With apologies to John Donne, no hospital is an island.
It doesn't matter if your hospital is in midtown Manhattan or Manhattan, KS. It doesn't matter how many licensed beds you have or how high you scored with HealthGrades. If you've got problems at your hospital—from labor disputes, to HIPAA violations, to dirty sheets—you'd better be prepared to have answers for the government, public advocacy groups, plaintiffs' attorneys, and the news media.
In the era of the Internet, specialized trade journalism, and the 24-hour news cycle, every misstep is a headline waiting to happen.
That was apparent this week when Washington, DC-based Public Citizen issued an alarming press release detailing potentially dangerous infection risks at one Wyoming hospital located 1,849 miles due west of the nation's capitol.
According to Public Citizen, 88-bed Sheridan Memorial Hospital made a decision to stray from the manufacturer's guidelines and failed to adequately sterilize reusable laryngeal mask airways. As a result, "several hundred patients" were potentially exposed to assorted infectious viral and bacterial agents between May and November of 2011.
"The hospital's decision to abandon steam sterilization was reckless and potentially dangerous for patients undergoing surgery at the hospital," Michael Carome, MD, deputy director of Public Citizen's Health Research Group, said in a statement which was sent to media outlets across the country.
After being contacted by HealthLeaders Media on Tuesday and shown Public Citizen's accusations, SMH issued a statement saying that the problem had been identified in November, reported to the state, and resolved.
"The (WY) Department of Health directed the hospital to change procedures to include steam autoclaving," the statement read. "SMH immediately implemented the new procedure, developed a procedure spreadsheet, and posted directions for the staff. The plan of correction was implemented that day and no further corrective actions were recommended by the state."
Hospital officials said they had received no reports of infections or complications related to the problem, which they suggested had been resolved.
"The medical staff executive committee based on surgery department reports and consultation with the state Department of Health believe that compliance with the state recommendations have been achieved and that any risk of infection to surgery patients prior to the change is very low," said SMH Chief of Staff John Addlesperger, DO.
The Wyoming Department of Health also issued a statement indicating that the issue had been resolved:
"Following receipt of the anonymous complaint in November, our department did investigate the issues surrounding the airway devices at the hospital in Sheridan. They addressed concerns about the tracking of the use of the devices as well as the sterilization procedures. Our department ordered those issues to be fixed and they were fixed that same day at the hospital. Since then, there have been no related reports of illness made to the hospital or to our department," the statement read.
After HealthLeaders Media showed SMH's statement to Public Citizen, the advocacy group issued a counter-counter-statement ridiculing the hospital's assurances that former patients were not in danger.
"The claim by the hospital that ‘there have been no infections or complications that have been reported in relation to this situation' is ludicrous for two reasons," Carome told HealthLeaders Media.
"First, because the hospital did not proactively notify affected surgical patients of their exposure to inadequately sterilized devices, patients experiencing any infections or complications would not have attributed such events to the exposure since they were unaware that inadequately sterilized LMAs had been used. Second, certain infections may be asymptomatic, and without appropriate screening, may have gone undetected so far."
It was not clear at deadline if SMH was planning a counter-counter-counter statement. It almost doesn't matter. Did SMH correct the problem, as it claims? Or did the hospital sweep it under a gurney, as Public Citizen suggests?
Who knows?! The rest of us don't have to pick a side. For us, the back-and-forth between the hospital and the advocacy group is better seen as a cautionary tale about questionable decisions that can come back to haunt you.
The moral of the story: No matter its size or prominence, if your hospital deviates from SOP, no matter how seemingly innocuous at the time, you'd better have a good reason and you better be prepared to explain it to the world.
The nation's hospitals are seeing continued relatively high leadership turnover, but most providers are doing little if anything to plan for it.
Thomas C. Dolan, president/CEO of the American College of Healthcare Executives, says a new survey from his organization tracked hospital CEO turnover at 16% nationwide in 2011, the same as in 2010. Between 2001 and 2009, he says, CEO turnover has run between 14% and 18% nationally.
By comparison, average annual CEO turnover is about 13% for Fortune 100 companies, he says.
Dolan has a ready explanation for the high turnover. "First of all, in general they are very difficult jobs and they have never been harder with healthcare reform and demands from the various stakeholders often conflicting in nature," he says.
"Secondly, if you are good at one of these jobs you get recruited constantly."
"Third, unfortunately if you are not good, there is little tolerance for poor performance. As best we can figure out about 20% of those 16% who turn over every year are being terminated," he says.
"The last one is the Baby Boom retirement. The average hospital CEO is approximately 55 years old. That is the median and clearly a number are older than that and they are heading into retirement," Dolan says. "I expect that 16% to stay constant and maybe creep up in the next few years."
Dolan says it's hard to put a price tag on the cost of this leadership flux. "But I can tell you that when there is a vacancy at the top things don't happen," he says. "Partnerships are not made. New people are not hired. Sometimes senior people might start looking for other positions. Medical staff may defect. Whenever there is a vacuum in that top leadership position, there is a tendency in that organization for push back until a new leader is appointed."
Hawaii, Puerto Rico, and Wyoming led the nation with hospital CEO turnover rates of 35%, 30%, and 29%, respectively, in 2011. However, Dolan warns against reading too much into one year of data. "Hawaii and Puerto Rico, for example, have relatively small numbers of hospitals. So, one or two random changes could affect them disproportionately," he says. "What are more likely to affect turnover are highly competitive areas, low reimbursement states, things of that nature."
Along with the high turnover, Dolan notes, 58% of hospital CEOs have been on the job less than five years, and that also has the potential to create problems in continuity of leadership.
"We pretty much know from the management literature that if you go in and make positive changes in an organization, if you aren't there for at least five years to make sure those changes aren't woven into the fiber of the organization, oftentimes organizations will go back to what they were doing in the past," he says. "You might have a great CEO who makes a lot of changes, but if she or he leaves in a few years oftentimes the organization will revert to its old ways."
Even with more than a decade of relatively high CEO turnover, Dolan says a large majority of hospitals still have no succession plans in place.
"We did a survey on this a few years ago and only about 20% of hospitals have a CEO succession plan," Dolan says. "When we prod them and ask 'why don't you?' the most common response is 'we just hired a new CEO.' We come back and say 'the median hospital CEO tenure is only four years.'"
While succession planning is the primary responsibility of the hospital board, Dolan says that CEOs should be active partners. "As soon as a new CEO is hired the board and the CEO should agree to develop a succession plan and start working on it immediately," he says.
"First of all they have to determine whether they can groom people from within," he says. "In a very small hospital you may not be able to. Then you have to make sure that you have somebody who can fill in on the interim as you recruit somebody from the outside."
Larger healthcare organizations may have the luxury of grooming several internal candidates for the top spot. "If the CEO leaves, then hopefully you are promoting from within, supporting that individual with on-boarding and coaching their first year because it's always a big change moving to No. 1 even if you've been No. 2 in the organization," he says.
Whenever possible, Dolan says, the new CEO should be promoted from within. "The evidence from the industry is very clear that the most successful companies promote from within," he says. "Their returns are better. Their stability is better."
Job growth in the healthcare sector has been strong in the first two months of 2012, accounting for one in five new jobs in the overall economy, and even surpassing the robust pace of job growth throughout most of 2011, new federal data shows.
The Bureau of Labor Statistics reports that the healthcare sector created 49,000 jobs in February, including 28,200 jobs in ambulatory services, and 15,400 jobs in hospitals.
J.D. Kleinke, a fellow at the American Enterprise Institute, said the explosion in healthcare job growth "is just more of the same."
"Healthcare is recession-proof. Healthcare costs always go up. There is always going to be growth," Kleinke says. "For all its capital and technology, it is still a labor intensive industry. People want to see their doctors. Nursing is very labor-intensive. You can't automate healthcare like you can manufacturing."
Revised BLS figures show that healthcare created 43,300 jobs in January, continuing a strong trend in job growth that saw 296,900 payroll additions in 2011. Healthcare accounted for more than 18% of new jobs in the overall economy last year, Bureau of Labor Statistics data shows.
In 2011, ambulatory services, which include physicians' offices, accounted for 64% of the job growth in healthcare. The subsector created 18,500 jobs in January and 191,400 jobs in 2011, after creating 166,100 jobs in 2010.
Michael T. Rowan, COO at Englewood, CO-based Catholic Health Initiatives, says he expects healthcare job growth to continue well into the future as Baby Boomers age, and healthcare reforms expand health insurance coverage to an additional 30 million people and place more demands on healthcare providers.
"Certainly healthcare is one of the few bright spots in the economy," he says. "It is the nature of healthcare that we are always going to be around. Health is one of those universal issues that affect everyone. We are an industry that is everywhere. Even the smallest community has healthcare in one form or another."
Rowan says the top driver for job growth at CHI is information technology.
"There is a mandate to get to meaningful use under healthcare reform and people are putting in clinical information technology systems and that is fueling significant hiring," he says. "In our organization we are looking at about $1.5 billion we are going to spend over five years to upgrade our clinical IT and we are hiring nearly 400 additional people just to be able to install and then manage those systems. That doesn't even count toward the hiring that has taken place in our local markets."
The physician-employee model is also driving hospital employment.
"More and more physicians are looking to be employed versus out there in private practice," Rowan says. "Using CHI as an example, we have hired more than 1,000 additional physicians over the last 24 months."
Another driver is the demand for administrators who can help hospitals and health systems navigate through new federally mandated payment models. "With the move from volume-based fee-for-service reimbursement to going at risk for episodes of care and the like and population health management, all of that is calling for some new competencies related to risk and insurance," Rowan says.
"Those are not skill sets that most hospitals and health systems have. So, we are hiring people with that background and expertise. It's not at the level that you see for IT and physicians, but it is still significant."
Kleinke says the high demand for technicians to install and operate complex electronic medical records systems are creating new opportunities for American workers who've been left behind in the recession and changing economy.
"It's a perfect job in the new economy for somebody who used to work in an assembly plant or a service job or used to do something that's been off-shored," he says. "It is something you can learn to do in a couple of years at a technical school. There are federal grants available for that and the jobs are there and the jobs are good."
More than 14.2 million people worked in the healthcare sector in February, with nearly 4.8 million of those jobs at hospitals, and more than 6.2 million jobs in ambulatory services, which includes more than 2.3 million jobs in physicians' offices.
The 49,000 jobs created in healthcare in February represent 21.5% of the 227,000 jobs created in the overall economy for the month. In 2011, the 296,900 jobs created by healthcare represented more than 18% of the 1.6 million jobs created in the overall economy that year.
BLS data from January and February are preliminary and may be revised considerably in the coming months.
In the larger economy, the nation's unemployment rate stayed unchanged in February at 8.3%—maintaining a level last seen in early 2009. BLS said the 227,000 new jobs created in February came from healthcare and social assistance, professional and business services, leisure and hospitality, manufacturing, and mining.
Even with the modest gains, BLS said 12.8 million people were unemployed in February, matching January's measure. The number of long-term unemployed, defined as those who have been jobless for 27 weeks or longer, was little changed at 5.4 million in February, and represented 42.6% of the unemployed.
This article appears in the February 2012 issue of HealthLeaders magazine.
The weak economy has limited the ability of many healthcare organizations to pursue capital projects; indeed, in our March 2011 Intelligence Report, only 29% of respondents said their capital projects were unaffected by delays or elimination, and fully 42% anticipated difficulty accessing capital. While capital spending is expected to increase in the coming year, what short-term and long-term effects does this sluggish economy have on fulfilling strategic goals, and what factors are influencing where you will focus your capital spending?
Gregory Pagliuzza CFO, Trinity Regional Health System, Rock Island, IL
Our local balance sheet and income statements are not the prime performers within Iowa Health System [with which Trinity is affiliated]. We get an allocation based on our financial performance and operational needs, requiring us on the capital side to step it up as far as operations go. I know we are not unique in this, but for us it is a little bit more highlighted because we have some older facilities and we need an upgrade. We also have some other functional issues capitalwise that are causing lots of challenges.
Our oldest facility needs significant upgrades. I think it was opened in 1971, so it is 40 years old and there has not been a significant outlay to modernize it. We know what we would like to do, which is to expand and redo our emergency room and set up a cardiovascular center. We also have a significant investment in behavioral health.
The reality is we are going to have to scale it back. We are in the middle of the process to try to justify it, to at least get the cardiovascular and emergency room overhaul done. That has a $70 million-plus price tag. We can borrow. We are AA rated so we are in an excellent position to go out to the capital market. Access to capital is dependent upon our financial performance. If we don't perform, we may not be able to go out and expand as we would like.
Mark Bogen Vice President of Finance, South Nassau Communities Hospital, Oceanside, NY
Between the equipment technology and bricks and mortar, we've invested close to $300 million in the past dozen years. A master facility plan was launched in the 1990s, culminating with the 170,000-square-foot bed tower in 2006. That success led us to continue an enhanced plan to take us into the next 20, 25 years. In 2008 we got the board to sign off on the plan right as the stock market tanked. We put it on the shelf. We resurrected it again about a year ago, and we are continuing to look at it.
We have been chasing the mythical 435-bed operating capacity as part of the overall master facility plan. But given the length-of-stay decline that we have continued to enjoy over the past four or five years and the softening of the economy and some of the elective surgeries that people are postponing, we are really now looking again at the master facility plan. We don't want to build something that is not going to be supported in the years to come under healthcare reform. With that said, the expectation is we plan to do this master facility plan, which will probably have a price tag of $200 million.
It's not so much currently the access to capital, because we have a strong balance sheet and we have had good performance these past three or four years. But even though interest rates are low, that doesn't always translate into the real cost of capital and whether you can create and demonstrate financial feasibility to ultimately borrow the money.
Gary Boyd CEO, Mammoth Hospital, Mammoth Lakes, CA
We are a 17-bed critical-access hospital, and the 10-year facility plan is a $50 million expansion of the inpatient area and creating some new clinic space. We are rated BBB-plus, and we would like to be rated AA-minus. We need a couple more years of financial performance behind us before Standard & Poor's will raise our ratings. The healthcare climate, healthcare reform, all those things are going to make that challenging.
We put about 10% on the bottom line and our goal every year is between 7%–10% of margin. If we do that, we will have access to capital. We have done a real financial turnaround here in the past three years. At one point we were down to about 35 days of cash on hand. We couldn't even get a line of credit from the local banks. Today we have about 140 days cash on hand and the banks are coming to us.
Our goal is to have 180 days cash on hand, and everything over that will go toward the building project. As long as we maintain that strong financial position, we will have access to capital—not like the big guys, but we will have what we need.
Jim Shannon Executive Vice President of Development, LHP Hospital Group, Plano, TX
The impact of reform: Two things drive the discussions that I am having around capital. The first is healthcare reform. Hospitals that were fiercely independent for decades are no longer feeling comfortable being independent. Everybody is sensing that scale is going to be necessary to compete successfully going forward.
The impact of markets: The second issue is there has been a lot of deferred capital over the past few years, and it is starting to be unsustainable in some markets. Given the weakness in the tax-exempt bond financing arena, folks are finding it more and more difficult to access reasonably priced capital. So they are looking for alternatives.
The calls I get are generally from hospitals that have some big capital need that they can't meet on their own. I don't think there is any doubt that the sluggish economy has impacted the credit markets, which in turn have impacted the amount of capital that hospitals have available to them to spend.
The widening gap: What you see in the healthcare industry is similar to what you see in the economy as a whole. There are haves and have-nots, and the gap is widening. The volume of tax-exempt financing has picked up pretty substantially over the past year and a half or so. But the systems that are getting those bonds tend to be the top-tier organizations. If you are not one of those top-tier organizations with investment-grade credit ratings, it is really difficult to access tax-exempt financing
right now.
This article appears in the February 2012 issue of HealthLeaders magazine.
Michigan's remote Upper Peninsula may soon have a new blue chip player competing in the healthcare arena with the likes of the prestigious Mayo Clinic and Henry Ford Health System.
Duke LifePoint Healthcare this week announced that it has signed a memorandum of understanding to explore a partnership with Marquette General Health System, a regional referral center that serves about 300,000 people in a 15-county area in the U.P.
A HealthLeaders Media case study and live + simulcast event hosted by renowned Baldrige-winner Henry Ford Health System. Join the leadership team at Henry Ford Health System and learn how to build lasting clinical excellence. >>REGISTER TODAY
If the deal is finalized in the coming months and approved by the Michigan Attorney General, Duke LifePoint would take ownership sometime this summer and MGHS would become a for-profit entity.
MGHS President/CEO Gary Muller says it is too early to put a price tag on the value of the deal, but he told HealthLeaders Media that an outright ownership arrangement by Duke LifePoint, with oversight from locally controlled board of trustees, makes the most sense.
"Our board looked at different joint ventures, 80-20, and 50-50 partnerships," Muller explained. "They felt like the best thing for the community is to have an outright acquisition by Duke LifePoint because otherwise you don't gain as much capital or involvement. You do give up autonomy to an extent, but why go halfway?"
Muller says MGHS is negotiating from a strong financial position, but also with an understanding of the new challenges for recruiting, service lines, and capital that non-urban, not-for-profits face in a shifting and highly competitive healthcare delivery landscape.
For example, the health system had planned on Medicare reductions of about $55 million over the next decade. A few weeks back, however, they were notified that the reductions would total about $90 million.
"A lot of the companies come in and buy hospitals that are in trouble. We are definitely not in trouble, but I will give our board credit for looking ahead," Muller says. "It's like when you are selling a house. You want a nice house with a good roof. It is, in a way, giving an asset to another company. But what we and our board see is a larger gain for the community in terms of quality and the tax base. Local control is still going to be here because we will keep the board."
While the notion of surrendering community ownership to an out-of-state for-profit company required some adjustment, Muller says the MGHS board "took a leap of faith and changed their whole perception."
"We see many boards that don't take our board's position. A few of them are neighbors. They see the hospital as their asset, but it is really the asset of the patients and the communities," he says. "Not-for-profits lack the capital and the scale that we will have and their communities will suffer."
Muller says that the MGHS board also recognizes that Duke LifePoint would bring assets, efficiencies and a national reputation for quality.
"We are a fairly large $310 million business and with our scale of purchasing we will immediately save on that," he says. "We can recruit physicians better through Duke. We are also looking for quality oversight, which our doctors are very much looking forward to, even though we are doing well. They know that to compete with Mayo Clinic up here or Henry Ford downstate we need to be a little bit better."
William F. Carpenter III, chairman/CEO of Brentwood, TN-based LifePoint Hospitals, told HealthLeaders Media he doesn't believe that MGHS' remote location will pose significant logistical or cultural challenges.
"Our focus was on North Carolina and the surrounding region but clearly the Duke LifePoint partnership has a range beyond that," he says. "When you look at the map you see a region in the Upper Peninsula that is very well suited to what we are trying to accomplish in that original vision; to build a strong network there around a regional medical center in Marquette."
If the deal is finalized, MGHS will be the first hospital in Michigan for LifePoint, which now operates 56 hospitals in 19 states.
"The focus of Marquette General will continue to be on patients in the Upper Peninsula so they are able to receive quality care close to home. The Duke LifePoint partnership will enhance that. I don't think of it as being in competition with anybody. I see it strengthening community-based care in the Upper Peninsula."
Carpenter believes that hospitals across the nation are in the same situation as MGHS and could be ready for a new business model.
"They are considering how they will respond to the significant financial pressures that they feel based on the lingering effects of the recession, based on the reductions in reimbursements that are facing us, [and] based on the very challenging regulatory environment that faces all of us, the cost of technology and capital improvements," Carpenter said.
"LifePoint and Duke LifePoint are perfectly aligned with the interests of local community hospitals in dealing with that because we bring resources designed to improve quality of care and designed to provide state-of-the-art technology and make capital investments in community hospitals," he says. "It is a great match."
One of the troubling ironies of nursing is that many of the people who dedicate their lives to healing patients do so at the expense of their own health. It doesn't have to be this way.
Hospitals can be dangerous work environments for healthcare professionals. There is the threat of exposure to an alphabet soup of hepatitis and tuberculosis strains, along with other dangerous pathogens. There is also the threat of violence and injury at the hands of angry, frightened, drugged out, drunk, and mentally unbalanced patients, their friends, and family.
And now a recent study in Journal of Nursing Administration that examined survey data from 2,103 female nurses has determined that 55% of them are obese. For context, 34% of adult Americans are considered obese, while another 34% are considered overweight but not obese, according to the Centers for Disease Control and Prevention.
Of course, there is no reason to expect that nurses should be exempt from the overweight and obesity epidemic that is plaguing this country. However, it is disheartening to learn from the JNA survey data that nurses are actually at greater risk than the general population.
Kihye Han, PhD, RN, the lead researcher for the study, and a postdoctoral fellow at the University of Maryland School of Nursing, says she was drawn to the topic when she first came to United States from her native South Korea and confronted our overweight and obese epidemic firsthand.
"I was shocked when I came here and saw so many people (more than half) who looked so heavy," Han wrote in an email exchange with HealthLeaders Media. "This was no exception in hospitals. (In Korea, the obesity rate is not as high as here.)"
It shouldn't be surprising because Han says nurses are "surrounded with obesity risk factors."
"First of all, hectic work schedules. Non-standard work schedules affect normal eating time and habits among nurses," she writes. "For example, night shift nurses require additional efforts to get healthy food and to access facilities for exercise, and they also eat junk food during their night shifts. Extended work hours make nurses sleepy and lack of sleep is an important independent risk factor for obesity."
"Moreover, nurses, a female-dominant workforce, have double care-responsibility at work and home," Han says. "They take care of their children at home and this is another stress source and requires support from work, e.g., providing day care service, modifiable work schedules for mom nurses."
Job-related stress and fatigue induces nurses to find comfort in sweet and fatty foods.
Han's findings are the latest in a series of University of Maryland School of Nursing studies examining nurse health and productivity and the linkage to quality of care. Other UMD studies led by Profs. Alison Trinkoff, Carla Storr, and Jeanne Geiger-Brown, have linked nurses' 12-hour shifts and irregular schedules with sleep deprivation, health problems, and patient-care errors.
"When I presented the preliminary results of this study at a national nursing conference in 2010, a lot of nurses showed me their interest," Han wrote. "They agreed their working conditions influence their eating/exercise habits and finally their weight. But also they said they felt nobody cares for their health, especially for their lifestyle-related health. Usually hospitals show attention for nurses' occupational health, such as needle-stick injuries. Nurses are assumed to have desirable lifestyles and be healthy and in addition, to be a caregiver rather than a care receiver."
Han believes that hospitals can take steps to create a healthier work environment for nurses. These could include educational interventions to make nurses aware of the risks they face, improvements to work schedule flexibility, and even instituting naps in the workplace to prevent sleep deprivation during 12-hour shifts.
Hospitals should also provide affordable and easy access to healthier foods, and give nurses sufficient time to eat properly, Han believes. In South Korea, for example, she says hospitals often offer free and healthy meals to nightshift workers.
"Some hospitals offer on-site farmer's markets to increase access to healthy food for healthcare workers who work nonstandard hours," Han says. "Healthy vending machine choices and food delivery services to the work unit can also increase food quality and access for nightshift nurses."
Of course, even the best preventive measures will fall short if the healthcare workplace is understaffed, Han concedes. "Sufficient staffing should be employed to provide nurses to decrease their workloads and job stress. However, we all know it's hard to make organizational level changes," she says.
In the end, adequate staffing levels will be the biggest obstacle because of the cost.
However, hospital and healthcare organization leaders who are reluctant to acknowledge or act on the problem of nurse obesity and overweight should remember that this isn't just about "employee wellness." There is more at play than the upfront costs of providing for a healthier workforce. This is also about reducing labor costs and medical errors while improving outcomes.
Healthier nurses mean reduced absenteeism and turnover. They provide better care and make fewer errors, all of which save lives and money.
The economy might be on the rebound, but the nation's hospitals should still brace for the possibility of $360 billion in cuts in Medicaid, Medicare, and other federally funded healthcare programs and services over the next decade.
Moody's Investors Service said in a credit outlook that the ongoing reductions in federal funding for healthcare in the fiscal 2013 budget and beyond could make it disproportionately more difficult and more expensive to borrow money for hospitals that rely on Medicare.
"If adopted, the cuts would reduce reimbursement to hospitals, forcing these institutions to continue finding additional expense savings or new sources of revenue to avoid the credit negative deterioration of their profit margins," Moody's said in a budget analysis.
"Most hospitals have been adjusting to negative credit trends since 2008, and many have improved their quality and efficiency substantially. But past operating savings reflect harvesting 'low-hanging fruit,' while future savings will be harder to achieve and will require more wrenching change."
Medicare rate increase reductions installed under the healthcare reforms will enter their third year when the fiscal 2013 budget takes effect in October. Over the next decade, Moody's says, about $268 billion in Medicare reductions could adversely impact funding for critical access hospitals, graduate medical education, and bad debt relief.
Moody's noted that the Medicare Payment Advisory Commission in January recommended a Medicare rate adjustment of 1% for the coming budget cycle, which is less than half the rate of inflation in the overall economy.
Lisa Goldstein, associate managing director at Moody's, told HealthLeaders Media that hospitals have done a good job confronting cost growth. "Low-hanging fruit examples would be reductions in work force, not filling existing positions, matching clinical needs with nursing skill sets better, looking at supply costs, negotiating bigger discounts with vendors, buying in bulk for example," Goldstein says.
However, she believes the "wrenching change" that hospitals may now have to undertake will be considerably more involved.
"'More wrenching change' speaks to the next level of cost reduction and expense management, which is more about gaining efficiencies. That is taking apart the fundamental basic building blocks of patient care and recreating them all over again in a more efficient manner," she says. "We have heard from providers across the country, examining how they deliver healthcare, the processes, the operations, the patient flow to become more efficient and extract permanent savings that way."
The federal budget also calls for about $52 billion in cuts to federal funding for Medicaid in the coming years. Moody's said those changes could include replacing current funding formulas with a single matching rate for each state, rebasing disproportionate share payments, and limiting the federal funding match for provider taxes.
"A limit on federal matches for provider tax payments would be a significant development because these programs have proliferated significantly over the past several years, and receive on a combined basis an increasing amount of federal support," Moody's said.
"Prior to 2008, 15 states operated provider fee programs. Today, this number has grown to 33, with another three states considering a program. These programs most benefit hospitals with high exposure to indigent populations and their elimination would negatively affect those hospitals the most," the report said.
Goldstein says the federal government could eventually shut down provider tax schemes as a cost cutting measure for the federal deficit. "Most hospitals realize that these provider tax programs may not go on forever," she says. "We look to hear how those hospitals and management teams will lower their reliance on these funds. How are you going to manage if this program abates one day?"
A proposed rule that would extend responsibility for Medicare overpayments through a 10-year "lookback period" is generating concern from healthcare providers.
The proposed rule, posted in the Federal Registry on Feb. 16 by the Centers for Medicare and Medicaid Services, implements a provision of the Affordable Care Act that details reporting and reimbursement guidelines for Medicare overpayments.
The lookback period now is generally about four years. CMS estimates that extending the review by another six years would cost as much as $58 million in reporting-related expenses each year for about 125,000 providers and suppliers.
The public comment period on the proposed rule extends through April 16.
Amy E. Nordeng, government affairs counsel for the Medical Group Management Association, told HealthLeaders Media that a 10-year lookback would create an undue burden for most healthcare providers.
"We wish it was shorter. We are going to argue that it should be shorter," said Nordeng. "For a group practice finding the records and having the same billing system in place 10 years down the road is pretty unlikely."
"Four years is much more reasonable because practices are used to that. You plan for the government being able to go back four years so you are able to develop processes for that," she says.
CMS said in the proposed rule that a 10-year lookback period would make it consistent with the False Claims Act statute of limitations and that the proposal is "appropriate for several reasons."
"First, we believe that providers and suppliers should have certainty after a reasonable period that they can close their books and not have ongoing liability associated with overpayment," CMS said. "We also believe that the length of the lookback period is long enough to sufficiently further our interest in ensuring that overpayments are timely returned to the Medicare Trust Funds."
Overzealous Oversight
Nordeng says CMS is a little too zealous. "To the extent where they are trying to find actual false claims where there was knowing intent to submit a false claim, they would still have that 10 years. But to attach that 10 years to the overpayment as well seems like overkill," she says.
Michael Gennett, of counsel at Miami-based Akerman Senterfitt Law Firm, told HealthLeaders Media he is urging his clients to voice their concerns during the public comment period.
"When we let our clients know there is a comment period for a proposed rule, usually I don't expect that somebody is going to take the time to shape the rule. But this is one that especially hospitals will want to weigh in on," he says. "The 10 years has a monetary impact obviously as far as how much you may have to return. But there's a practical impact of trying to go through records that go back that far. Most people may not have those records on site."
Linking the 10-year lookback to the False Claims Act isn't necessary, Gennett says, because most overbillings have no criminal intent.
"[Ten years] would be under the worst case scenario under the False Claims Act when in fact most of the time when there is some kind of billing error it is just that—an error. It is not a knowingly false claim," he says.
While the CMS proposal is alarming, Gennett says it shouldn't come as a complete surprise.
"The political environment we are in right now is one where the federal government is taking all kinds of measures to combat fraud and abuse in healthcare with the idea that we are going to save money," he says. "Most government agencies have taken a fairly aggressive stand and this would be an example of that."
The American Hospital Association and the American Medical Association also are drafting letters to CMS that will detail their opposition to the proposed rule.
"The AHA believes that hospitals need a workable solution to return overpayments. Unfortunately, the proposal will create new and unnecessary burdens and risks for hospitals, burdens and risks that go well beyond what Congress intended," AHA said in a statement.
"We are particularly concerned with the extraordinary expansion of a look back provision to 10 years and, what appears to be, an effort to effectively expand the reach of the False Claims Act beyond what Congress understood was necessary when it amended that statute to address overpayments in 2009."
We hear a lot these days about the challenges facing rural healthcare providers.
Those challenges are real and daunting. They include accessing technology and capital, finding qualified clinicians and other skilled healthcare workers and technicians, and providing access and wellness strategies for a population mix that can often be disproportionately poor, uninsured, unhealthy and isolated.
We should not forget, however, that rural healthcare providers are also creating innovative programs to overcome these many obstacles. These rural healthcare professionals are not sitting back waiting for someone else to solve their problems.
For example, Choptank Community Health System's six federally qualified health centers serving isolated communities along Maryland's Eastern Shore is using a $400,000 two-year grant from not-for-profit CareFirst BlueCross BlueShield to develop an intensive intervention program for noncompliant Type 2 diabetes patients.
CCHS believes the program will pay for itself with healthier diabetic patients requiring fewer emergency interventions and hospitalizations.
John R. Strube, CCHS's vice president of marketing and development, told HealthLeaders Media that most of the grant money will pay for two fulltime nurse coordinators to aggressively monitor treatment regimens for about 250 patients "whose A1Cs are seriously out of control."
"Diabetes is one of those illnesses that if you manage it well, you prevent a lot of damaging and expensive health problems, because the disease really does attack your whole system," Strube explained. "One of the challenges particularly for folks in the safety-net world or folks who have limited coverage is getting them involved in the kind of really intensive care you need to manage or prevent diabetes."
"The opportunity from CareFirst was particularly intriguing for us because they are focusing on doing things at the primary care level to manage chronic and multi-symptom diseases effectively and at a more cost-effective point in the care delivery system than having folks show up in the hospital in severe shape."
In addition to the individualized treatment plans and close monitoring, the intervention program will use group-centered disease management tactics that rely on peer support to maintain treatment regimens.
"Most insurance companies don't cover that very well but we made it clear to CareFirst that if this model works would you consider adapting your reimbursement model to cover this? They said yes," Strube says. "There is a real excitement about the partnership we are building."
CCHS will also use some of the money to devise financial incentives that will reduce care costs for the diabetes patients who maintain that regimen and meet health improvement markers.
"Part of what we are trying to do with this grant is to look at the problems our diabetic population faces and say if you join the program and are compliant and we see progress we will provide some form of incentive that, for example might help you offset the cost of your co-pay," Strube says.
About 80% of CCHS's 27,700 patients are at least partially insured, but that doesn't mean their costs are covered. "We have a fairly balanced case mix but a significant portion of our patients are economically distressed."
With the region facing tough economic times, Strube says it makes sense to offer financial incentives in a pilot program to keep cash-strapped diabetic patients on their regimen. "We offer greatly reduced costs for folks who don't have insurance, but it is not free," he says.
"Even for folks who have insurance, many employers are going to high deductible plans. So the first $1,000 might be out of their own pocket. When gas is $4 a gallon and you have to drive to get anywhere around here because there is no public transportation, people are oftentimes putting their co-pay in the tank to come and see the doctor."
What happens in two years when the CareFirst grant money runs out?
"Once the funding goes away we will have to look at how we can maintain an incentive program. That is the one wildcard in all of that," Strube says. "Our hope is that as we are able to demonstrate this we will along the way become certified as a diabetic education site with the American Diabetes Association. That will help us provide a service that is reimbursable with insurance. By capturing that reimbursement we should be able to sustain the program post grant."
Strube believes that a successful diabetes intervention program could also serve as a blueprint for treating other chronic diseases. All of this would help to reduce spiraling healthcare costs and alleviate other challenges that chronically understaffed and underfunded rural healthcare providers face.
"For our uninsured population, we don't generate a lot of revenue. The savings are to the system, not necessarily to us. Along the way, if we can show that we are bending the cost curve, we share in those savings," Strube says.
"The key thing is we know that if we can engage the patients and their families in making the investment to do the things they need to do, we know their health will improve."
About $36 billion could be shaved off the nation's healthcare tab each year if the cost for 300 common procedures covered under employer-based insurance plans were reduced to their median prices, according to research from Thomson Reuters Healthcare.
To do so, however, those healthcare consumers would need ready access to provider-specific price and quality information, including summaries of costs associated with the care, such as ancillary and hospital fees, and potential out-of-pocket expenses, the report says. Right now, that ready access does not exist.
"Increasingly the cost of healthcare is shared more significantly by the consumer," Raymond Fabius, MD, CFO of Thomson Reuters Healthcare, Inc., told HealthLeaders Media.
"One of the reasons why it is so important to promote the concept of transparency, both in terms of cost and outcomes, is so that people can engage in a much more sophisticated decision-making process between not only 'should I do this or not', but also 'with whom should I do it,'" he says.
David Shapiro, MD, president of the Ambulatory Surgery Center Association, supports transparency, but says trying to compare prices for healthcare is practically impossible right now because of its inherent complexity.
"I am a physician, and if I seek to purchase healthcare … I have the same problem that a non-physician patient would have trying to determine what that cost would be," Shapiro said.
"You may or may not know what your insurer will pay. You may or may not know what you pay for insurance. Possibly your employer writes the check. So you have huge firewalls between your hard earned money and purchasing healthcare," he said.
"Healthcare is not only the most important service you buy, it is certainly the most expensive and complicated. You mix all those things up and you essentially have the perfect storm and the patient who has the most at stake really has the least input and knowledge of the system," he says.
The study used insurance claims data for employer-sponsored insurance plans to analyze variations in prices nationwide for 300 "shoppable" high-volume elective procedures, such as a mammogram, colonoscopy or MRI. The claims data showed that some prices in some markets were two or three times higher than the median price for the same procedures.
The study identified site of service as another major driver of price variation. The costs of services done in hospitals are significantly higher than in the outpatient or office setting, and the study found nothing to indicated that higher prices correlated with higher quality of care.
Fabius says health insurance plans and providers need to drop their longstanding reluctance to hide their prices from the public.
"Getting that cultural change to occur will be a challenge," he says. "There is some good reasoning behind the interest on the part of providers and payers to negotiate privately. They believe their pricing schedule at least on the payer side may provide some competitive advantage."
"Ultimately marketplaces should be responding to the needs of the purchaser. The wind is in the sails for change and ultimately it will become clear to both the providers and the payers that in order to serve the needs of their ultimate customers, the purchasers and the consumers, they need to support greater transparency."
If consumers are expected to pick up more of the cost for their own healthcare, Fabius says simple fairness demands that consumers know those costs.
"There is the hope that because the consumer or patient has more ‘skin in the game' they may be more inclined to engage in comparative shopping," he says. "What is concerning is that without adequate price or quality transparency it is very difficult to shop even if you have skin in the game."
