The pace of hospital job growth has slowed to a crawl this year. The root cause is "not just healthcare reform," says one analyst, citing about $100 billion of other cuts since 2010.
Healthcare reform, federal funding cuts, a sluggish economy, and new technologies and treatments are accelerating a longstanding trend that has seen healthcare job creation shift away from hospitals and toward outpatient ambulatory care.
Nicole Smith and Artem Gulish, analysts from the Georgetown University Center on Education and the Workforce, said in an email exchange with HealthLeaders Media that ambulatory care employment first outgrew hospital employment in 1995 with the gap widening ever since. For the past 13 years hospital employment has been growing at a slower pace than the overall healthcare sector while ambulatory services has grown at a faster pace than the sector.
"The slow growth in hospital employment and fast growth in ambulatory care services has been the trend in healthcare since the 1990s," say Smith and Gulish, citing Bureau of Labor Statistics data. "This trend has been driven by the move away from high-cost, high-risk hospital care and towards more convenient, lower-cost ambulatory care… In recent years this trend has been driven by development of new technologies that have allowed patients who previously required hospital care to be treated in ambulatory setting, such as the use of stents for many people who previously required bypass surgery."
Bureau of Labor Statistics preliminary data for August shows that the healthcare sector, which includes hospitals, nursing homes, ambulatory surgery centers, clinics, and physicians' offices, created 32,700 new jobs in August, which represents 20% of the 169,000 new jobs created in the entire economy for the month.
Ambulatory services accounted for 26,600 of those new jobs, and hospitals accounted for 900 new jobs. Hospitals shed 9,000 jobs in May, and 1,300 jobs in July, BLS data and preliminary data show. BLS data for August and July is considered preliminary and can be subject to considerable revision.
For the past five years the general consensus has been that the recession and sputtering recovery have played a role in reducing inpatient admissions.
"The pace of growth in hospital employment has significantly slowed down since 2008 following the beginning of the recession, even before 'Obamacare' was enacted," the Georgetown analysts say. "This is most likely due to impact of macroeconomic conditions and is indicative of the downward cyclical decline in employment. The pace of growth improved since the recovery started to take hold; though it is still much slower than before the recession."
"Ambulatory care employment has been largely protected from the recession, likely due to its cost advantage over hospital care. So, as cost became a greater consideration for insurers and providers, they were more like to use ambulatory care in place of hospital care."
In 2013 the pace of hospital job growth slowed to a crawl.
"We are seeing significantly lower job growth for hospitals this year than we did year-to-date in August 2012 and year-to-date August 2011," says Caroline Steinberg, vice president, health trends analysis at the American Hospital Association.
"Last year at this time job growth was about 44,500 by August and this year it is only 7,000, but that is not surprising given the mounting payment cuts to hospitals, particularly the 2% cuts to Medicare mandated by the sequester."
While ambulatory services created most of the jobs in healthcare, Steinberg says hospitals had been holding their own until this year. "The trend in terms of employment is really due to the cuts," she says.
"We had been seeing steady increases in hospital employment even as we saw a shift away from inpatient care because a lot of that inpatient volume is being replaced by outpatient volume. Overall demand for hospital care is not really dropping off. It's that the funding for the same amount of care is getting to be less."
Steinberg says hospitals are reluctant to hire because they're bracing for massive reductions in federal funding over the next 10 years. "It's not just healthcare reform. We've seen about $100 billion of other cuts coming that are not healthcare reform since 2010."
"You've got the sequestration, which is about $45 billion over 10 years, then you have the coding offsets and they've tacked on more cuts to Medicaid (disproportionate share payments) and cut the reimbursements for bad debt. There are a lot of other cuts that hospitals are facing that are causing them to really cut back on staff."
Adam Powell, a Boston-based healthcare economist, says the move away from fee-for-service reimbursements is changing the way healthcare is delivered. "We are seeing a movement toward accountable care organizations and contracting and this means that healthcare providers will have fixed revenues and can only increase their profitability by decreasing their costs. Now, seeing as providers tend to have the largest cost being their staffs the only way to decrease costs is to reduce staffing," says Powell, president of Payer+Provider consultants.
"There is naturally a certain rate of staff attrition which helps solve the problem. The way to reduce staffing costs without laying off people is simply not hiring as many. This is all part of a trend toward running leaner operations."
Hospital consolidation is also a factor. "Two merged hospitals don't need two CEOs and two CMOs. They can potentially eliminate positions that help reduce costs. The staff gets right sized. The community doesn't need two complete departments for a particular specialty," Powell says.
While it is indisputable that hospital hiring is down, Steinberg says the BLS data may not reflect the big picture because it does not account for hospitals' buying physician groups and other ambulatory services.
"If a hospital bought a physician practice and that practice continues to operate in an off-campus facility that would still be counted as a physician office for BLS data. So you have to be a little careful in terms how you are looking at the data. The data is collected at the establishment level and the establishment is a particular location," she says.
Adults earning below the federal poverty level who live in the 26 states that have either rejected Medicaid expansion or have yet to commit to it will be ineligible for a federal subsidy to help them buy coverage on the health insurance exchanges.
Many working poor who live in states that won't expand Medicaid also won't be eligible for federal subsidies that would make private health insurance affordable.
A Commonwealth Fund study released this week estimates that a glitch in the implementation of the Patient Protection and Affordable Care Act was created when the U.S. Supreme Court ruled last year that the Medicaid expansion was optional for states. Even with the ruling, no one foresaw that some state would actually reject the billions of federal dollars to prop up the expansion.
However, 42% of adults who've been recently uninsured and who live in the 26 states that have either rejected Medicaid expansion or have yet to commit to it will be ineligible for a federal subsidy to help them buy coverage on the health insurance exchanges.
In those states, the study says, the lowest-income adults—those earning below the federal poverty level, or less than $11,170 for an individual and $23,050 for a family of four in 2012—will not have access to either the Medicaid expansion or subsidized private insurance through the new state insurance marketplaces and are likely to remain uninsured.
"A primary goal of the Affordable Care Act is to provide health insurance coverage to the millions of uninsured people in the U.S., the majority of whom have low and moderate incomes and struggle to afford the health insurance and healthcare they need," Commonwealth Fund Vice President and study coauthor Sara Collins said in prepared remarks. "However, if states don't expand their Medicaid programs, adults with the lowest incomes will continue to live without the health and financial security provided by the Affordable Care Act."
The report, In States' Hands: How the Decision to Expand Medicaid Will Affect the Most Financially Vulnerable Americans [PDF] , is based on a survey of U.S. adults ages 19 to 64 that estimated that 55 million Americans were uninsured at least part of the time from June 2010 to September 2012. In the 26 states, 72% of adults whose incomes fell below 133% of the federal poverty level ($14,856 for an individual and $30,657 for a family of four in 2012) during the two-year period were uninsured at some point.
In a perverse twist of the ACA, Collins says that some of the lowest income adults, the very people for whom the programs are designed, will be especially at risk in the states that don't expand their Medicaid programs.
It's understood that people earning less than 133% of the federal poverty level in 2014 will qualify for Medicaid, while people making between 100% to 133% of the federal poverty level are eligible to purchase subsidized insurance coverage through the state marketplaces if they are not eligible for Medicaid.
Here is where it gets skewed: People making less than 100% of the poverty level in the 26 states are not eligible for marketplace subsidies because it was assumed that they would be enrolled in Medicaid.
As a result, Collins says, not only will the lowest-income people be unable to enroll in expanded Medicaid, but they won't be able to purchase subsidized health insurance through the marketplaces.
The Commonwealth Fund estimates that the glitch will affect two-in-five adults who live in the 26 states and who were uninsured any time over the two-year survey period earned less than the federal poverty level in one or both years. The report also finds that low-income people in the 26 states could lose coverage if their income changes.
For example, one year a family's income level could qualify them for subsidized coverage through the marketplaces. However, an income loss, such as that resulting from the loss of or change in a job, could drop them into the category where they no longer qualify to purchase subsidized coverage through the marketplaces. With no expanded Medicaid and no option for subsidized coverage through the marketplaces, they would likely become uninsured.
Collins says that 29% of people who would qualify for subsidized coverage saw an income change from 2011 to 2012 that dropped their income below 100% of the poverty level, meaning they would no longer qualify for subsidized coverage through the marketplaces. Another 12% of those earning between 133% and 249% of poverty in 2011 also experienced an income change that lowered their earnings to less than the poverty level in 2012.
In contrast, 30% of people with incomes below 100% of poverty had an income gain that would have made them eligible for subsidized coverage.
The study calls on states to accept the Medicaid expansion. In the likely event that they do not, at least in the near term, Collins says Congress could pass legislation that would allow those making less than 100% of the federal poverty level, who are not eligible for Medicaid, to be eligible for subsidized coverage through the state marketplaces.
Such legislation would be unlikely to clear the Republican-controlled U.S. House, which has voted 40 times to repeal the PPACA.
Gary M. Wiltz, MD, the newly elected chairman of the National Association of Community Health Centers, vows to expand the public profile of the organizations he calls "the base of primary preventive care."
Gary M. Wiltz, MD
Since the mid-1960s community health centers have done the heavy lifting and often thankless work of providing healthcare to poor and low-wage earners in underserved areas. In those decades they have proven their value and now serve about 22 million people who otherwise might go untreated. By some estimates community health centers will serve as many as 50 million people by 2019.
Gary M. Wiltz, MD, the newly elected chairman of the National Association of Community Health Centers, sees the role of community health centers growing dramatically over the next few years with the advent of the Affordable Care Act and its emphasis on population health and expanding Medicaid to improve access.
"We touch one in every 15 Americans right now, which is quite a statement about the expansion that we have enjoyed historically. We are projecting a lot of growth in the next five years, so there is a lot of work out there and a lot of people in need," says Wiltz, who also is the CEO at Teche Action Clinic in Franklin, LA.
"Quality is very important to us and we just want to make sure that we are making ourselves available and accessible. Our center here in Franklin is open six days a week, 12 hours a day, and a lot of our centers are trying to do extended hours to make sure we have the capacity to serve all of the newly insured that we hope when they come through our doors. It's the right thing to do for the country and the right thing to do by people."
Spend any time around these community health centers and the people who run them and it's hard not to be impressed, both with their dedication to their mission, and with the cost-effectiveness with which they deliver care.
Primary Care Starts Here
Community health centers have been around for close to a half-century because they deliver on both of those values. "If you look at healthcare as a triangle, we are the base of primary preventive care," Wiltz says.
"If we do our jobs correctly, if we bring people in and screen them for diseases and get those diseases under control and manage them and not always be reactionary, if we get people to quit smoking and lose weight, and exercise, do the cancer screenings and heart disease and do the things we do well then we can keep people from getting secondary and tertiary diseases, doing the prenatal care to protect against low birth weight bottles or preventing baby bottle tooth decay. That is our whole emphasis."
"I have been doing this for 30 years. I see patients now who I saw when they were 40 years old and got them to quit smoking and now they are 70 and they haven't had a heart attack or a stroke or developed cancer. That is the benefit of what we do."
Unfortunately for Wiltz and the people he serves his health center is in Louisiana, which is one of the 20 or so states that have opted out of the Medicaid expansion under the Affordable Care Act.
"In our state we estimate it will affect about 400,000 people who would be eligible for Medicaid expansion that are not going to get it," Wiltz says. We are going to try our best to get them into traditional Medicaid and the health insurance exchanges, but it really doesn't make any economic sense let alone moral sense. It is purely politics and philosophy that is operating and it's unfortunate for the people who are suffering and who could benefit."
Wiltz says expanding Medicaid would save money because treating people in community health centers costs a fraction of what it would cost in an emergency room. "On average, a Medicaid patient seen in a health center is $110. That same person in a hospital setting is almost $800. We have demonstrated tremendous savings."
Community health centers have also been caught in the budget battle between the Obama administration and Congress. The Obama administration included $11 billion in the ACA for capital improvements to the 1,128 federally funded community health centers across the nation.
Congress, however, cut funding for health centers by $600 million in 2011. Also, sequestration cuts are expected to cost community health centers about $120 million, which some studies estimate would translate into 900,000 fewer patients served. Community health centers are stutter stepping.
A Downward Slope
"Having prepared for a decade of strong growth, health centers now face significantly diminished funding and the prospect of a slower expansion of Medicaid, both of which exert downward pressure on health center expansion," the Kaiser Commission on Medicaid and the Uninsured stated in March.
"In light of health centers' role in our healthcare system and their unique potential to advance the goal of expanded access to care for the medically underserved, these shifts in the direction of retrenchment pose a challenge going forward." Wiltz says he is experiencing the effects of that retrenchment.
"We got money to do the capital development at almost all centers in the U.S. Before that we were in two double-wide trailers and an old house. A lot of centers were in churches and schools and had not gotten any money from capital development to even get out of those dilapidated buildings into more modern facilities," Wiltz says.
"We built these facilities with the thought that these uninsured would be covered through Medicaid expansion. That was the model that we have been operating on. I have two buildings that have been renovated and are ready to go but I can't open them because if I do and 80% who come to us are uninsured, I don't have operational dollars."
Wiltz concedes that community health centers have done an inadequate job of "tooting our own horns." He vows to expand their public profile during his two-year chairmanship.
"We represent 22 million people and I don't think all of our voices have been fully heard," he says. "I would like to see us get more media savvy and have people understand that when you touch one in every 15 Americans that says a lot."
Demonstrated Worth
He takes solace knowing that community health centers have endured for nearly a half-century because they've demonstrated their worth and no one else steps in to fill the need.
"When you look back on our beginnings in 1965, no one expected us to thrive and survive. We have a history of being creative and finding solutions. I don't have the exact road map, but I can tell you that we have enough talented and creative people and enough force and drive that we are going to make it happen one way or another."
"We are like that inscription below the Statue of Liberty: 'Send these, the homeless, tempest-tossed to me.' No one else wants to deal with them, but we have always provided a welcoming door. That is part of our DNA."
Part of the reason for the current shortage of family physicians harkens back to the perception in some medical circles just a few years ago that primary care was a specialty best to be avoided unless you wanted to work long hours for less pay.
For the seventh straight year family physicians topped the list of the 20 most sought-after specialties for recruiters Merritt Hawkins.
This should not surprise. It has been evident for the last several years that as healthcare reform eventually mandates a shift away from fee-for-service and rewards prevention, quality outcomes, and population health, primary care physicians will lead the way.
Another driver for the high demand is the growing numbers of service sites. Medical groups searching for primary care physicians increasingly find themselves competing against other medical groups, hospitals, community health centers, urgent care centers, retail clinics, academic centers, and government facilities.
It was fashionable in the 1990s and the Health Maintenance Organization era to refer to primary care physicians as "gatekeepers" who would map out and coordinate care strategies to reduce costs and waste. While the gatekeeper label might have gone out of fashion (or conjures up unpleasant thoughts of rationed care) the role clearly has come storming back.
Return of the Gatekeeper
"Everybody wants to be in primary care. The whole mantra with healthcare reform is wherever your patients are let's be there," says Kurt Mosley, vice president of strategic alliances at Irving, TX-based Merritt Hawkins.
"Back in the 1990s the whole issue was gatekeepers. I knew a CEO who had a sign on his desk that said 'He who retires with the most primary care doctors wins. ' And I think we are back to that."
Merritt Hawkins' 2013 Review of Physician and Advanced Practitioner Recruiting Incentives [PDF], the 20th edition of the survey, tracks the 3,097 recruiting assignments in 48 states the firm conducted from April 1, 2012 to March 31, 2013. The report shows that physician recruiters handled 624 searches for family physicians. General internal medicine came in a distant second with 194 searches.
Part of the reason for the current shortage harkens back to the perception in some medical circles just a few years ago that primary care was a specialty best to be avoided unless you wanted to work long hours for less pay.
"The problem is when all of those specialties started coming up years ago we started seeing all of these doctors making all of this money and there was a bias against primary care in medical school. Some of the faculty would say to students 'you are way too smart for primary care.' We bit off our own nose in spite of our face."
The report shows that demand for some medical specialists has decreased. Radiology, which was the most requested specialty from 2001 to 2003 did not make the top 20. Anesthesiology, also a one-time top recruiting assignment, also did not make the list in 2013.
Compensation Remains a Sore Spot
While family practitioners are in high demand, their average base salaries or guaranteed incomes of $185,000 remain near the bottom. Only pediatricians fared worse with an average base of $179,000.
"A key factor that people have to understand is that primary care is not necessarily growing in salary, but more specialties are coming down closer to them," Mosley says. "We used to talk about cardiologists in the $800,000 to $900,000 range. Now they are in the $500,000s and $600,000s. Also doctors in medical homes can make a heck of a lot more money because they are paid that base salary and they are paid a maintenance fee and they are paid the malady improvement fee. There are ways for doctors to make money. We are going to see it continue to rise."
Seventy-five percent of search assignments this year featured a salary with production bonus. Most such bonuses (57%) are based on a Relative Value Units formula. A growing number of production formulas also feature quality-based metrics. For example, 39% of the search assignments offered production bonuses that featured a quality-based component, up from 35% a year earlier.
By comparison, in 2011, fewer than 7% of recruiting assignments that offered a production bonus included payments based on quality-of-care metrics. In 2013 that number grew to 39%, which Mosley says illustrates the rapid shift away from rewarding physicians for the volume of services they provide and toward rewarding them for the value of services they provide.
Other Recruiting Trends
Nonetheless, quality measures averaged less than 10% of a physician's potential bonus in 2013 and volume is still the key driver of physician incentives. The survey identified these trends as well:
Also for the first time, geriatricians cracked the top 20 and are being actively recruited to supplement elder care traditionally provided by internists, pulmonary and palliative care specialists.
Hospitalists ranked third among the top 20 search assignments, probably because their training and emphasis on coordinating inpatient care and reducing readmissions are aligned with the goals of new care delivery models such as accountable care organizations.
Other hospital-based physicians, particularly emergency medicine physicians, are in increased demand, as data show that a greater prevalence of insured patients does not necessarily decrease emergency room visits – a significant trend as millions of the previously uninsured begin to obtain coverage through the Affordable Care Act.
The trend toward hospital employment of physicians continues and represented 64% of search assignments in 2012/13, up from 11% in 2004.
Demand for physicians is not confined to underserved rural areas. Merritt Hawkins worked in 48 states in 2012/13 and 49% of the firm's searches were in communities of 100,000 people or more, the highest percentage in the 20-year history of the review.
In a joint venture, Florida Hospital Healthcare System and Health First Health Plans will partner to form a commercial health plan in Central Florida. The coverage area will include Tampa, Orlando, and Daytona Beach.
Mike Schultz, President and CEO
Adventist Health System Florida Region
Florida Hospital and Health First Health Plans are partnering to create a commercial health plan that will serve 10 counties across Central Florida.
The new plan, which is expected to be operational on the state's health insurance exchange by mid-2014, will be a joint venture between Florida Hospital Healthcare System, which administers employee health insurance for Florida Hospital, and Health First's Brevard County, Florida subsidiary. A formal agreement is expected to be in place by the end of 2013.
Mike Schultz, president/CEO of the 23-hosptial Adventist Health System Florida Region, says the joint venture creates an opportunity to improve patient outcomes while attempting to contain the unsustainably high medical inflation.
"Florida Hospital's footprint is pretty big in Central Florida, so we believe we have the size that can have a positive impact on the medical spend," Schultz says.
"We believe that payers have to be aligned with providers to lower that medical spend with an emphasis on health and wellness. Right now we get paid when people are sick, so there is no incentive for us to keep them out of the hospital. We believe that aligning with a payer like Health First will provide us with the opportunity to focus on health and wellness and then over the course of time we believe that will bring down the health spend that will help our governments and our employers."
FHHS operates healthcare networks in 10 Central Florida counties stretching from Tampa to Orlando to Daytona Beach, with 23 hospitals, 22 urgent care centers, more than 4,000 physicians and ancillary providers. FHHS also provides third party administrative services for employers in the region.
Health First is Central Florida's only fully integrated health system, with more than 7,500 employees and four hospitals. Health First Health Plans offers plans in Brevard and Indian River Counties. Health First Medical Group is the largest multi-specialty physician group on Florida's Space Coast.
Adam Powell, a healthcare economist, says the new partnership is "yet the latest in a series of narrow network plans that have emerge in response to healthcare reform."
"These plans tend to offer people high-value care delivered from a concentrated set of providers in their area," says Powell, president of Boston-based consultants Payer+Provider.
"By keeping patient panels within a health system, these integrated plans make it easier for providers to manage the cost and quality of care. By encouraging patients to a house brand health plan, Florida Hospital can more fully capture profit across the healthcare value chain and can more firmly manage patients' care. The plan has the potential to improve the quality of care, as when patients stay within a health system, they tend to have better continuity of care and to have more complete medical records."
Schultz says the arrangement with Health First and the gradual roll out of the plan over the next three to five years allows Florida Hospital to position itself to become "owners of a health plan over time, and that helps align incentives."
"A number of systems that have the size are looking at areas of where they can get into the payer side of the business," he says. "We decided to go with Health First as opposed to building our own insurance company from the ground up. That was more of a speed-to-market deal. It's not unique from the standpoint of strategy that a number of people are doing. Payers are already buying physicians and I believe you will see payers buying hospitals to incorporate the same strategy. The incentives need to be aligned, whoever is doing it."
Powell says that Florida Hospital is hardly alone in its desire to manage more patient risk.
"The Advisory Board recently announced that of the 100 hospitals it surveyed, 34% responded that they already own health plans and 21% responded that they planned to launch a health plan by 2018," he says. "While Florida Hospital Healthcare System has experience operating as a third-party administrator, the partnership with Health First brings it the competencies it needs to launch commercial and Medicare plans."
Owing to a conflict with Georgia's stringent Certificate of Need laws, the FTC will grudgingly drop its attempts to nullify Phoebe Putney's 2011 acquisition of rival Palmyra Park Hospital from HCA for $195 million.
A two-year antitrust investigation launched by the Federal Trade Commission against Georgia's Phoebe Putney Health System and the Hospital Authority of Albany-Dougherty County has ended with a settlement that has both sides claiming victory.
Owing to a conflict with Georgia's stringent Certificate of Need laws, the FTC will grudgingly drop its attempts to nullify Phoebe Putney's 2011 acquisition of rival Palmyra Park Hospital from HCA for $195 million. Phoebe Putney will keep the hospital, now called Phoebe North Campus, but the health system and the Authority may not for the next five years contest potential competitors providing additional acute care services in the six-county area around Albany, GA.
Phoebe Putney and the Authority said the settlement allows them to object to CON applications for other projects, but they have agreed to tell the FTC when they do. The hospital will provide the FTC with annual compliance reports for the provisions for 10 years. The two sides expect to finalize the consent agreement within 30 days.
The FTC had sought to have the acquisition voided and another buyer found for Palmyra, but learned that doing so would prompt a Certificate of Need review from the state of Georgia. "Unfortunately, Albany is deemed ‘over-bedded' by Georgia's strict need assessment criteria making it unlikely that any possible divestiture buyer could obtain the necessary CON approval to operate an independent hospital," the FTC said in a media release.
Phoebe Putney said the consent agreement will stipulate that the FTC made no findings that the hospital or the Authority violated antitrust laws. "Instead, solely to achieve a compromise with the FTC, and for purposes of these proceedings only, Phoebe Putney and the Hospital Authority have stipulated that the acquisition of Palmyra might substantially lessen competition within the service and geographic markets alleged by the FTC," the hospital said in a media release. "The settlement expressly reserves the rights of Phoebe and the Authority to contest that allegation in any other proceeding"
Joel Wernick, president/CEO of Phoebe Putney, said a settlement after more than two years of legal wrangling allows the health system to "put this proceeding behind us…"
"Today's settlement means Phoebe Putney will be able to use the Phoebe north campus as planned, to meet current capacity needs and to expand its tradition of high quality healthcare for our entire community," Wernick said in prepared remarks. "The citizens of Southwest Georgia are well served by this compromise solution [which] we believe to be in the best interests of all parties. It will also allow us to continue moving forward at a time of great change in our country's health delivery system"
In a case that prompted a ruling in February from the U.S. Supreme Court, the FTC alleged in its antitrust complaint that Phoebe Putney constructed an elaborate scheme that used the Authority as a "straw man" to "cloak private, anticompetitive activity in governmental guise in the hopes that it would exempt the acquisition from federal antitrust law"
Phoebe Putney and the Authority countered that they were immune from federal antitrust liability under the "state action" doctrine—which provides an exception for anticompetitive conduct if it is an act of government.
A federal district court and an appeals court sided with Phoebe Putney and the Authority. In February, however, those rulings were tossed out by the U.S. Supreme Court, which ruled that the appeals court had "loosely" interpreted a state law cited by Phoebe Putney to justify a merger that would give the consolidated health system control of about 85% of the market in the region.
FTC officials said they were disappointed that they could not stop the Palmyra acquisition despite the favorable ruling from the high court, but they took solace in knowing that their complaint had established a more stringent legal precedent for state action exemptions.
"The FTC's efforts in this case produced a tremendous victory for consumers when the Supreme Court unanimously reined in overbroad application of state action immunity and allowed federal antitrust review of this merger," Deborah Feinstein, director of the FTC's Bureau of Competition, said in prepared remarks.
"Regrettably, that legal victory will not undo the acquisition's clear harm to competition. Because divestiture is unavailable in light of Georgia's strict certificate of need legislation, this proposed order is the most effective and efficient resolution that can be achieved at this time"
Lack of vendor readiness for the move to Stage 2 Meaningful Use means physicians will be unable to meet the requirements for EHR implementation and will be subject to fines starting in 2015, the Medical Group Management Association says.
The Medical Group Management Association has become the newest member in a grumbling chorus of prominent healthcare professional associations that want the federal government to modify components of Stage 2 Meaningful Use implementation.
MGMA-ACMPE President/CEO Susan Turney, MD, in a letter this week to Health and Human Services Secretary Kathleen Sebelius said that concern over "vendor readiness" for the move into Stage 2 Meaningful Use has left physicians in a lurch.
"It has become clear that the alignment between the more rigorous Stage 2 requirements and the ability of the vendor community to produce and deploy Stage 2 certified products has simply not occurred at the pace anticipated," Turney said in the letter.
"If the appropriate steps are not taken, we believe physicians that have made significant investments in (electronic health record) technology and successfully completed Stage 1 requirements will be unfairly subject to negative Medicare payment adjustments. Accordingly, HHS should immediately institute an indefinite moratorium on penalties for physicians that successfully completed Stage 1 meaningful use requirements."
A Lack of Vendor Readiness
Turney said vendors are lagging far behind on Stage 2 EHR systems. She said there are more than 2,200 products and almost 1,400 "complete EHRs" certified under the 2011 criteria for ambulatory eligible professionals. However, there are only 75 products and 21 complete EHRs certified for the Stage 2 criteria, which goes into effect for physicians on Jan. 1, 2014.
"This lack of vendor readiness has significant implications for (eligible professionals). Without the appropriate software upgrades and timely vendor support, EPs will be unable to meet the Stage 2 requirements and thus will be unfairly penalized starting in 2015," Turney said.
"Those EPs who invested considerable resources in their Stage 1 certified EHR, many of them in small or rural clinical settings, are now in danger of falling behind. To avoid the Medicare payment adjustments, EPs would be required to 'rip and replace' their existing EHR with one certified for the Stage 2 criteria. This is an unrealistic and unreasonable demand as the cost to the practice would be prohibitive and the disruption to organizational workflow and patient care would be significant."
AHA, AMA Also Want Delay
Last month the American Hospital Association and the American Medical Association sent a joint letter to Sebelius asking that the implementation date for Stage 2 be delayed. The two professional associations echoed MGMA's concerns about the lack of readiness on the part of EHR vendors as a primary reason for the needed delay.
Stage 2 implementation for hospitals takes effect on Oct. 1.
"Our members, and the vendors they work with, report growing concerns that the rapidly approaching start date for Stage 2 is on a trajectory that will not provide enough time or adequate flexibility for a safe and orderly transition unless certain changes are made," the AHA/AMA letter said.
The College of Healthcare Information Management Executives (CHIME) in May called for a one-year delay for implementation of Stage 2, noting that the delay "will give providers the opportunity to optimize their EHR technology and achieve the benefits of Stage 1 and Stage 2; it will give vendors the time needed to prepare, develop and deliver needed technology to correspond with Stage 3; and it will give policymakers time to assess and evaluate programmatic trends needed to craft thoughtful Stage 3 rules.
Last week, the Healthcare Information and Management Systems Society called for launching Stage 2 on schedule, but extending Year 1 of the Meaningful Use Stage 2 attestation through mid-2015 for hospitals and physicians. The society said the additional 18 months "encourages continued progress while simultaneously acknowledging short-term obstacles."
"Perfect Storm" of Regulatory Compliance Issues
On Aug. 7 the American Academy of Family Physicians asked Centers for Medicare & Medicaid Services Administrator Marilyn Tavenner "not to delay the implementation of MU stage two, but to extend the timeframe for compliance with MU stage two requirements by 12 months."
AAFP Board Chair Glen Stream, MD, told Tavenner that "2014 brings a perfect storm of regulatory compliance issues for family physicians that, we fear, may derail health information technology adoption and substantially interfere with our shared progress toward achieving better care for patients, better health for communities and lower costs through improvements to the healthcare system."
A recommendation to strip critical access designation from any hospital that was given that status under a state "necessary provider" designation lacks consideration for the role of critical access hospitals in the rural healthcare safety net.
Last year, for example, at the 25th Annual Rural Health Care Leadership Conference, James E. Orlikoff with the Center for Healthcare Governance told a hotel ballroom packed with hospitals leaders that payment cuts to critical access hospitals were "inevitable."
The outsized payments for critical access hospitals, he said, were low-hanging fruit in a cash-strapped healthcare delivery system. "Anytime you face an economic crunch when you have carved-out artificial protections, they can't last," he said then.
"Is it evitable? Yes. 'When' and 'how' are the questions… I think things are going to happen much more quickly. I tell my critical access hospitals to strategically plan on three years to be off the cost-plus model."
A year-and-a-half later, the Department of Health and Human Services' Office of the Inspector General has recommended that Congress allow the Centers for Medicare & Medicaid Services to strip critical access designation from any hospital that was given that status under a state "necessary provider" designation.
If the OIG's recommendations are acted upon they could adversely affect about 1,000 of the 1,300 critical access hospitals in 45 states that gained an "NP" exemption, which includes Margaret Mary Health in Batesville, IN.
Tim Putnam, CEO at Margaret Mary
Tim Putnam, CEO at Margaret Mary and the president of the Indiana Rural Health Association, says his 25-bed hospital is already reeling from the 2% cuts in Medicare mandated by the sequestrations. Further stripping the hospital of its critical access status and the funding that goes with it " would be a significant cut in reimbursement which would cause us to carefully evaluate services " for the older, sicker, poorer patient base the hospital serves.
"For us, the program has been successful. It has allowed us to remain a vibrant healthcare system. We have always felt we have been financially responsible and frugal and this will be a significant impact," Putnam says.
Critical access hospitals are paid 101% of allowable costs, which sounds great on paper. But Putnam says "allowable" narrows when you read the fine print.
"Allowable costs eliminate all costs associated with legal fees, marketing, and things that are not provided for Medicare patients, " he says. " So the square footage in the gift shop has to be carved out of our cost report. Any portion of the cafeteria that is used to provide meals for family and guests that are not provided for patients has to be carved out. "
"When you cut all of that out, he says," it ends up that most critical access hospitals receive about 95% of their costs. It varies depending upon who you talk to from 92% to 98%. But they all lose money on Medicare patients, every single one of them."
In addition, Putnam says most, if not all, critical access hospitals don't receive the market basket adjustments that urban hospitals get. So they are paid at a much lower rate for the same services. "The critical access program was designed to recognize that the (diagnosis-related group) payments were for urban hospitals and not small rural hospitals. It tried to even the playing field," Putnam says.
"I have heard that we would move from losing about 5% on Medicare patients to somewhere in the 20% range" without critical access funding.
It's also difficult to talk about "economies of scale" or "leveraging" market share with payers when you've got 25 beds or fewer. "When you have a smaller patient population, my emergency room has to be open 24 hours a day regardless of the volume. What revenue you get out of 100,000 visits in the ER is completely different from what you get off of 5,000," Putnam says.
"But you have to be ready for everything and the cost of readiness is a big aspect of it but you just don't have the volume to cover that."
Even with additional funding Putnam says that 40% of critical access hospitals lose money. "They stay in operation by donations or county funding or local taxes," he says.
"But when you start cutting this much more, then they will have very little choice but to cut access to services or close completely. When that happens, you'll never get it back. I can't tell you of one critical access hospital that closed its doors and then vibrant healthcare was provided in the community afterwards."
And when hospitals shed jobs, cut services, or close their doors, the communities they serve lose a vital economic engine.
"It creates an economic wasteland, "Putnam says." They might get a small physicians' office or a clinic, but 24/7 access is gone and multiple services are gone. You aren't going to get businesses to move into those communities."
In my opinion, nobody should disparage OIG auditors for ensuring that tax dollars are spent wisely. That is their job. And critical access hospitals should not be exempt from review to ensure that they actually need and deserve higher reimbursements.
However, rural healthcare advocates such as Putnam are correct when they protest any review that is based on cost alone. There has to be equal consideration for the role of critical access hospitals in the rural healthcare safety net. And because job growth is a critical issue in this country right now, the role of the hospital as a local economic driver should also merit some consideration.
Let's remember that critical access hospital designation was created by Congress in 1997 after a wave of rural hospital closings. With the designation 16 years ago federal policymakers demonstrated that they understood the importance of access and that what works in an urban hospital might not work in a rural hospital.
Now that OIG has called for a review of critical access hospitals, it is up to rural providers to make their care and ensure that the lessons learned in the 1980s and 1990s aren't lost.
"People say small rural hospitals need to be part of a larger system, but when you cut the reimbursement so much that they can't operate on the volumes without losing money, my question is how many systems will want to expand into rural healthcare? "Putnam says.
"That is the mindset when I talked to people in Washington. 'If it gets bad you'll have to join a system.'I tell them' that is not going to be the option you think it is.'"
Federal prosecutors say improper Medicare billing at six Florida hospitals operated by Shands ran from 2003 through 2008. Shands makes no admission of liability, but will pay a total of approximately $26 million plus interest.
Shands HealthCare will pay $26 million to settle whistleblower allegations that six of its Florida hospitals knowingly billed the government for inpatient procedures that should have been outpatient services, federal prosecutors said Monday.
"The Department of Justice is committed to ensuring that Medicare funds are expended appropriately, based on the medical needs of patients rather than the desire of healthcare providers to maximize profits," Stuart F. Delery, assistant attorney general for the Department of Justice's Civil Division, said in prepared remarks. "Hospitals participating in Medicare must bill for their services accurately and honestly."
The six Florida hospitals were named as defendants in a whistleblower lawsuit brought under the False Claims Act. Prosecutors said an audit showed that the improper billing at the six hospitals ran from 2003 through 2008 and that Shands officials knowingly submitted the improper claims to Medicare, Medicaid, and TRICARE.
The six Florida hospitals are: Shands at Jacksonville; Shands at Gainesville, also known as Shands at the University of Florida; Shands Alachua General Hospital; Shands at Lakeshore; Shands Starke and Shands Live Oak. Specifics details of the billing scheme were not provided in a media release issued by prosecutors.
Shands issued a press release stating that it cooperated with the investigation and negotiated the settlement "to avoid long and costly litigation. While there has been no admission of liability, Shands HealthCare hospitals in Gainesville and Jacksonville will pay a total of approximately $26 million plus interest: $25.2 million to the United States under the Medicare program and $829,600 to the State of Florida under its Medicaid program."
The settlement results from a whistleblower lawsuit filed in 2008 in federal court in Jacksonville, FL, by Terry Myers, the president of a healthcare consulting firm, YPRO Corp. Shands said it had hired Myers as an independent consultant in 2006 and 2007 to conduct a routine audit of its billing practices. Myers' share of the settlement has yet to be determined, prosecutors said.
"The audit showed inconsistent billing processes in 2006 and 2007. Allegedly, for some patients, Shands may have billed Medicare and Medicaid for short overnight inpatient admissions rather than for less expensive outpatient or observation services. In each case of alleged overbillings, the patient received all services ordered," Shands said in a media release.
Timothy M. Goldfarb, CEO of Shands HealthCare in Gainesville, said in a media release that "the case in question does not involve the failure to provide high-quality patient care, but rather inconsistent billing processes. We proactively initiated an independent audit that identified some opportunities to improve billing processes at Shands. We took immediate steps to make improvements."
Goldfarb said Shands proactively conducts audits of its billing practices to remain current with the complex healthcare regulatory environment, which he said is subject to continued change in policy and guidelines. He said the health system encourages staff to identify and report potential issues and errors.
"As a responsible corporate citizen, our intent and practice has always been to comply with government regulations. We have conscientiously worked to create and operate an appropriate, fair and accurate billing system for all payers," Goldfarb said. "There was no intentional misconduct or callous disregard of these issues on our part."
Prosecutors, however, saw it differently.
"The public expects its medical professionals to operate with a high degree of integrity," A. Lee Bentley III, Acting U.S. Attorney for the Middle District of Florida, said in prepared remarks. "When healthcare providers seek higher profits at the expense of their professional judgment, the public trust in the medical system is compromised."
Daniel R. Levinson, Inspector General of the U.S. Department of Health and Human Services said that "regardless of the complexity of these schemes to siphon off crucial healthcare dollars, our law enforcement officials will work tirelessly to seek justice."
DOJ said that since January 2009 it has recovered more than $14.8 billion through False Claims Act cases, with more than $10.8 billion of that amount recovered in cases involving fraud against federal healthcare programs.
Alan Morgan, CEO of the National Rural Health Association, is blasting a federal report that recommends stripping critical access designation from any hospital that was brought into the program under a state "necessary provider" designation. "The practical effect is that it would kill rural health," Morgan says.
Hundreds of small hospitals across the nation could lose their critical access status and the extra funding that goes with it if the federal government acts on a series of recommendations made public this week.
The Department of Health and Human Services' Office of the Inspector General has recommended that Congress allow the Centers for Medicare & Medicaid Services to strip critical access designation from any hospital that was brought into the program under a state "necessary provider" designation.
Brian Jordan, a program analyst for OIG's Office of Evaluation and Inspections in Chicago, said in a podcast produced by his office that nearly 1,000 of the approximately 1,300 critical-access hospitals in 45 states gained the "permanent exemption" under the necessary provider designation. Congress closed the loophole in 2006, but grandfathered in the hospitals.
Without that designation, Jordan said about 800 hospitals would not have met location requirements in 2011 because they were too close to another hospital.
"We were concerned that some of these hospitals may not be providing critical access to rural patients because they were located very close to other hospitals that could provide similar services," Jordan said. More than 300 critical access hospitals were less than 15 miles from another hospital in a 2011 review.
Jordan said that Medicare could save $1.3 million for every critical access hospital that is stripped of its designation, and that "de-designating" critical access hospitals that are less than 15 miles from the nearest hospital would save Medicare $449 million a year.
"Remember, necessary provider hospitals never had to meet the distance requirement," he said. "And, until March of 2013, CMS never went back to check that other critical access hospitals still met the location requirements. With new hospitals being built and towns expanding, some of these hospitals might no longer qualify for critical access hospital status. Since we pay these hospitals more to provide this critical access to rural patients, we wanted to know if these increased payments are tax dollars well spent."
Alan Morgan, CEO of the National Rural Health Association, blasted the report.
"The practical effect is that it would kill rural health," Morgan says. "I know that is a strong statement, but OIG viewed this with blinders on, not looking at how healthcare is delivered in rural America. We aren't talking about just closing 800 rural hospitals potentially. We are also talking about closing the EMS services in many of those communities and removing access to mental healthcare in many communities. Most of these hospitals have provider-based rural health clinics and a lot of these hospitals have nursing home beds in effect."
"OIG is viewing this strictly [as] a narrow payment issue and not recognizing what this will do to the rural healthcare safety net," he says. "It's about access and this report is only about finances and not access. It is a spending and finance issue and we seem to have forgotten the rationale for the creation of this program, which was an access issue."
Jordan said OIG is merely recommending that "CMS periodically check if each critical access hospital still provides services that rural beneficiaries can't easily get somewhere else, and therefore deserves the increased financial support from Medicare and beneficiaries. We also recommend that necessary providers be required to meet the distance requirement."
If CMS follows the OIG recommendations, Jordan believes it would not necessarily result in nearly two-thirds of critical access hospitals losing their designation.
"These hospitals are costly for Medicare and beneficiaries, but we have to balance cost concerns with hospital access for rural beneficiaries," Jordan said on the podcast. "With that balance in mind, we recommend that CMS create alternative location related requirements for critical access hospitals that don't meet the distance or rural requirements. For example, CMS could allow critical access hospitals to keep their designations—if they serve communities with high poverty rates."
Morgan says the nation's hospitals are already reeling from the effects of the 2% sequestration cuts and that removing the critical access designation, which theoretically allows hospitals to collect 101% of Medicare costs, "effectively closes them."
"The first thing we are going to hear argued back at us is that OIG isn't recommending that they shut the doors, but they are," Morgan says. "When they're talking about removing that designation from facilities where a large percentage of them are operating in the red already, that will effectively close them. So it's not an honest argument saying that 'we are not recommending closing 800 rural hospitals.'"
