Nearly half of hospitals surveyed say they expect to outsource coding work and one hospital in five is already using outside resources for this purpose, a market research firm reports.
Nearly half of the 650 hospitals in a recent survey said they will outsource ICD-10 services when the new diagnostic and coding system goes online in October 2015, market research firm Black Book Rankings says.
The Black Book survey found that 19% of hospitals are outsourcing coding already, but that the number is anticipated to grow to 47% of hospitals by the providers polled.
"Transitioning to ICD-10 is a complicated process and hospitals are leaning on the expertise and successes of outsourcing vendors," Doug Brown, managing partner of Black Book, said in prepared remarks.
"We still operate in an ICD-9 world, complicated by EHR implementations, value-based reimbursement models, compliance issues and optimizing reimbursement; a perfect storm from which outsourcers have the expertise to shield their clients."
The survey found that hospitals strongly rely on outsourcing for a broad array of coding and clinical documentation services. For example 25% of hospitals now outsource clinical documentation audit, review and programming, and that percentage is expected to increase to 71% by the third quarter of 2015, as hospitals adjust to the new codes.
In addition, transcription services are now outsourced by 63% of hospitals and are also expected to grow to more than 70% of providers as the ICD-10 deadline approaches.
Melanie Endicott, senior director of coding and CDI products development at American Health Information Management Association, says the survey raises questions. "I would like to know a little bit more of the story. I am wondering if these hospitals are thinking that they'll do some outsourcing but still keep some in-house staff," she says.
Endicott says it's acknowledged among providers that productivity is expected to decline in October 2015 as coding staff adjust to the new system. "So the likelihood that a facility would need to outsource some coding work is very high, I would say even more than half. But it may not be forever. They may need six months of additional help until their own coders get up to speed, or whatever the situation might be. And they might hire some outsourced coders to pick up the back log. There is going to be a variety of things going on."
Endicott says the one-year delay in the ICD-10 Implementation, a surprise addition to the physician sustainable growth rate bill, has already costs providers who were ready and counting on the anticipated October 2014 implementation.
"Most facilities had budgeted through 2014 to train staff and that was going to stop as soon as they were in ICD-10," she says. "Now they have to add another year to the training to make sure they don't lose what they have lost. That additional training takes away from productivity and it does increase costs."
"A lot of facilities were planning on rolling out dual coding six months prior to implementation. That would have been around April of this year. Some facilities did still go with that dual coding beginning this year, maybe less aggressively than they were planning to do. But they are rolling it out a little bit so they can get their coders trained, have them practice in the real world environment, and identify any issues that they can work out. Having this extra year helps them take their time and might provide for smoother implementation next year."
Still, Endicott says she is concerned that some laggard providers won't use the extra time to prepare.
"I always worry that with the delay they just delay their planning as well and they still won't be ready next year," she says. "It's like anything. Most people put it off until they have to do it. The only excuse we might hear is that it's been delayed so many times we thought it would be delayed again. And when it really does happen they might be caught off guard."
The Government Accountability Office reports that states are finding ways to pay for Medicaid that involve cost-shifting schemes that leave the federal government stuck with the tab.
Have you ever wondered where your state finds the money to pay for its share of the federal Medicaid program?
You're not alone.
The Government Accountability Office told Congress this week that states are finding creative new ways to pay for the program that involve cost-shifting, back-scratching schemes with local governments and providers that leave the federal government stuck with the tab.
For example, in Illinois, a $220 million payment increase for nursing homes in 2012 was paid for with a tax on those nursing homes. GAO said the ploy brought back a $110 million increase in federal matching funds with no increase for Illinois' general fund, and a net payment increase of $105 million to the nursing homes after paying the taxes.
It would be hard to find a comparative revenue-generating tactic in the real world that doesn't involve spam emails soliciting "winning" Bulgarian lotto tickets or a dearly departed and long-lost uncle from Mombasa who's left you in his will.
In effect, GAO says states are making large supplemental payments, apart from payments made for medical services, "to providers that supplied funds to finance the nonfederal share of the payments, for purposes of obtaining billions of dollars in additional federal matching funds without a commensurate increase in state funds used to finance the nonfederal share of these Medicaid expenditures."
"Such arrangements have the effect of shifting costs to the federal government because the federal government then pays its share of the new payments," GAO said in its report. "We and others have raised concerns about these financing arrangements and whether data reported by states are sufficient for (Centers for Medicare & Medicaid Services) to determine that these arrangements are in compliance with applicable federal requirements."
Medicaid covered 58 million low-income people in 2012, at a cost of $432 billion, for which the federal government footed about 57% of the cost. In 2012, states financed 26% of the nonfederal share of expenditures, about $46 billion, with funds from providers and local governments. That number was $32 billion in 2010 and $23 billion in 2006.
"Because supplemental payments are typically not paid through states' Medicaid claims systems, the payments are not captured in federal data systems and therefore lack transparency for oversight purposes," GAO says.
It is highly likely that states are fully aware that these supplemental payments are hard to identify, quantify, and track. That would explain their growing popularity.
Keep in mind that these numbers predate the expansion of Medicaid under the Patient Protection and Affordable Care Act. Before we simply blame the Obama administration, we should note that the GAO since 2003 has considered Medicaid a "high-risk" program, both because of its explosive growth and because of the unaccountable "gaps" in federal oversight of these various funding schemes that states are using to pay for their part.
Unlike the Medicaid expansion, this cost shifting can't be attributed to Red State/Blue State politics. States that rely on cost-shifting to local governments and providers to generate up to half of their Medicaid spend include California, Florida, Vermont, Tennessee, New York, Colorado. Michigan, Mississippi, Alabama and Wisconsin. Missouri alone used cost-shifting to fund more than half of its Medicaid spend.
Matt Salo, executive director National Association of Medicaid Directors, looked through the GAO's findings and said "there's not really much to report here, as far as I can see."
"Everybody who knows Medicaid knows that financing is very complicated (labyrinthine?), and that it has been this way for a very long time," Salo said in an email exchange with me.
"States endeavor to be sure that all provider taxes, intergovernmental transfers, and other financing arrangements fully comport with federal law and regulations—CMS does approve them, after all. Sometimes members of Congress (or the Administration) find that the current state of the law and regulations are too permissive, and attempts are made to further restrict how they work."
"That of course is their prerogative, but we would just want to be sure that they don't throw the baby out with the bathwater. Medicaid never has enough money to full meet all the demands that the healthcare system places on it. Further restricting long-standing arrangements will only lead to even fewer dollars being available for patient care."
Salo raises legitimate points. Regardless of the motives, it's clear that states have been gaming the system and the feds have been on to it for a while.
The GAO report was compiled from data collected from 2008–2012 in the midst of the worst economic downturn since the Great Depression. So, we could infer that cash-strapped states were desperate for revenues and created these shadowy funding schemes in an attempt to maintain critical services for their most vulnerable citizens.
However, many of these cost-shifting schemes predate the recession, and there are indications that they are continuing today, even as many states are collecting more tax revenues. The Department of Health and Human Services' Office of the Inspector General identified an improper Medicaid payment rate of 5.8% in 2013, which represents $14.4 billion in federal matching funds.
This will not be allowed to continue, especially because the Medicaid expansion has become a toxic political issue. CMS will be under even more pressure to demonstrate the integrity and cost-effectiveness of the program. Look for federal oversight to stiffen and more audits challenging supplemental payments.
For that reason, providers need to know how their states are generating their portion of the Medicaid spend, and more importantly, who will cover the costs of the Medicaid spend if these opaque funding mechanisms are dismantled.
A pair of conflicting rulings regarding tax credits for those who buy health insurance on the federal marketplace is a "credit negative" for health plans and not-for-profit hospitals, Moody's Investors Service says.
Not-for-profit hospitals and health plans may feel the economic effects of the uncertainty created when two federal appellate courts last week issuedconflicting opinions on a key provision of the Patent Protection and Affordable Care Act.
In a 2–1 ruling in Halbig v. Burwell, last week, judges on the D.C. Circuit Court of Appeals last Tuesday said that specific language in PPACA does not authorize the Internal Revenue Service to extend tax credits to an estimated 4.7 million people in 34 states who bought coverage through the federally facilitated Healthcare.gov exchange.
On the same day, the Fourth Circuit Court of Appeals in Virginia issued a conflicting ruling on essentially the same case, saying that the tax credits were legal. The case is expected to be heard by the U.S. Supreme Court.
The tax subsidies are a key provision of Obamacare that keeps health insurance affordable for millions of people, and the uncertainty created by the rulings is a "credit negative" for health plans and not-for-profit hospitals, Moody's Investors Service said.
If the Supreme Court rules that the subsidies are illegal, Moody's says it would be "an unambiguous credit negative" for hospitals in states that relied on the federal exchanges.
"Of the approximately 5 million polices sold on the federal exchanges, the federal government has reported that between 80% and 90% of these policies were issued to lower or moderate income individuals with some portion of the premiums paid for with federal subsidies," Moody's said.
The new revenue that was expected from insured patients is supposed to mitigate reimbursement cuts for hospitals from all payers, and supplemental cuts to Medicare and Medicaid disproportionate share payments.
"Given the higher amount of uncompensated care that not-for-profit hospitals provide, they are at greater risk to lose revenue than for-profit hospitals should the DC Appeals Court ruling be upheld," Moody's said.
Eliminating the subsidy would also be a credit negative for health plans because it would reduce the number of policies sold on the federal exchanges, which would then skew towards a less-healthy population, Moody's says.
"These lapses could occur because policyholders may no longer be able to afford the premiums for these policies without the financial assistance provided by the premium subsidies," Moody's said.
The ruling has also prompted insurers to rethink expansion and pricing for the 2015 enrollment period, even as many insurers have already submitted plans and premium rates for 2015 to the Centers for Medicare & Medicaid Services.
"If subsidies are no longer available in the 36 states that rely on the federal exchanges, the profile of the potential insurance purchaser in these states would drastically change," Moody's said. "Under a no-subsidy scenario, insurers would expect the exchanges to attract a less healthy population because only those who most need insurance coverage would likely purchase an unsubsidized health plan. As a result, insurers have indicated that if the ruling were upheld, it would lead to higher premiums."
Unless the legal battle is resolved before the next enrollment period, which may be unlikely, Moody's anticipates that some insurers will either revise their premium submissions or withdraw from some exchanges during the enrollment period later this year.
The Obama administration last week said the subsidies that are now in effect will continue through the appeals process.
Brendan Buck, spokesman for America's Health Insurance Plans, says the health insurance industry "certainly is aware of what the impact would be in terms of what it would do to the risk pool and the effect on affordability."
"That said, it is a long way off until this is resolved and in the meantime we are remaining focused on doing our job of delivering affordable care and access to consumers," he says.
John Holahan, a fellow at the Urban Institute's Health Policy Center, says eliminating the tax subsidies would exacerbate already significant disparities in access to healthcare from state to state.
"I don't think anyone intended that this would be health reform for Blue States but that is what seems to be turning out, between the Medicaid decision and this," Holahan says. "Even though it was conservatives behind this lawsuit, the real impact of this would be on the conservative-learning states that will have more uninsured."
"It affects people. It affects state economies. Between the Medicaid expansion and this they are giving up a boatload of money and then there are already big disparities in insurance coverage and the quality of healthcare and those disparities will just expand."
A Florida law prohibiting doctors from talking with patients about gun safety is upheld by a three-judge panel in the 11th Circuit Court of Appeals, but an injunction blocking the law remains in effect.
Family physician associations say they will challenge a federal appellate court's ruling that upholds a Florida law prohibiting physicians from speaking with patients about firearms.
The 2-1 ruling issued Friday by the 11th Circuit Court of Appeals in Atlanta overturns a June 2012 U.S. District Court ruling that struck down the state law – popularly referred to as the "physician gag law" or the "Docs v. Glocks law"—as a violation of physicians' First Amendment rights.
Mobeen Rathore, MD, president of the Florida chapter of the American Academy of Pediatrics, the Florida Pediatric Society, and a lead plaintiff in the suit, said physicians will appeal the ruling to the full appeals court.
"We strongly disagree with the 11th Circuit's decision. It is an egregious violation of the First Amendment rights of pediatricians and threatens our ability to provide our patients and their families with scientific, unbiased information," Rathore said in prepared remarks.
"This dangerous decision gives state legislatures free license to restrict physicians from asking important questions about health and safety that are vital to providing the best medical care to patients."
Doctors who break the Florida law could face discipline, including fines and loss of license. However, an injunction blocking the law remains in effect.
Writing for the majority, Judge Gerald Bard Tjoflat, appointed to the court by President Nixon, said the law takes into account a patient's "relative powerlessness" in a physician's examining room, and "simply acknowledges that the practice of good medicine does not require interrogation about irrelevant, private matters."
"As such, we find that the Act is a legitimate regulation of professional conduct. The Act simply codifies that good medical care does not require inquiry or record—keeping regarding firearms when unnecessary to a patient's care," Tjoflat wrote. "Any burden the Act places on physician speech is thus entirely incidental."
In dissent, Judge Charles R. Wilson, appointed to the court by President Clinton, said gun violence is a serious public health issue and that the Florida law "significantly infringes" upon a physician's legitimate reasons to raise gun safety concerns with patients.
"Simply put, the Act is a gag order that prevents doctors from even asking the first question in a conversation about firearms," Wilson wrote. "The Act prohibits or significantly chills doctors from expressing their views and providing information to patients about one topic and one topic only, firearms."
"Regardless of whether we agree with the message conveyed by doctors to patients about firearms, I think it is perfectly clear that doctors have a First Amendment right to convey that message."
In a statement released Monday afternoon, Robert M. Wah, M.D., President of the American Medical Association said, "We are disappointed by the court's ruling to uphold a Florida law that seeks to bar physicians from freely discussing firearm safety with their patients. This law poses real harm to patients as it interferes with physicians' ability to deliver safe care, and hinders patients' access to the most relevant information available. The AMA strongly believes the patient-physician relationship must be protected, because physicians provide appropriate treatment options based on open, honest and confidential communications with their patients.
The Institute of Medicine and the National Research Council issued a report in 2013 that stated that in 2010 more than 105,000 people were killed or injured in firearms-related incidents.
Data on firearms violence in the United States could become more difficult to obtain since Congress, at the behest of the National Rifle Association, eliminated funding for gun violence research by the Centers for Disease Control and Prevention.
The NRA, one of a long list of defendants in the case, applauded the court's ruling. The gun lobby had pressed the Florida Legislature to pass the 2011 law. The NRA said in a media release that the law is needed to protect gun owners' privacy rights "from Florida chapters of the American Academies of Pediatrics and American College of Physicians, along with a number of other groups and individuals backed by the anti-gun community…"
"Every gun owner in Florida and across the country is grateful for this common sense ruling. It is not a physician's business whether his or her patient chooses to exercise their fundamental, individual right to own a firearm," said NRA lead lobbyist Chris Cox.
Howard Simon, executive director of the American Civil Liberties Union of Florida, said he was "astounded" by the appeals court's ruling. The ACLU had filed a friend of the court brief on behalf of the physicians.
"It's a sad day when judges tell doctors what is in the best interest of their patients," Simon said in prepared remarks. "This unconstitutional law gags doctors and prevents them from talking to their patients about measures to help parents protect children from guns in the home. The only thing that makes this discussion 'bad medical practice' in the view of two federal judges is the fact that it has to do with guns."
Simon said he expects that the ruling will be overturned when the case is reheard by the full appeals court.
Under the deal, which has entered the due diligence phase, Tenet would become majority partner responsible for all operations of Carondelet's assets and Ascension would all but leave the Arizona market.
Under the deal, which has entered the due diligence phase, Tenet would become majority partner responsible for all operations of Carondelet's assets, including St. Joseph's and St. Mary's Hospitals in Tucson; Holy Cross Hospital in Nogales, AZ; Carondelet Medical Group; Carondelet Specialist Group; and Carondelet's ancillary businesses.
The deal means that Ascension is all but leaving the Arizona market, but the St. Louis, MO-based health system would hold a minority interest and Carondelet would continue its Catholic sponsorship.
Dignity Health's role in the joint venture and its stake in the partnership were not detailed in the joint media release. Executives from the three health systems said this week they would not comment beyond praising the deal in a joint media release.
The announcement marks the second major deal with statewide implications in Arizona in the past four weeks. In late June, Banner Health, the University of Arizona, and its affiliated University of Arizona Health Network announced that they will create a statewide healthcare organization.
The affiliation is expected to generate $1 billion in new capital and academic investments, and would combine more than 37,000 employees, making it the largest private employer in Arizona.
Daniel Derksen MD, with the University of Arizona College of Public Health, says many of the forces that are changing the healthcare marketplace in other parts of the country are at work in Arizona.
For starters, the percentage of uninsured Arizonans declined by 300,000 in the first six months of 2014, largely through regained coverage through Medicaid restoration, the Medicaid expansion under the Affordable Care Act, and the private coverage bought through the health insurance marketplace.
"The music that we are all dancing to is more of our uninsured being covered and systems that have been challenged with a heavy burden of uncompensated care now have the opportunity to partner with others to provide the full array of services," Derksen says.
"It makes sense because now it is not a matter of how you keep the sick people out of your system and reduce your uncompensated care. Now, as more Arizonans get coverage, we have to compete on value and user friendliness and easy access to the services we provide," he says.
"There is going to be a lot of looking around and saying 'which partner can we arrange a union with so that we can be more responsive to the population that is coming before us?' rather than 'let's just focus on lucrative niche services and that will cross subsidize our uncompensated care some way.' Now the issue is integration and coordination of care and identifying gaps in that service or gaps in that fully integrated system and finding partners who can help strengthen those weaknesses so they can respond to these opportunities."
Federal data confirms what we know about rural hospitals and the care they deliver, and allows those of us who care about access to make a compelling case for providing good care to this population.
Many rural providers who look at this compilation from 2010, the latest available data, would likely nod their heads in recognition of the landscape. The data reviewed by the Centers for Disease Control and Prevention's National Center for Health Statistics found that:
About 60% of the 6.1 million rural residents who were hospitalized in 2010 went to rural hospitals; the remaining 40% went to urban hospitals.
About 51% of rural residents hospitalized in rural hospitals were aged 65 and over, compared with 37% of those hospitalized in urban hospitals. No significant difference was observed in the percentage of hospitalized rural residents under age 45 who were in rural hospitals compared with urban hospitals.
Twenty-four percent of rural residents hospitalized in rural hospitals were aged 45–64 compared with 32% of those hospitalized in urban hospitals.
Rural residents who remained in rural areas for their hospitalization were more likely to be older and on Medicare compared with those who went to urban areas.
Almost 75% of rural residents who traveled to urban areas received surgical or nonsurgical procedures during their hospitalization, compared with only 38% of rural residents who were hospitalized in rural hospitals.
More than 80% of rural residents who were discharged from urban hospitals had routine discharges, generally to their homes, compared with 63% of rural residents discharged from rural hospitals.
Seventy-four percent of hospitalized rural residents who were in urban hospitals received a surgical or nonsurgical procedure during their hospitalization, compared with only 38% of those hospitalized in rural hospitals.
Rural residents hospitalized in urban hospitals were more than three times as likely to have three or more procedures as rural residents hospitalized in rural hospitals.
With this data, we can flesh out what's happening with rural care delivery.
About 17% of Americans live in rural areas, many of which are sparsely populated and medically underserved. The nearest provider could be 20 miles away, and the rural hospitals that provide the care are usually smaller, with low volumes, operating on a shoestring budget and with minimal staff and limited services.
The younger rural hospital patients, who are more likely to have greater mobility and access to commercial health insurance, likely seek care in urban settings because rural hospitals often don't have the funding or patient populations to support specialists or a particular area of specialty care, such as cardiac or oncology.
For the most part, these rural hospitals primarily serve an aging, poorer population admitted for low-acuity care of chronic diseases, and so they likely want to remain close to their homes and their personal physicians.
It would also be reasonable to conclude, however, that many elderly rural hospital patients get their care locally because of barriers to urban hospital access that younger rural residents can surmount. An elderly patient either may not have a car, or may not have a friend or family member who can drive them to the closest city for care.
Because more rural hospital patients are elderly and because specialty care options are limited, NCHS data also shows that rural hospital patients are more likely to be discharged into some sort of short-stay hospital or a long-term care facility.
Ultimately, this data confirms what we already know about rural hospitals and the care they deliver, which in many respects is significantly different that the care provided in urban settings. But telling us what we already know doesn't make the data any less valuable.
Rural providers may not be providing cutting-edge care for highly acute patients, but it's not realistic to expect that they would be, and it certainly doesn't negate the mission of rural providers.
This data allows those of us who care about access to healthcare in rural America to make a compelling case for the care provided and the people served.
Two federal appeals courts on Tuesday issued diametrically opposed politically charged rulings on the legality of tax credits for millions of Obamacare enrollees in 34 states who purchased their health insurance through the federal exchange.
In a 2–1 ruling in Halbig v. Burwell, judges on the D.C. Circuit Court of Appeals said that specific language in the Patient Protection and Affordable Care Act does not authorize the Internal Revenue Service to extend tax credits to an estimated 4.7 million people in 34 states who bought coverage through the federally facilitated Healthcare.gov exchange.
"We reach this conclusion, frankly, with reluctance. At least until states that wish to can set up Exchanges, our ruling will likely have significant consequences both for the millions of individuals receiving tax credits through federal Exchanges and for health insurance markets more broadly," Judges Thomas Griffith and Raymond Randolph, both Republican appointees, wrote in their majority opinion.
"But, high as those stakes are, the principle of legislative supremacy that guides us is higher still. Within constitutional limits, Congress is supreme in matters of policy, and the consequence of that supremacy is that our duty when interpreting a statute is to ascertain in the meaning of the words of the statute duly enacted through the formal legislative process. This limited role
serves democratic interests by ensuring that policy is made by elected, politically accountable representatives, not by appointed, life-tenured judges."
Senior Judge Harry T. Edwards, a Democratic appointee, dissented, and wrote that the "appellants' argument cannot be squared with the clear legislative scheme established by the statute as a whole."
Statute Upheld in 4th Circuit
About an hour later, down the road in Richmond, VA, judges in the 4th Circuit Court of Appeals in a 3–0 ruling in King, et al v. Burwell, upheld a district court ruling that the IRS had the authority to extend the tax credits.
"The plaintiffs contend that the IRS's interpretation is contrary to the language of the statute, which, they assert, authorizes tax credits only for individuals who purchase insurance on state-run Exchanges," the Richmond judges wrote.
"We find that the applicable statutory language is ambiguous and subject to multiple interpretations. Applying deference to the IRS's determination, however, we uphold the rule as a permissible exercise of the agency's discretion."
The three Richmond judges are all Democratic appointees. Judges Stephanie D. Thacker and Andres M. Davis were appointed by President Obama, and Judge Roger L. Gregory was appointed by President Clinton.
May be Headed to SCOTUS
The tax credit issue is under challenge by Republican lawmakers and conservative activists in four separate federal lawsuits, and ultimately it is expected to be heard before the U.S. Supreme Court.
White House spokesman Josh Earnest said the D.C. Court ruling would be appealed before the full court. "It's important for people all across the country to understand that this ruling does not have any practical impact on their ability to continue to receive tax credits right now," Earnest said of the D.C. court's ruling.
"Right now there are millions of Americans all across the country who are receiving tax credits from the federal government as a result of the Affordable Care Act that is making healthcare more affordable for them. While this ruling is interesting to legal theorist it has no practical impact on their tax credits right now."
A report this month from the Robert Wood Johnson Foundation and the Urban Institute estimates that 7.3 million people, or about 62% of the 11.8 million people expected to enroll in federally facilitated marketplaces by 2016, could lose out on $36.1 billion in subsidies. Residents in Texas and Florida would lose the most, $5.6 billion and $4.8 billion in subsidies at risk in this court decision, the report said.
"Millions of people already get their private health insurance through federally facilitated marketplaces, and millions more will do so in the coming years. For most of these individuals, federal subsidies make the difference in being able to afford health insurance," John Lumpkin, MD, senior vice president at the Robert Wood Johnson Foundation, said in prepared remarks.
"If financial help is available to people living in some states but not others, it will widen the substantial health insurance disparities in our nation, making it harder for millions to access the care they need."
Reaction
Nina Owcharenko, director of health policy studies at The Heritage Foundation, said that 27states have not set up a state exchange and another seven entered into a federal-state partnership on an exchange.
"Even with federal incentives, states are struggling to keep their state exchanges afloat—especially as they prepare to take on full financial responsibility for them," Owcharenko said in prepared remarks.
"Only 17 states have set up Obamacare exchanges and some already are looking at abandoning their exchanges and using the federal exchange. This is more bad news for Obamacare's future as enrollees in the federal exchange could face higher costs of coverage."
A new report catalogs state laws that attempt to regulate or encourage competition within healthcare markets in the face of industry consolidations.
States are taking a number of measures to regulate hospital and provider competition within their borders as healthcare sector consolidation accelerates, a new study has found.
The joint report,State Policies on Provider Market Power, from the National Academy of Social Insurance and Catalyst for Payment Reform catalogs state laws that attempt to regulate or encourage competition within healthcare markets in the face of this wave of consolidations.
"Really, it's not a best-practices type of study. It just shows what exists," says Shaudi Bazzaz, Program Manager at CPR, and a coauthor of the report. "It is difficult to say what works because so much of healthcare is market specific. What works in one market might not work in another."
"There are a lot of dynamics that go into healthcare pricing, hospital costs, and all that. The paper is not saying what is the best thing to and that would be a very difficult thing to do as a generalization."
Among the findings:
Forty-two states have laws on price transparency, requiring hospitals and other providers to make pubic price information. However, the information is frequently not easily accessible to consumers.
Eighteen states have banned anti-competitive favored nation clauses that can prevent new health plans from entering local markets.
States are forming regulatory bodies to monitor healthcare prices. Delaware, Maryland, Massachusetts, and others have passed legislation establishing healthcare commissions to monitor and review prices.
Texas is the only state that has passed legislation that supports market competition during the development and implementation of ACOs. Other states that have passed legislation supporting the development of ACOs, such as Alabama, have provisions to grant provider groups exemptions from state antitrust laws and immunity from federal antitrust laws through the state action doctrine.
Five states have Certificate of Public Advantage statutes that permit exemption from antitrust provisions for providers merging or consolidating for the purposes of cooperation and healthcare delivery improvements.
"Some of the regulations out there that are providing safe harbors for providers to consolidate outside of antitrust scrutiny, I didn't realize existed, so that was a little bit scary to find out about," Bazzaz says.
"Especially given the environment where we are looking at trying to promote coordination, and to let providers bypass antitrust scrutiny in order to get that coordination is a little bit concerning."
Bazzaz says there is tension in the healthcare sector right now between antitrust concerns of some states and federal regulators, and the move toward consolidation, which is tacitly encouraged with the adoption of capitated payments for population health and narrow networks to contain costs.
"I don't know how this is going to turn out, but I definitely can identify that the friction exists," Bazzaz says. "The idea that coordination of care can only happen though consolidation feels faulty to me. If we had a history where consolidation had resulted in improved efficiencies and quality and coordination I don't think we would be having this discussion right now. "
"But the fact is we have had negative outcomes due to consolidation. We don't have a strong body of evidence that says 'consolidate and we are going to get you improved coordination of care.'"
Bazzaz says many in the healthcare sector lump together the distinctly separate ideas of coordinated care and consolidated care.
Bazzaz says many in the healthcare sector lump together the distinctly separate ideas of coordinated care and consolidated care.
"The issue is not that care should be coordinated," she says. "The issue is will consolidation get us there and is that the primary motivator of consolidation? If you can show coordinated care is the best way to achieve it through consolidation I don't think anybody would have a problem with that. That is not what we have seen in the past. Consolidation shouldn't be our first avenue we are going down to try to coordinate care."
In our February Intelligence Report, three-quarters of leaders indicate that their organization's IT operating budget will increase over the next three years. What is the outlook at your organization, and how are you prioritizing your IT spend?
This article first appeared in the July/August 2014 issue of HealthLeaders magazine.
Vernita E. Todd, MBA
CEO
Heart City Health Center
Elkhart, IN
We spent a little more than $800,000 on IT hardware, software, and support since 2009. The budget probably will be adjusted to reflect additional interfaces with our health information exchange and local hospitals.
The support and maintenance of it is really the most exorbitant cost. ICD-10 is a perfect example. We implemented our EMR and within four months, the ICD-10 rules came out and our EMR didn't fit that; then meaningful use came out and our EMR didn't fit that. The need for e-prescribing came out and our EMR didn't fit that. It seems like every year and a half or so we have a change in regulations that requires an adaptation to the EMR. It's not a plug-and-play thing.
You have to make the decisions about the data you are trying to capture way before you build it. Building it and then finding out that these things have changed sometimes takes you all the way back to the beginning of the drawing board. Sometimes it's an easy tweak. But the maintenance and support of that is a significant cost.
Roger Seaver
President and CEO
Henry Mayo Newhall
Memorial Hospital
Valencia, CA
Our spending should be flat as it relates to the percentage of the budget, but it has been consuming up to 40% of our capital budget for the past five years. In the hospital we're 85% installed and using electronic medical records. There is a lot of work to be done on the full benefits of EMR, of course, and connecting devices, and so on. We are still in the process of doing that, interfacing devices. And the opportunity to do more continues. There is some growth in there, but it is not in the most expensive parts of IT.
Spending is still a significant issue when you combine infrastructure hardware and software. The end of license of Windows software, for example, is almost a $2 million expenditure for this single hospital.
The scariest part right now for me is we are at the beginning of a second infrastructure review that is going to identify all of the areas of infrastructure that we have to bolster, particularly for traffic, the use of much more data flowing through our pipes, which probably aren't big enough, and things like that. So I could get a surprise here on the upside as the assessments come in. We are doing a lot of assessment marrying it up with our business strategic plan to make sure we get the right priorities.
Jeff Thompson, MD
CEO
Gundersen Health System
La Crosse, Wisconsin
On HIT spending over the long haul: Our budget will be flat compared to previous years because we have been very aggressive over the past several years. Might we need to shift some things around? Sure. But we believe we are probably in a spot where we need to be.
On the rewards of early adopters: We felt there was an advantage being out on the edge. Sometimes you bleed a little out on the edge, but in this case it helped us quite a bit. We built our own electronic record more than 20 years ago. That was very successful, and only in the past four or five years did we convert that over to an outside-sourced electronic record. Being an early adopter helped us a lot. It helped differentiate us from other competitors when it came to recruiting.
On the challenges of early adopters: We were all on track to be there exactly on the numbers for ICD-10 and meaningful use when it was going to switch. The delays have cost us money already. We're not big fans of increased complexity in healthcare, but since the rest of the world has long since gone to ICD-10, we felt that was something that was going to happen and we needed to do it.
On the next wave of IT spending: There will be a steady spend in healthcare IT because the upgrades keep coming. The systems need to be improved. We are not as efficient as we need to be. The electronic record is not completely an improver of flow right now. There will be continued investment.
William Lewkowski, CHCIO
Chief Information Officer,
Executive Vice President
Metro Health Corporation
Wyoming, MI
As early as 2005, Metro Health started increasing our IT budget, and we had already invested significantly in clinical systems. We already had growth in our IT spend and our operating budget over the past several years. It still has increases. It would be more in the category of minor increases, but we already are doing near 6.5% operating budget for IT, which is pretty high for healthcare.
We are investing in business intelligence and analytics and population management and a lot of other things, but the overarching thing is our clinicians. We are a digital organization, and that is a core backbone of how we do things.
Our strategies aren't driven by ICD-10 or meaningful use. Those things are by-products of using these systems in a very integrated way that is all about our patients. We start with our patients. We then group our populations, and out of that we make sure that we comply and we know where things are going. The industry is going through a transformation. A lot of that is going to be reimbursements starting to be based on value and not on volume. We are positioning and doing a lot of that not knowing exactly how things are going to lie. You have to have that agility to do that, and that is how we try to organize ourselves.
Year-to-date operating margins have improved from $140 million in 2013 to $184 million in 2014, an Arizona Hospital and Healthcare Association survey finds. And there's been no mad rush to emergency departments, as many had predicted.
For the most part I try to avoid writing about the politics of healthcare in this column. Frankly, there are plenty enough sources to cover that angle, and talking about the partisan aspects of "Obamacare" tends to bring out extremists on both sides of the issue, with everyone intent on generating more heat than light.
It's hard to stay apolitical, however, when it comes to the Medicaid expansion. That's because it was partisan politics by some governors and legislators in some states to reject the additional hundreds of millions in federal dollars that would cover health insurance costs for millions of people who could not afford it otherwise.
Because most states have seen the no-brainer wisdom of accepting Medicaid expansion and embracing health insurance exchanges, the percentage of uninsured people in the United States continues to hit record lows.
The excuse in those states that have rejected the expansion is that they cannot afford to take up the new entitlement once the federal government begins to scale back on its share of the funding.
On its face that's a specious argument and reeks of political cover.
Under Medicaid expansion, which the Supreme Court made optional in 2012, the federal government will pay 100% of the cost through 2016 and 90% of the cost by 2020.
The problem is that those rejecting Medicaid money presume that healthcare is just like any other product, and that the demand will disappear if nobody pays for it. As every hospital administrator understands, however, healthcare doesn't work that way.
The demand will still be there, the uninsured will continue to access their care through the emergency department, and people with insurance and their employers will continue to pay for the "uncompensated care" through "hidden taxes" in the form of higher premiums and cost-shifting.
Rejecting Medicaid expansion only makes sense as a political wedge issue, and it's possible that that calculation could backfire as well. In Georgia, Gov. Nathan Deal, up for reelection in November, has called a special committee to find ways to help the Peach State's struggling rural hospitals, many of which are on the verge of shuttering.
At a recent meeting of the group, however, accepting Medicaid expansion money was not on the agenda. While the people sitting on the committee seem sincere, capable, and committed, the governor's actions provide election year political cover.
Arizona Gov. Jan Brewer, an ardent and vocal opponent of Obamacare, shocked observers in January 2013 when she announced that she would support the Medicaid expansion.
That turns out to have been a good idea. Since Jan. 1, 2014, about 190,000 Arizonians have been covered under the Medicaid expansion, and another 120,000 people gained private coverage.
'A Significant Drop in Uncompensated Care'
This month, an Arizona Hospital and Healthcare Association survey of 75% of its member hospitals found "a significant drop in uncompensated care" over the first four months of 2014, down from $246 million in 2013 to $170 million for the same period in 2014, a decline of 31%.
In addition, year-to-date operating margins have improved from $140 million in 2013 to $184 million in 2014. The hospitals also have not seen a mad rush to the emergency department by these newly covered Arizonians, as many had predicted.
Of course, Medicaid expansion money won't solve everything. Even with the additional federal funding and the expansion of the private coverage rolls, more than 30% of Arizona's hospitals reported in the survey that they are losing money. And the AHHA survey does not factor in about $230 million in quarterly Medicaid assessment fees that hospitals pay the state of Arizona.
Still, it's hard to demonstrate that the Medicaid expansion been anything other than a net positive for the hospitals of Arizona, just as refusing the expansion money has put many Georgia hospitals on the brink of collapse.
If your hospital is in a state that has rejected Medicaid expansion money, it's not too late to act. It's an election year. Your elected officials and the people who voted them into office must understand the real world repercussions of a purely political decision to reject tens of millions of dollars in healthcare funding that could very well determine whether or not your hospital stays open.
