Hospitals in the 29 states and Washington, D.C. that expanded Medicaid saw bad debt drop an average of 13%. Some hospitals saw reductions of 40%, but that's not the entire story, says a Moody's Investors Service analyst.
Not-for-profit hospitals operating in the 29 states that expanded their Medicaid rolls under the Affordable Care Act saw "significant" decreases in bad debt when compared with hospitals in non-expansion states, according to Moody's Investors Service.
However, Moody's also found that the Medicaid expansion did not affect the bottom-line financial performance of the hospitals. In fact, financial performance improved for hospitals in every state in 2014 thanks largely to an improving economy.
"The lower bad debt in and of itself is not surprising or necessarily the headline here," says Daniel Steingart, a senior analyst for Moody's and the lead author of the study. "What is interesting is the lack of difference in financial performance between the expansion and the non-expansion states. There was a lot of press coverage over the past year talking about expansion states, what a difference we are seeing, how they are pulling ahead. This is showing that this is not the entire story."
Moody's examined the unaudited interim financial reports from about 150 not-for-profit hospitals for 2014, the first full year of the Medicaid expansion. Hospitals in the 29 states and Washington, D.C. that expanded Medicaid saw bad debt drop an average of 13%. Some hospitals saw reductions of 40%.
In contrast, bad debt for hospitals in non-expansion states rose for most of 2014, although it dropped in the fourth quarter for as yet undetermined reasons.
Steingart says the numbers are just a snapshot, and could fluctuate in the coming months,
"I wouldn't look to that 13% as the final end-all be-all number," he says. "That bad debt clearly dropped throughout the year and the pace clearly accelerated throughout the year. If it ends up being 15% to 20% that would surprise me. The trend is clear."
In 2013, bad debt accounted for only 4.8% of a median hospital revenues in Medicaid expansion states. While the reduction in bad debt is a credit positive, Steingart says hospitals in expansion states have yet to shift their reduced exposure into higher cash flow of better financial results.
"They are taking the savings and putting it into other investments. They probably could flow it to the bottom line but they are not," Steingart says. "You're seeing more investment in population health strategies, putting it back into salaries and other deferred investments that have been cut over the past several years as hospitals have been laser focused on expense control."
The improved financial performance for hospitals in all states, regardless of their Medicaid expansion status, was less about reduced bad debt, Steingart says, and had more to do with "macroeconomic conditions" around an improving economy, and cost cutting and improved management by the hospitals.
"Big drops in bad debt do not necessarily lead to big improvements in operating performance," he says. "It goes to show that there are so many other factors that drive performance. Volumes, the general economic environment, are much better than they have been in the last several years. Those factors are themselves are overpowering what it is happening on the payer mix bad debt side."
In the near-term, Steingart says bad debt "will continue to trend along at whatever level it settles out at."
"I don't know that we are quite at that settled-out point. We are only now into the full 12 months of Medicaid expansion. The exchange rollout was so troubled in the first quarter that I almost don't consider that quarter as a part of the expansion. Even though Medicaid, technically, sits outside of that, it was all wrapped up in it," he says.
"We have another quarter to go to see a little more improvement and then the pace of improvement will taper off. What you will see are bad debt levels, as a share of overall revenues, will remain much lower than they were historically in the expansion states, but I do not think you will see continued major year-over-year improvements."
"The other thing to mention, the big thing that people have been waiting for is King v. Burwell," he says. "Although that doesn't impact Medicaid expansion, it does affect the exchanges. Depending upon how the Supreme Court rules, that could have a very disruptive effect on how people are accessing insurance and that in and of itself could have a spillover."
"People are dying, and if you have 283 hospitals close you are going to have something equivalent to 9/11 happening every year… all over this country, and it is completely and totally unacceptable," says Belhaven, NC, Mayor Adam O'Neal.
For the second time in two years, O'Neal and civil rights veteran Bob Zellner are marching to Washington, DC to draw attention to the plight of the nation's rural hospitals.
On Monday, the two men and 20 supporters representing 11 states, carrying an empty wooden coffin with "Save our Hospitals" written on the side, departed coastal Belhaven (pop. 1,687) on a two-week, 283-mile march to the nation's capital. Each mile of the trek represents one of the 283 rural hospital that could close because of financial stress. The march is scheduled to end on June 15 on the steps of the Capitol.
HealthLeaders Media caught up with the trekkers on the second day of their journey, just north of Plymouth, NC.
"It is a national crisis when you have 283 hospitals close," O'Neal says. "Can you imagine 283 urban hospitals closing? Do you think there would be an outcry? Well, let me tell you these rural hospitals are more important than the urban hospitals because these rural hospitals serve a radius of maybe 100 miles. In a city if a hospital closes, most times there are two or three other ones in town."
O'Neal, a Republican, acknowledges that the Republican-led North Carolina legislature and Republican Gov. Pat McCrory, are responsible for much of the misery in Belhaven because they have refused to expand Medicaid under the Affordable Care Act.
"The Medicaid expansion was supposed to fill that gap," O'Neal says. "When you don't accept Medicaid expansion there is nothing to bridge that gap for the cost of indigent care and those falling revenues. The states that aren't accepting Medicaid, like my state of North Carolina, need to fill the gap with some other money. They don't need to let hospitals close."
"The ACA is the law now. That's the way it is. I understand that they have some concerns with it, but they need to go to Washington and deal with it there."
O'Neal notes that 62 million Americans live in rural areas, which means that the federal government must find money to keep rural hospitals afloat. He has a solution.
"This year we are going to give away $27.2 billion to other countries in foreign aid. How 'bout we keep $300 million of that for these hospitals," he says. "One million dollars per hospital is a lot of money for these small rural hospitals. Let's give away $26.9 billion and keep our rural hospitals open. That's a good idea!"
Not Their First Walk
In 2014, O'Neal and Zellner walked a more direct route of 273 miles to Washington to protest the closure of the Belhaven's Vidant Pungo Hospital, one of the nation's first designated critical access hospitals. Now, Belhaven residents have to drive about one hour to Greenville, 49 miles away, to access emergency services. Vidant Health is building a $4.2 million, 12,000-square-foot "multispecialty center" to replace the hospital, but it won't include an emergency room. O'Neal says that's not good enough, and the town is trying to wrest control of the old hospital from Vidant.
Since Vidant Pungo shuttered last year, O'Neal says there have been two avoidable deaths, including Portia Gibbs, 48. The mother of two suffered a heart attack and died waiting for a helicopter.
"Portia Gibbs spent the last hour of her life in a high school parking lot waiting for a helicopter. She died as it landed," O'Neal says. "Before, when our hospital was open, she would have been in an emergency room physician's hands within 25 minutes."
"People are dying, and if you have 283 hospitals close you are going to have something equivalent to 9/11 happening every year to our children, our parents, and friends all over this country and it is completely and totally unacceptable."
It's not just the loss of healthcare services. O'Neal says closing rural hospitals is a huge economic blow to small towns. Hospitals are often the largest employers in their communities, and healthcare jobs are often the highest paying. It also makes it difficult to attract new businesses and residents to a town that has no hospital.
O'Neal says last year's trek created a lot of media attention for Belhaven, and he's hoping this year's walk will increase public awareness of the plight of rural hospitals across the nation and maybe prompt elected officials to stop the partisan bickering and work toward a solution.
"Back in the 1940s this country saw the need for rural hospitals and they created theHill-Burton Act. The first Hill-Burton hospital in the U.S. opened in Belhaven in 1947 and now that hospital is closed. That is a sign of how our priorities have gotten screwed up," O'Neal says. "When these hospitals close, it's not just Democrats or Republicans or Libertarians or Independents or blacks or whites or Latinos, it's everybody dies. This is something that has to go beyond politics."
"I understand the ACA is very controversial, but President Obama, the Congress, the states and governors have to work together. They can't let 283 hospitals close while they fuss and fight."
Various patient-centered and value-based programs have also generated about $1 billion in savings in 2013 by reducing costly and wasteful care duplication, according to the Blue Cross Blue Shield Association.
The nation's Blue Cross and Blue Shield plans saw $71 billion in spending directed toward patient-centered, value-based care in 2013, according to an in-house survey released this week.
That $71 billion represents about one-in-five dollars in medical spending in 2013 by the 37 BCBS companies across the nation, an increase of 9% over the $65 billion in value-based care the plans identified in 2012.
The various patient-centered and value-based programs also generated about $1 billion in savings in 2013 by reducing costly and wasteful care duplication, according to the Blue Cross Blue Shield Association, which compiled the survey.
"It's only going to go up," says Justine Handelman, vice president, legislative and regulatory policy, at BCBSA. "We are really trying to push the move away from fee for service in how we incentivize quality over quantity. This report really illustrates how we've been able to hone in on what's been working and how we can work with public payers and the government to reform the healthcare system."
Handelman says the Blue Cross plans have keyed on four strategies to shift away from fee-for-service, which she identified as:
Changing how providers are paid to include incentives for delivering better care.
Providing doctors and hospitals with tools and real-time patient data to transform their practices.
Helping consumers to become active in their healthcare.
Promoting savings by reducing duplicative or unnecessary services and tests.
"Our goal is to continue to raise the bar and move in the direction and as we learn what's working to make sure that we are adapting our system to provide the best quality care and ensure we have the best outcomes for people," Handelman says.
The 2013 survey identified 570 locally-developed, patient-centered care programs in 48 states, Washington D.C. and Puerto Rico, up from 350 such programs in 2012. Combined, the Blues contract with more than 228,000 physicians and 1,500 hospitals to expand value based care. More than 25 million BCBS customers are enrolled in some sort of value-based plan that include accountable care organizations, patient-centered medical homes, pay-for-performance programs and episode-based payment programs.
"The acceleration is tremendous," Handelman says. "We've got more than one-in-five medical claims dollars. That is growing. We are excited that the government is moving in the direction of working to align with what is already working in the private sector. We have the results and the acceleration as you see Medicare coming online with what we are already doing and what is working. We will see it accelerate even more."
"In five years we are really going to see a transformed delivery system with the Blues leading the way," Handelman says. "The way we are using data and technology is really going to explode over the coming years. We are going to be in a truly value-based system."
Performance improvements are attributed in part to tying physicians' performance bonuses to actionable patient data. But "not all medical home interventions are alike," one researcher notes.
A medical home model in Pennsylvania that provided timely and pertinent patient data to physicians and paid bonuses for the resulting improved care showed significant improvements over comparison practices, a RAND study shows.
The study analyzed data from 17,363 patients from 27 pilot and 29 comparison practices in the northeast region of the Pennsylvania Chronic Care Initiative from 2009–2012. The pilot practices were recognized by the National Committee for Quality Assurance as medical homes, but did not receive payment for the designation.
By year three, the pilot practices had achieved statistically significantly better changes in performance on four measures of diabetes care and breast cancer screening. In addition, as measured per 1,000 patients per month, the pilot practices saw:
1.7 fewer hospitalizations
4.7 fewer emergency department visits
A 3.2% lower rate of ambulatory care-sensitive emergency department visits
Specialty care visits declined by 17.3 visits per month
Mark W. Friedberg, MD, the study's lead author and a senior natural scientist at RAND, says a key component of the success for the northeast region pilot medical homes was tying the performance bonuses with actionable patient data.
"The health plans that were participating in the northeast region in this paper also gave timely data to the participating practices on whether their patients were going to see their partners at hospitals and which ones they were going to, and which patients were going," he says.
"That was not part of the intervention in the southeast region, nor in a lot of the other medical home interventions. That may have had something to do with the effect we saw. That can be just as important as financial incentives. It's one thing to give more incentives and another to help them achieve those incentives, and they did both here."
Friedberg says it's too early to determine if the northeast pilot could provide a standard roadmap for successful medical homes.
"It's hard to make that kind of a big statement based on just one study, but this suggests features of medical home interventions that others may want to replicate," he says.
"When you create a medical home initiative to produce changes in utilization of care it makes sense to both give providers an incentive to control utilization and also to give them the means and ability to control the utilization, not just in the primary care practice but also in hospitals and emergency departments and unless you know where your patients are at all times that is very hard to do."
Friedberg says it's important to remember that the medical home is an evolving model.
"We and other researchers are continuing to evaluate different medical home pilots with different ingredients and different settings," he says. "The next big task—and we aren't ready to do this study yet—is to put all of those evaluations together and start to look at the differences in the results and see what seems to be the ideal way to construct a medical home intervention."
"The big take-away here is that not all medical home interventions are alike," he says. "As with any new attempt to try to improve the healthcare system, the first few attempts out of the starting blocks will include some experiences that we can learn from to make them more effective later. We are starting to see the second generation of these interventions. It seems so far to be potentially more effective than the earliest iterations.
Simply stated, the rule would better align Medicaid and Children's Health Insurance Program regulations to make them more consistent with the federal rule governing commercial, marketplace, and Medicare Advantage plans.
For the first time in more than a decade the federal government is proposing sweeping changes to the rule governing managed care programs under Medicaid and the Children's Health Insurance Program known as CHIP.
Late Tuesday afternoon the Centers for Medicare & Medicaid Services rolled out the 700-page tome for public view.
Simply stated, the rule would better align Medicaid and CHIP regulations to make them more consistent with the rule governing commercial, marketplace, and Medicare Advantage plans.
"A lot has changed in terms of best practices and the delivery of important health services in the managed care field over the last decade," Andy Slavitt, Acting Administrator of CMS, said in remarks accompanying the report.
"This proposal will better align regulations and best practices to other health insurance programs, including the private market and Medicare Advantage plans, to strengthen federal and state efforts at providing quality, coordinated care to millions of Americans with Medicaid or CHIP insurance coverage."
Medicaid managed care rules were last updated in 2002 and 2003, even as growth in Medicaid managed plans has flourished in the last two decades. In 1992 only 8% of Medicaid beneficiaries were in capitated health plans. Most recent data from 2011 show that 58% of all Medicaid beneficiaries in 39 states and the District of Columbia access some of their care in capitated plans.
A Regulatory Minefield
The regulatory boundaries between the federal government and the states' various Medicaid programs and waivers is a minefield, and the National Association of Medicaid Directors is urging the federal government to tread lightly.
"It will be important for the rules to balance the needs for stewardship of the taxpayer dollar with state flexibility to design programs that can reflect local health care conditions," NAMD said in prepared remarks.
Medicaid is one of the largest items in state budgets, and any overly burdensome rule change could be viewed as a hated "unfunded federal mandate" in state Capitols. NAMD warned that a new rule must not become "overly prescriptive" in areas such as administration, rate setting, network adequacy, and program integrity.
"The rules must help, not hinder, the outpouring of innovation that states are driving in how to improve the health and well-being of traditionally hard-to-serve populations, such as those needing long-term services and supports, those dually eligible for both Medicare and Medicaid, and individuals with multiple chronic conditions," NAMD said.
The health insurance industry cast a wary eye on a provision in the rule that attaches medical loss ratios to Medicaid managed care plans.
"An arbitrary cap on health plans' administrative costs could undermine many of the critical services—beyond medical care—that make a difference in improving health outcomes for beneficiaries, such as transportation to and from appointments, social services, and more," Dan Durham, interim CEO for America's Health Insurance Plans said in prepared remarks.
That concern was echoed in remarks from Jeff M. Myers, president and CEO of the Medicaid Health Plans of America, the advocacy arm for 124 plans in 33 states.
"We urge CMS to rethink standards for a federal minimum medical loss ratio given that MLR is already built into health plans' contracts with the states," Myers said.
On the other hand, Myers said he was "encouraged to see CHIP included in the proposed rule given the fact that half of US births are covered by Medicaid. We're also glad that the rule seems to cover long-term care, actuarial soundness and rate-setting, and quality ratings of health."
Comments to Come
Other key lobbies that undoubtedly will have something to day over the 60-day comment period are holding back on any detailed critiques until they can pore through the fine print.
Jeff Goldman, vice president of coverage policy at the American Hospital Association, offered guarded support: "We believe the proposals strengthen Medicaid and Children's Health Insurance Program managed care regulations by aligning them with Qualified Health Plans and Medicare Advantage plans.
We look forward to providing feedback to CMS after consultation with our members."
The American Medical Association says it's reviewing the rule and isn't ready to talk, yet.
The comment period ends on July 27. We'll be hearing more detailed comments from these lobbies in the coming weeks.
"We were looking for a strong partner, but we were also looking for a good fit," says West Georgia Health's CEO. "Culturally, I believe this is a very good marriage."
LaGrange, GA-based West Georgia Health has signed a letter of intent to join Marietta, GA-based WellStar Health System, the largest not-for-profit community health system in Georgia.
"We were looking for a strong partner, but we were also looking for a good fit—the right fit. WellStar is that fit," Jerry Fulks, president and CEO of West Georgia Health, said in a media release. "They've amassed the size and financial muscle you need to succeed in today's healthcare world, and they've done that while keeping a sharp focus on patient care and employee satisfaction—and the relationship between those two. Culturally, I believe this is a very good marriage."
Jerry Fulks
West Georgia Health includes flagship West Georgia Medical Center, two skilled nursing facilities, a cancer clinic, heart clinic, women's center, occupational health clinic, outpatient lab and rehabilitation services, a wound care clinic, home care services, and 21 primary care and specialty practices operating in two counties.
WellStar serves more than 1.4 million residents in five counties. The system includes WellStar Kennestone Regional Medical Center, and WellStar Cobb, Douglas, Paulding and Windy Hill hospitals; WellStar Medical Group; urgent care centers and various outpatient clinics and services.
"As not-for-profits, WellStar and West Georgia Health have similar missions and commitments to our communities," WellStar CEO Reynold Jennings said in prepared remarks. "WellStar was formed 20 years ago when five hospitals came together to create a new health system. By bringing West Georgia Health into the regional system, we are continuing our commitment to deliver world-class healthcare to the communities we serve."
LifePoint will own 80% of the joint venture with Wisconsin's Watertown Regional Medical Center, which will retain a 20% ownership stake in the hospital if the deal is approved by regulators.
Wisconsin's Watertown Regional Medical Center,has signed a definitive agreement to partner with Brentwood, TN-based LifePoint Health.
Subject to regulatory approval, LifePoint will own 80% of the joint venture, while WRMC will retain a 20% ownership stake in the hospital, which will transition to for-profit tax status.
Governance will be shared equally through a board with equal representation from WRMC and LifePoint.
Financial terms of the deal were not disclosed, but the joint venture will invest $100 million in WRMC over the next 10 years for projects that include a wellness initiative and various capital improvements.
Proceeds from the joint venture transaction will be used to pay off WRMC's existing financial obligations, and the remaining assets will be used to create a substantial charitable foundation focused on community health.
John Kosanovich, president and CEO of WRMC, says the deal caps months of negotiations.
"The board determined that finding a partner was the move that made the most sense going into the future, given all the change that was happening in the healthcare environment, just the whole notion that the stand alone community hospital wasn't the best model for sustainability and viability in the future," Kosanovich says.
"Through that process we selected LifePoint. It was their track record of successfully managing and growing community hospitals and their proposal that included a joint venture structure that allowed for continued community involvement, including a 50−50 board and governance structure. The board really felt it was important that the community continue to be involved and not only contribute to, but benefit from the success of WRMC."
Kosanovich says the hospital's changing tax status "really doesn't matter anymore. Whether you are nonprofit or for profit you are making a profit to stay in business. The one difference we see, obviously, is payment of taxes and the city and the school board are pretty positive to see some more dollars added to the tax rolls."
UW Health was one of seven suitors in the deal before LifePoint was selected. Kosanovich says the relationship will likely change now that WRMC is with LifePoint, but that the hospital will retain some clinical affiliations with UW Health.
"We've worked with UW for a number of years in a clinical affiliation to enhance services that were available here, and look to continue to work with them in the provision of specialty services where it makes sense for both organizations," he says.
LifePoint Health, which this monthchanged its name from LifePoint Hospitals, owns and operates more than 60 community hospitals, regional health systems, physician practices, outpatient centers, and post-acute facilities in 20 states.
WRMC will update its brand and logo on July 1.
Allan Baumgarten is a veteran hospital and health system analyst who tracks hospital mergers and acquisitions throughout the Midwest. He notes that LifePoint gained a toehold in the Upper Peninsula of Michigan two years ago when it acquired Marquette General Health System.
"I assume that if they are entering Wisconsin with one acquisition [or] joint venture that others will follow," Baumgarten says.
Under the joint venture finalized this week, WMC has taken 60% ownership of the system and controls day-to-day operations. Marriottsville, MD-based corporate parent Bon Secours Health System has retained 40% interest. The Sisters of Charity of St. Elizabeth, which has co-sponsored Bon Secours Charity Health System since 2000, will remain canonical cosponsors of the system, but will not retain a financial stake.
The three hospitals in Bon Secours Charity Health System: Good Samaritan Hospital in Suffern, St. Anthony Community Hospital in Warwick, and Bon Secours Community Hospital in Port Jervis, will keep their names and remain Catholic providers.
Michael D. Israel, president and CEO of Westchester Medical Center, declined to attach a dollar figure to the value of the deal when he spokes with HealthLeaders Media.
Michael D. Israel
"It's a very complicated deal. It is not a straight purchase," Israel says. "The only thing I can tell you is that Bon Secours Charity Health System issued the other day $122 million in bonds. If for some reason that entity cannot pay the debt service, we have guaranteed the yearly debt service, so the $122 million was issued by Bon Secours Charity using our credit rating."
WMC has three hospitals on its main campus: a 415-bed adult hospital, a 136-bed children's hospital, and a 101-bed behavioral health center. Israel says the joint venture allows WMC to "better fulfill our mission, which is to keep this campus an advanced care campus and continue to work with community hospitals, these ones we happen to have an ownership interest in."
"Our traditional model here has been working with community hospitals in the region. We don't do primary and secondary care here. We only do tertiary and quaternary care," he says. "We have, if not the highest, one of the highest case mix indexes in the U.S. given that we don't do primary and secondary. We are to a large extent a receiving hospital. We do 24,000 to 25,000 admissions a year and we have more than 7,000 transfers. That's about 20 a day… Bottom line is we are the tertiary referral center in the Hudson Valley."
"It also allows us to better develop tertiary services that are closer to where people live," he says. "We believe the relationship we have, both the ownership and the management of the Bon Secours Charity Health, will allow us to expand our reach and to work with them to expand services and improve service delivery to the communities they serve. We are just reacting to the changes in the healthcare system the way everybody else is."
With the majority stake, Israel says WMC's service area now includes about three million people living in eight counties in the Hudson Valley.
Last year, WMC purchased the financially struggling St. Francis Hospital in Poughkeepsie and placed it under WMC license as a second campus 53 miles to the north.
"Three years ago, every community hospital in the region was independent," Israel says. "Within the next three years there will be no independent community hospitals in the region. They will be either owned or affiliated by larger systems. What is happening nationally is happening in New York in a very compacted period of time. So, we obviously have to change with the changing times."
Israel says WMC's three Valhalla hospitals are operating at near capacity, so gaining more regional referrals is not a primary driver in the joint venture.
"We're really not focused on the traditional development of branches to refer patients in here," he says. "One of the purposes of the relationship with Bon Secours is the development of more and better services in Rockland and Orange Counties. Of course, the high-end tertiary and quaternary cases that they can't do there, we obviously would like to see those cases come here. But the goal of this is not strictly 'let's go out and control some community hospitals so we can shift the high-end business here.' That is not what we are about."
In a recent HealthLeaders Media Intelligence Report, healthcare leaders indicate that 64% of capital budget investment will go to ambulatory or outpatient care expansion, with just 36% dedicated to inpatient acute care expansion. HealthLeaders Media Council members discuss the outlook at their organizations.
This article first appeared in the June 2015 issue of HealthLeaders magazine.
Christian Pass
Interim CFO
John Muir Health
Walnut Creek, CA
We continue to build out our ambulatory strategy. We recently opened an outpatient care center with integrated physicians/specialists, other educational facilities, and ancillary services in the building. We're looking to expand outpatient care facilities in the Bay Area. Most of our new building capital investment is looking at the ambulatory strategy and then continuing to keep the inpatient facilities up to date with the latest equipment.
Healthcare is changing, with a significant shift toward the outpatient arena and trying to do things outside the hospital that we didn't do previously. Still, we will need that emergency uptime 24-hour care in the event of disasters. We have to be mindful of the capital and make sure we are planning appropriately, including, obviously, the pressures on payments and the movement to exchanges and things like that. It's a careful little chess game we are playing right now.
Another thing facing California in 2030 is the seismic regulations, so we are keeping that on the horizon as well. As we are looking at our capital outlook, even now into 2022 or longer, we need to start planning for either new construction or retro-fitting. Right now it's not directing a lot of funding. We have to be mindful of it in the future.
Ninfa Saunders
President and CEO
Navicent Health
Macon, GA
There is no question that ambulatory and outpatient care expansion is going to be where the preponderance of money will go. It's going into the world of retail, with some traditional outpatient, but tweaked to be more in the public space. The new retail product in the market space should be packaged in such a fashion that it is consumer-facing. The inpatient acute care expansion is not going to be bricks-and-mortar. It will go into the program as an inpatient product.
More important, the development in all areas—whether it is ambulatory or inpatient, the development of a comprehensive network or providers, whether we own them or not, it could be by partnership or some other arrangement—is designed so that the whole care continuum is populated to cover retail, hospital-based programs, and postacute. The only thing missing here is the postacute, unless you're looking at postacute as an inpatient expansion.
If we are serious about population health management, we have to start going from the mind-set of “build it and they will come” to going to the patients who might be using the care. Because, by the time they come to us, they're so very sick, and we're providing acute delivery as opposed to managing health. The management of illness through transactional care to the management of health is where the investment is going to go.
Jack Kolosky
Executive Vice President and COO
Moffitt Cancer Center
Tampa, FL
About 70% of our spending—and a growing rate—are outpatient revenues at Moffitt, which is consistent with what cancer care is becoming. The largest single capital investment that we have is a 206,000-square-foot outpatient building that we're building about 1 mile from the main campus to accommodate the sprawling activity.
Most of that is what I will call pure outpatient, with not a lot of crossover with inpatient. There is the breast program, the cutaneous skin cancer program, ambulatory surgery, and some chemotherapies. It will be those programs that will go over there initially. That is the majority of what our big investments are.
The only caution I'd have is that at some point we will need to address the inpatient hospital, which is coming up on 29 years old.
Capital investment at a cancer center is somewhat different from an acute care hospital in the sense that we don't have an emergency department or services such as obstetrics. But I would say we are not immune from the general trends in healthcare—that is, lesser inpatient, quicker stays, more use of ambulatory, and particularly in cancer there is consideration of oral chemotherapies, which the patient can take at home as opposed to coming in for IV therapy. That might be the single most important trend that could affect us down the road.
Bill Leaver
CEO
UnityPoint Health
West Des Moines, IA
On the shift toward ambulatory care: Our capital spend, which is in the neighborhood of $250 million a year, historically has been 55% facility, 20% ambulatory, and 25% technology/HIT. We have swapped out all of our IT platforms, inpatient, ambulatory, and are doing our enterprise resource-planning platform, as well. We have invested heavily in technology. Thinking about the next three to five years, I see that shifting to probably 50% ambulatory, 20% technology, 30% inpatient facility and technology. When I say inpatient facility I also mean replacing an MRI at a hospital, those types of things.
On the trends at hospitals: On the inpatient side, our board has had very good discussions. Some of our 17 hospitals needed some significant investments in terms of infrastructure, a new emergency department or critical care units and so forth. We have made those investments. Senior staff, the operators of these hospitals, sit in on these board meetings, so they are hearing our board members say we need to be looking at accelerating that shift to ambulatory.
On reexamining inpatient investments: A good example may be that some of our hospitals still have semiprivate rooms. It may be that three years ago the desire was to create all private rooms. Maybe that is something we don't
necessarily need to do, or won't be able to afford to do. It's not an unlimited capital budget. The ambulatory presence is a bigger priority.
"The financial health insecurity that comes from being underinsured is substantial and puts people's health and well-being at risk," says The Commonwealth Fund President David Blumenthal, MD.
High-deductible health insurance plans have been touted as a means to expand coverage to millions of people who otherwise could not afford it.
New reports out this month suggest that high-deductible non-group plans are not a silver bullet, however, and that while the premiums may be affordable, the costs of accessing care remains prohibitively high.
A survey released this week by The Commonwealth Fund found that 31 million adults ages 19–64 with health coverage were "underinsured" in 2014, and that oftentimes these underinsured people skimped on care because it was too expensive.
"The financial health insecurity that comes from being underinsured is substantial and puts people's health and well-being at risk," The Commonwealth Fund President David Blumenthal, MD, said at a news conference Tuesday. "If health insurance costs continue to be shifted to consumers this insecurity will deepen."
Sara Collins, the lead author of study, and vice president, Health Care Coverage and Access at The Commonwealth Fund, says "underinsured" status considers an insured adult's out-of-pocket costs during a year of coverage and the plan deductible. Premiums are not factored.
David Blumenthal, MD
"Someone is underinsured if their out-of-pocket costs excluding premiums over the 12 prior months are equal to 10% or more of household income," Collins says, "or if their out-of-pocket costs excluding premiums are equal to 5% or more of household income if their income is under 200% of the federal poverty level, which is about $23,000 for an individual and $47,000 for a family of four, of if their deductible is 5% or more of household income."
Collins says that after nearly doubling between 2003 and 2010 the number of underinsured adults held constant between 2012 and 2014.
"However, growth and the proliferation and size of deductibles threatens to increase underinsurance in the years ahead," she says. "Underinsured adults tend to skimp on needed healthcare and many are accumulating medical debt that is damaging their credit ratings and depleting their savings."
The effects of group coverage under the Patient Protection and Affordable Care Act were not factored into The Commonwealth Fund's report because people insured for a full year in the survey had coverage that began before the PPACA's major coverage expansion going into effect.
"The Affordable Care Act improves the quality of insurance coverage for people who lack job-based health benefits, but many marketplace plans and individual marketplace policies come with high deductibles," Collins says.
"The law has only limited ability to improve the cost protections of large employer plans. New approaches to benefit design are needed to better protect consumers from healthcare costs and encourage the use of timely care. System-wide efforts to lower the underlying rate of medical cost growth with those savings shared with consumers will be critical."
The Commonwealth Fund report's findings are in line with a Families USA report this month which also found that that one-in-four people who bought non-group health insurance in 2014 went without needed care because they couldn't afford it. That report blamed deductibles of $1,500 or more as the leading cause for the skipped care.
"It is critically important that consumers be able to afford all of these types of care," the report says. "Not getting follow up care to treat an illness or not taking needed medications can result in people facing avoidable, more serious health problems and more expensive healthcare costs down the road."
'Blunt Instrument' Wendell Potter is a former health insurance executive who has become an ardent critic of the health insurance industry. He says high-deductible plans are a windfall for commercial insurance providers. "To them right now this is an ideal scenario," Potter says. "They are collecting premiums, which continue to go up every year, but every year they are shifting more of the costs to the consumers."
Wendell Potter
"As you look at trend lines, you'll see the deductibles keep going up every year too but median household income is not keeping pace with these increases," he says. "The insurance industry is really doing quite well because they are taking in money in premiums, but they aren't paying nearly as much out in payments to medical providers that they were in the past because people have to pay so much out of their own pockets before their coverage kicks in."
Blumenthal rejects suggestions that high-deductible plans are simply a windfall for insurance companies.
"That doesn't mean [the underinsured] aren't getting any benefits. It means they are still not adequately protected against the cost of illness," he says. "I don't think it is fair to conclude that their insurance isn't worth anything. Their condition would potentially even worse, they might be paying 20%, 30%, 40% of their income or more than their income on an annual basis if they had no insurance at all."
"One of the clear questions that arises is are people who were previously uninsured better off with insurance, even though they are underinsured? That's likely to vary from individual to individual, but on balance I think the answer is yes." Potter says high-deductible plans have been used as a "blunt instrument" that doesn't factor an individual's income along with deductibles.
"It can be refined to take into consideration that people who are of modest means are going to have to go without care if they are in a plan with a high deductible," he says. "It's something that policy makers and employers and payers are going to have to look at because people are going without the care they need. In the long run, that is going to be a problem for payers and for society."
"Keep in mind that this strategy was promoted by people who can easily afford to put 'skin in the game,'" Potter says. "I can remember several years ago when that was a term that was used by CEOs of big insurance companies. They can easily meet a deductible. They had not walked many days in the shoes of people who are of modest means and don't know what it is like to make a choice between going to the doctor or putting food on the table, or picking up a prescription or make the car payment. They just don't have a clue what it is like to be an average American."
Collins says prohibitively high front-end costs are not the best way to achieve better health outcomes at a lower cost.
"People who are underinsured or who have deductibles that are high relative to their income are skimping on healthcare they need; not filling prescriptions, not getting preventive care tests, not going to the doctor when they were sick," she says.
"It suggests that high front-end out-of-pocket costs do deter people's use of healthcare services that they need. This points to the need for innovation in benefit design that encourages people to get the healthcare they need rather than delay that care."
