump at the beginning of the year and then gradually decline as the year proceeds. But the amount of decline throughout the year will decrease as the market settles in at a sustainable size.
Moody’s analysis shows that plenty of liquidity and flexibility from a debt covenant perspective give Tenet time to make operating improvements or change its strategic direction.
Despite high leverage, disgruntled shareholders, and mounting uncertainty, Tenet Healthcare Corp. has the time and flexibility to adjust before refinancing is required in 2020, an analysis from Moody’s Investors Service says.
“We had expected Tenet to de-lever primarily through organic growth and the deployment of capital to acquire EBITDA-generating ambulatory surgery centers. But recent developments create considerable uncertainty around the company's strategy,” Moody’s said.
Those recent developments include the Oct. 23 accelerated departure of long-serving CEO Trevor Fetter who had planned to retire early next year. He leaves with a severance package worth nearly $23 million.
Dallas-based Tenet is the nation’s third-largest for-profit hospital company, based on the number of hospitals it operates. It is also one of the most highly leveraged, and its margins are significantly lower than other investor-owned, publicly traded hospital companies, Moody’s says.
The company has outstanding debts of $17.2 billion, and a debt/EBITDA ratio of 7.0X. Moody’s gives the company a B2 credit rating with a negative outlook.
Fetter’s abrupt departure and a board of trustees shake up come amid growing shareholder unrest, led by Glenview Capital, an activist investor that owns 18% of Tenet’s stock.
Tenet has also announced a series of hospital divestitures by year’s end.
Moody’s says Tenet is well-positioned in the near term with favorable debt terms and good liquidity providing flexibility.
“The company has no significant near-term maturities and good liquidity with minimal covenant restrictions,” Moody’s says. “The next large maturity that would require refinancing is in October 2020. As a result, Tenet has significant flexibility and time to make operating improvements or change its strategic direction.”
While still grappling with a challenging hospital environment, Tenet’s earnings are expected to improve with the company’s investment in ambulatory services businesses.
With the changes in leadership at Tenet, Moody’s says “all options are on the table,” including the sale of its ambulatory services centers, and its Conifer revenue-cycle management subsidiary. If Tenet sells Conifer or ASCs, the company is not obligated to use those proceeds to pay down its debts, although Moody's says that would be a “significant credit negative.”
However, if Tenet sells ASCs to reduce debt, Moody’s says the company would also “lose scale and diversity and risk considerable operating disruption because these businesses are closely aligned with its hospitals.”
