A tax expert describes how forgiving medical debts that a healthcare provider will more than likely never collect has an "incredibly low cost, generating very high return" for hospitals.
Working with cash-strapped patients to restructure or forgive their medical debts could provide an excellent return on investment for hospitals that probably aren't going to recover the money anyway, one analyst says.
The biggest hurdle, however, is getting the federal government to agree with the idea, says Brian Haile, senior vice president of Health Care Policy at the Parsippany, NJ-based Jackson Hewitt Tax Service.
Haile says focus groups in Tennessee have that found low-income people with huge medical debts say they would be less likely to pay premiums for health insurance under programs such as the Affordable Care Act as long as they are paying older medical debts.
"If they were close to filing for personal bankruptcies, they already had protections against catastrophic medical events and they knew that," Haile says. "In order to make the insurance have significant value for that household you have to remove the underlying medical debt. Otherwise the family looks at the very real possibility that if someone was hospitalized unexpectedly they would, under [the Emergency Medical Treatment and Active Labor Act]get the care they need and then declare bankruptcy."
Haile says some Tennessee families with huge medical debts were trying to pay off those debts as best they could while still struggling with other pressing issues such as buying food, paying rent, and keeping the lights on.
"These families were working very hard to get their lives back together and they were making some very difficult economic decisions," he says.
"Realistically a lot of hospitals and providers are at best going to collect pennies on the dollar. Is there a way to convert that account receivables that will never be received into something that has real value for hospitals in the form of qualified health plan enrollment to make sure that the next time the individual shows up at the facility they are in a commercial plan that pays commercial rates and from which the facility is going to have a realistic prospect of receiving reimbursement?"
Haile says forgiving debts on money that more than likely will never be collected will benefit hospitals in several ways.
"It's a pretty easy case to make. Hospitals have the ability to target this relief to people who sustain enrollment in qualified health plans. It is not like they are writing off all debt. They can limit it to the folks with whom they induce real behavior change. In that sense it is highly efficient," he says.
"No. 2 is there is just a public relations win with this. And thirdly, in terms of how hospitals spend resources, this has incredibly low cost generating very high return. You don't see this kind of thing very much. Because you are working with clients who already incurred debt with you, it is highly likely that they are going to have medical utilization going forward."
"It's a win, win, win all the way around. The hospital is going to have nice PR. You are going to burnish the brand. You are going to help people in terms of being insured, and hopefully there will be some revenue for the hospital because the next time the person shows up they won't be uninsured."
The only problem now is convincing the federal government.
Haile says Tennessee officials have been negotiating with the U.S. Treasury and the Internal Revenue Service since 2011 but have yet to receive a firm commitment on any sort of debt relief that doesn't end up hurting the consumer.
"They count debt relief as a source of income and a taxable event for the consumer and so it becomes one of the things the hospital has to be very careful about," he says. "If the hospitals forgive the debt then you have the IRS pursuing you and you can't extinguish that debt in personal bankruptcy. It's the worst of all possible worlds."
Haile says Tennessee officials worked out a tentative agreement with the federal government that would allow hospitals to forgive any debts above 10% of the adjusted gross income without a tax penalty for the consumer.
For example, if a person earns $35,000 a year and has medical debts of $20,000, the federal government would permit debt forgiveness on any amount above $3,500. However, that $3,500 would be considered taxable income, and Haile says that could create "enormous problems" for struggling consumers. He says hospitals and their professional trade associations must pressure the federal government for a solution.
"This is an issue which is a bit of a sleeper issue and for understandable reasons. It's somewhat smaller than other issues like the [Disproportionate Share Payments to hospitals.] But there is a real opportunity here. This is something you don't need Congressional action on, or even a rule change. You just need an opinion letter," he says.
"It strikes me that there is a lot of room here to get the IRS into a comfortable place that supports where hospitals want to go, which is to get people enrolled."
Hospitals and bond rating agencies will likely spend the next decade adjusting to the transition from volume-based to value-based payments. Moody's Investors Service is trialing 20 new value-focused indicators to evaluate hospitals.
As hospitals move away from volume-based reimbursement models to less-tangible value-based reimbursements bond rating agencies are trying to figure out the best way to measure it.
Moody's Investors Service this year issued a report that outlined 20 new indicators that the rating agency will use to evaluate hospitals. Lisa Goldstein, associate managing director at Moody's, says the new indicators focus on value and measuring demand in ways other than admissions.
"For example, one of the new metrics is called unique patients. In addition to measuring your admissions every year, let's say Mrs. Jones comes to the hospital five times in one year. She would count as one unique patient, not five visits to the hospital," Goldstein says.
"It is a way of measuring market capture and under this new world of population health management, what is the population that comes into your hospital."
The push for value under the Affordable Care Act, Medicare reimbursement cuts, and the resulting tighter margins all are pressuring providers to reduce cost growth. Even though the major provisions of the ACA take effect in 2014, healthcare systems across the nation are in wildly varying states of readiness, says Standard & Poor's Managing Director Martin Arrick.
"This whole value orientation is very tricky for everyone," Arrick says. "Hospitals are moving carefully, and some of the better hospitals are moving faster and want to take full risk because they think they are going to do better. It does amp up the risk but the information around all of this is better than it was 20 years ago."
"But insurance risk is still insurance risk. We are going to find out how you are managing. First and foremost now we are interested in are you prepared for reform? What does it mean in your market? Where is it going? Talk to me about risk in your market. Talk to me about capitation in your market," Arrick says.
Goldstein says hospitals and bond rating agencies will likely spend the next decade or so "operating in two worlds; volume-based and value-based payments" as the transition period unfolds.
"It will be two orbits at the same time," Goldstein says. "It is not as if there is a magical date and everything switches on that date to all value-based no more volume. Hospitals are going to be operating in two different worlds concomitantly. They are going to go through a big transition. We have introduced new ways of measuring this new world."
Even though the reimbursement model is shifting, Goldstein says that doesn't mean that every metric now in use will suddenly become obsolete.
"Much of our analysis is based on the audited financial statements. The audits aren't going to change because healthcare reform is here," she says. "There is going to be a (profit and loss) statement, revenues, expenses, and a balance sheet and a cash flow statement. These are our core financial metrics at this point and we are not anticipating will change. You still look at leverage. You still look at liquidity. You still look at operating margin and profitability, just like we have been looking for 30 years now."
Moody's other new indicators for value-based care include covered lives, employed physicians, Medicare readmission rates, all payer readmission rates, and risk-based revenues. Goldstein says that could change.
"This is just the beginning. There may be more introduced as we learn more," she says. "Some of the 20 we may discontinue. We may learn they aren't showing us what we need to know. This is very organic. We aren't done yet. There is more to come."
In addition, Goldstein says Moody's is pressing four objectives for hospital managers responding to the shifting business model: Achieving breakeven performance with Medicare rates; building scale through non-traditional methods; improved patient experience; and cultivating informed leadership.
Arrick says that despite the upheaval, the healthcare sector is attempting to position itself to succeed under a number of different uncertainties. He says the only certainty now is that change is the new normal in healthcare.
"The secret is if you can lower your costs faster than the revenue pressures coming at you, your numbers are going to be better," he says. "You look at the balance sheets and people haven't been borrowing quite as much. There is more cash on the balance sheets. This is all getting ready for what people perceive will be harder times ahead."
A $39.3 million judgment and the specter of hefty fines hang over Tuomey Healthcare System following a jury's decision that it violated the Stark Law and the False Claims Act. Adventist Health will pay $14.1M to resolve false claims allegations. Both cases were initiated by whistleblowers.
A retrial this week that resulted in a jury's $39.3 million judgment against Sumter, SC-based Tuomey Healthcare System should demonstrate to providers everywhere that federal prosecutors are serious about enforcing anti-kickback laws.
"You look at what happened. This is a small hospital but the government put a lot of resources into this and this could put the hospital out of business and I don't think the government is wild about that," says Al Bassett, an attorney and consultant with Alexandria, VA-based Strategic Management Services LLC,
"There was a trial in 2010. There was an award. A federal appeals court set the verdict aside for a retrial. The government elected to take this to a retrial. In this second go-around you get this verdict and I think people will look at this and say 'look if the government did this to a 242-bed community hospital they will take on anybody.'"
After a four-week trial, the 10-member federal jury in Columbia, SC needed less than five hours to determine that Tuomey violated the Stark Law and the False Claims Act between 2005-2009 with its use of lucrative referral fees for 19 physicians who steered business to the health system. The case was brought forward by a whistleblower.
Tuomey has a month to appeal the ruling, but hospital officials have not said if they will.
In addition to the jury's judgment, the verdict exposes Tuomey to more than $350 million in fines stemming from nearly 22,000 violations of the False Claims Act, which allows the government to claim treble damages. It is not clear, however, whether prosecutors will attempt to collect those fines.
Bassett says law firms and consultants have been warning hospitals for years that anti-kickback statutes in Stark Law represent a significant regulatory risk.
"We have been telling our clients that they need to be very careful about establishing fair market value, about establishing the market need for the relationships with physicians," Bassett says. "They need to have what the government calls an 'arrangements database' where they are monitoring their compliance continually."
As was the case with Tuomey, Bassett says federal prosecutors rely on whistleblowers to ferret out Stark violations.
"It's not like billing. The government is aware of what is being billed to Medicare and Medicaid but the government is not privy to the contracts between hospitals and physicians," he says.
"Typically when there is a problem the government finds out about it through a whistleblower. That is what happened in this case. A physician brought a qui tam action back in 2005. So, this should be a wakeup call that what they have been told by law firms and consultants and the Office of Inspector General is true. This is a high priority."
With the advent of healthcare reform, Bassett says Stark Law violations could become even more prevalent and costly as more hospitals establish relationships with physicians.
"This shows that you need to dot your I's and cross your T's. In all of the contractual relationships with physicians who are in a position to refer patients to the hospital they have to be absolutely certain that they have met all of the requirements of the laws."
Adventist Health Pays $14.1M to Resolve False Claims Allegations
Adventist Health System/West and affiliate White Memorial Medical Center in Los Angeles will pay the federal government and the state of California $14.1 million to settle whistleblower claims that they violated the False Claims Act, DOJ said.
The deal resolves federal prosecutors' claims that Adventist improperly compensated physicians who referred patients to the White Memorial facility by transferring assets, including medical and non-medical supplies and inventory, at less than fair market value. White Memorial also paid referring physicians compensation that prosecutors said was above fair market value to provide teaching services at its family practice residency program, DOJ said.
About $11.5 million of the settlement will be paid back to the Medicare Trust Fund and $2.6 million will be paid to California's Department of Health Care Services, DOJ said.
"Payouts made by hospitals and clinics—as the government alleged in this case—raise substantial concerns about physician independence and objectivity," said Ivan Negroni, special agent in charge of the Office of Inspector General, U.S. Department of Health and Human Services San Francisco region.
"Taxpayers and vulnerable patients rightfully expect such payments to be investigated and pursued."
The whistleblowers in this case will collectively receive $2.8 million of the recovery.
MT Hospitals to Pay $3.95M to Resolve Stark, False Claims Allegations
Two Montana hospitals have agreed to pay nearly $4 million after self-disclosing to the federal government Stark Law and False Claims Act allegations, DOJ announced.
St. Vincent Healthcare in Billings, and Holy Rosary Healthcare in Miles City will pay $3.95 million plus interest to resolve allegations that they gave incentive pay to physicians that made referrals to the hospitals, DOJ said.
Prosecutors alleged that the hospitals paid several physicians incentives that took into account the value or volume of their referrals by improperly including certain designated health services in the formula for calculating physician incentive compensation.
"St. Vincent Healthcare and Holy Rosary Healthcare allegedly put their financial interest ahead of their responsibility to provide cost effective healthcare," Michael W. Cotter, U.S. Attorney for the District of Montana, said in prepared remarks. "This case also demonstrates how the Department of Justice will work with those healthcare providers who disclose their misconduct,"
Physicians and attorneys—uncommon allies—support a Georgia law that creates a barrier between doctors and "ancillary" payer guidelines in the Patient Protection and Affordable Care Act which could potentially be used as evidence in medical malpractice lawsuits.
News that the Medical Association of Georgia and trial lawyers are united in their support of a new law that provides limited malpractice protections to physicians left some observers at the Capitol contemplating biblical prophecy.
"When their lobbyist and I testified together in support of this bill, one House member suggested that the committee should adjourn so that all of the members could get home before the locusts arrived," says William T. Clark, director of Political Affairs with the Georgia Trial Lawyers Association.
"He was joking, I think."
The "Provider Shield" bill (HB499) was signed into law on Monday by Georgia Gov. Nathan Deal. MAG and backers say it creates a barrier between Georgia doctors and "ancillary" payer guidelines in the Patient Protection and Affordable Care Act which potentially could be used as evidence in medical malpractice lawsuits.
MAG President W. Scott Bohlke, MD, said the new law will protect "physicians in the state from some unreasonable and unnecessary standards and legal liabilities."
"These guidelines, including factors like healthcare quality measures and payment adjustments and value-based payment modifiers, don't have any direct ties to the medical profession in Georgia," Bohlke said in prepared remarks. "These are simply cost management tools for the federal government and other third-party payers."
The shield law is being touted as the first in the nation and is based on model legislation crafted by the American Medical Association's Advocacy Resource Center.
AMA board member Patrice A. Harris, MD, said the law "makes it clear that federal standards or guidelines designed to enhance access to high-quality healthcare cannot be used to invent new legal actions against physicians."
"The decisive action of Georgia lawmakers holds the line against medical liability abuse and helps avert more civil actions against physicians, which increase medical liability insurance premiums and reduce access to health care for Georgia's patients," Harris said in prepared remarks.
Under the shield, evidence related to government and private payer guidelines won't be admissible in court, can't be used as the standard of care, and can't be used as a presumption of negligence in any malpractice lawsuit.
Clark says trial lawyers were "glad to partner" with physicians in support the bill because the protections it extends against malpractice suits are limited and should not affect patient safety.
"While we work steadfastly to shield patients from negligent medical care, especially given that 98,000 Americans die annually from preventable medical malpractice, we did not mind helping the physicians enact a bill that will prevent someone from suing a doctor for the doctor's failure to comply with a payment guideline, something that has nothing to do with the real question of whether the doctor failed to comply with the medical standard of care," Clark wrote in an email exchange with HealthLeaders Media.
Bohlke says the law will "ensure that Georgians have access to the highly trained physicians they need by creating a sustainable and more favorable practice environment."
Clark notes that it is "not a safe harbor for physicians who have failed to meet the appropriate standard of care when practicing medicine in Georgia."
"HB499 will not prevent a patient from suing to hold a doctor accountable if he or she fails to follow guidelines relating to the quality of care they are to provide or guidelines relating to best medical practices with which they are supposed to comply," he says.
"The only thing HB499 will do is to prevent a patient from suing a doctor because the doctor did not follow a federal payment guideline. No one in our Association is aware of there EVER being a medical malpractice case based on a doctor's failure to meet a payment guideline. So, restricting the ability to do that through this bill will not create any problems for any patient prosecuting a case of medical malpractice in Georgia."
To win the trial lawyers' support, Clark says Georgia lawmakers made the bill "go both ways so that it does not just shield doctors from having a patient assert that the doctor's failure to comply with a payment guideline was evidence of malpractice. The bill also shields a patient from having a doctor assert that his or her compliance with such a payment guideline is evidence that the doctor provided appropriate care to the patient."
"We took the position that what's good for the goose must also be good for the gander," Clark says. "And fortunately, the General Assembly agreed with us."
The shield law is not the only example of Peach State doctors and trial lawyers working together this year for the common good of Georgians. Clark notes their united effort to defeat SB141, which would have replaced medical malpractice jury trials with administrative hearings.
"It is an unworkable and unconstitutional alternative to jury trials that has failed miserably in some European countries where it has been tried," Clark says.
"And, it is based on a fallacious premise that says doctors spend 25% of their time performing unnecessary medical tests and medical procedures, something that is impossible in this day and time when managed care runs medicine and prevents doctors often from being able to perform even absolutely medically necessary tests and procedures, much less from being able to do unnecessary tests and procedures."
"Moreover, if you buy their premise, then you have to accept that that means doctors are committing insurance fraud, Medicaid fraud and Medicare fraud for billing for all those unnecessary tests and procedures. You and I both know that they are not doing that. And, that was a point we were able to agree on with our friends at the medical association. And, we agreed that the proposal was not going to bring down costs of malpractice insurance or costs of healthcare."
So, cooperation can occur between these two hostile camps. But before we break out the tie-dye shirts and sway together to Kumbaya, remember that trial lawyers and physicians will continue to eye one another with suspicion in state houses across the nation.
"We have worked together on another bill or two but it's rare because they spend way too much of their political capital trying to insulate physicians from accountability," Clark says. "So, there are instances where we work together. But, again, remember the locusts."
The federal government's inpatient admissions guidelines and growing claims denials are heaping pressure on hospitals to treat Medicare patients in the ED rather than admit them. Meantime, the severity of illness is rising, says the American Hospital Association.
Hospital emergency departments are treating growing numbers of sicker Medicare patients who require more complex and expensive treatment regiments, the American Hospital Association reports [PDF].
"The drivers [are] both the aging demographic, but also just that people are getting sicker. Chronic diseases are skyrocketing," says Caroline Steinberg, AHA's vice president of trends analysis.
"A lot of it has to do with lifestyle factors like obesity. We did look to see if the aging of the Medicare population was driving this and we didn't find a big change in terms of age. We did find that people are simply getting sicker. That is what a lot of the researchers say, that most of the chronic disease burden is related to lifestyle factors, exercise, weight, that sort of thing."
The AHA says data shows that between 2006 and 2010, the severity of illness of Medicare patients in the emergency department increased, as did the rate of use, a trend that policymakers fear is leading to higher spending with inadequate reimbursements.
Steinberg says hospitals want the federal government to acknowledge what the data clearly shows.
"We would just like recognition by [the Centers for Medicare & Medicaid Services] that patients are in fact getting sicker and that it is not related to changes in the coding claims, but that we really are seeing patients getting sicker," she says. "We have run into this problem in the inpatient setting as well, where CMS doesn't want to pay for rising acuity levels."
The federal government's more stringent inpatient admissions guidelines and growing claims denials are also putting more pressure on hospitals to treat Medicare patients in the ED rather than admit them.
"We are seeing an increase by audits by the [recovery audit contractors] and other Medicare auditors that are denying admission for short stays so there is huge pressure on hospitals not to admit patients unless they are very sure that those cases can be fully justified through medical necessity," Steinberg says.
"Nobody is questioning whether the care provided was medically necessary. They are just questioning whether or not it was provided in the right setting."
CMS in March said it would change its policy of flatly denying any reimbursements to hospitals that provide medically necessary care determined by auditors to have been delivered inappropriately in an inpatient setting. While that will allow hospitals to re-bill Medicare for hundreds of millions of dollars in uncompensated care, Steinberg says re-billings can only date back one calendar year.
"Unfortunately most of the RAC denials are occurring beyond a one-year timeframe. You can do it, but it is not going to help because that's when all the denials are happening," she says.
The AHA report is limited to Medicare claims data, but Steinberg says the advent of expanded health insurance coverage in 2014 under the Affordable Care Act means that EDs will probably see an uptick in usage from other demographics "as more patients become insured and there is still limited access to primary care in many areas particularly in poor neighborhoods."
"We haven't looked at what is going on in terms of other populations, but we would imagine that everybody is getting sicker because it's not like it all happens the day you enter the Medicare program. The obesity and the sedentary lifestyle and the high-stress environment—all those things are risk factors long before you enter Medicare, and a lot of that is exacerbated in the Medicaid population," Steinberg says.
The AHA report, based on an analysis of Medicare claims data conducted by The Moran Company, also found that use of the emergency department by Medicare/Medicaid "dual-eligible" patients is rising, and; EDs are serving more Medicare patients with behavioral health diagnoses.
Medical schools will boost enrollment 30% by 2017 to ease the nation's physician shortage, but that won't do much good if the federal government won't provide funding to expand residency slots, a new survey of the nation's medical school deans finds.
"Our medical schools have fulfilled their commitment toward taking the first step in addressing the physician shortage," says Christiane Mitchell, director of federal affairs for the Association of American Medical Schools. "Now we have to ask Congress to help us take the second step to make sure all of those new medical school graduates have a residency training position."
The 9th annual Medical School Enrollment Survey from the AAMC's Center for Workforce Studies found that first-year medical school enrollment is projected to reach 21,434 in 2017-18—a 30% increase above first-year enrollment in 2002-03, the baseline year used to calculate the enrollment increases that the AAMC called for in 2006.
In the survey, however, 40% of the medical school deans expressed "major concern" about enrollment growth outpacing growth in the number of available residency training positions. The 2013 annual match of medical school graduates with residency slots was only the second time there were more unmatched U.S. seniors than unfilled positions; the first time was 2010.
The insufficient number of residency slots means that some unlucky medical school seniors will graduate deeply mired in student loan debts but with nowhere to go. " You cannot practice medicine in the U.S. unless you complete a US residency training program," Mitchell says. "In fact, this year already we started to see a few students not match to residency position because there simply weren't enough."
The cost of medical residencies varies greatly depending upon the specialty, but Mitchell says the "back of the envelope" average is about $150,000 per residency slot. AAMC has recommended a 15% increase in the number of residency slots over the next decade, which would cost about $9 billion.
Unfortunately, Mitchell says, there is little support for the funding among federal elected officials.
"It is going to be an enormous challenge," she says. "In fact what we worry about most of all now is that not only are Congress and the White House not very interested in spending more money on graduate medical education, all of their deficit reduction proposals, Republicans and Democrats, Congress and the White House, have all put in cuts in current support. It is contradictory to efforts to make sure that there are enough doctors for Medicare beneficiaries and all of the folks who are getting coverage under healthcare reform. It's not consistent."
A breakdown of the survey found that 62% of the enrollment growth will occur in the 125 medical schools that were accredited as of 2002, 31% will occur in schools accredited since 2002, and 7% will come from schools that are currently applicant or candidate schools with the Liaison Committee on Medical Education. Fifty-five percent of the 4,946 new positions projected by 2017 are expected to come from public medical schools, with the greatest growth occurring in the South, where schools account for a 46% of the increase between 2002 and 2017.
Even with the challenges of funding and little support from Washington, D.C., Mitchell says medical schools are encouraging students to gravitate towards primary care, especially in this new era of payment and care delivery reforms.
"If you look at the payment changes that were made under the Affordable Care Act, even Medicare has realized that they are not paying primary care adequately so they are saying 'we value primary care and we need to put our money where our mouth is,'" Mitchell says.
"The [PPACA] has started that process and there is going to be an ongoing look at how they can insure that primary care physicians are being reimbursed fairly."
"The other thing is that we have this new evolving delivery system that emphasizes accountability. You have an accountable care organization or a patient-centered medical home," she says. "Primary care physicians have the opportunity to be not just leaders in this new model of delivering care but ultimately they are at the center of that delivery system."
"You do see a growing interest among medical students in a primary care career because they view it as a new role and purpose and a new stature associated with these new delivery models and that is improving the attractiveness of the primary care career. But you also have to remember that the new generation of physicians is also looking carefully to ensure their work and personal life are in balance and a primary care career can challenge that balance. It's money and personal perspectives and professional evolution all in play."
As healthcare delivery moves toward value-based reimbursements, medical directors at physician practices are increasingly shouldering duties tied to monitoring quality metrics such as patient safety and satisfaction, a new survey from the Medical Group Management Association shows.
"As we understand the industry is moving towards a value-based reimbursement model we are seeing that permeate and migrate into compensation methodologies as well, for many good reasons, " says Todd B. Evenson, director of data solutions for Englewood, CO-based MGMA.
The survey found that 40% of medical directors report duties that include monitoring quality metrics.
"It is a strong tactic for many organizations to align compensation methodologies with reimbursement methodologies, " Evenson says. " As we look toward the value-based environment, obviously quality and cost are the two biggest components in that equation. We have a snapshot in time with this survey, and my expectation is that it would continue to evolve as the industry moves closer towards more providers getting paid based on value versus a production level. "
The survey includes responses from 1,422 medical directors in 239 medical organizations, including 142 single-specialty practices and 97 multispecialty groups from all across the nation. Among the respondents,
54% worked in physician-owned practices
27% worked in hospital- or integrated delivery system-owned practices
17% were in some other ownership model
Evenson says this shifting dynamic will also require a new relationship between medical directors and practice administrators. " It is probably more important now than ever to have a strong physician administrator team and have a strong understanding of a common goal, " he says.
"In the past if it was production, we focused on patient flow and efficiencies in the practice. But in the new environment it is delivering value and clinical quality. There is going to have to be a movement within the organization to ensure there are harmonized activities and that the practice can deliver the greatest quality possible. "
Compensation and time allotted for medical director duties appears to vary depending upon the ownership of the physician group. Respondents in this survey tended to represent medical directors working in physician-owned practices, where Evenson says " the preponderance of their activities will still be in that clinically based care because they are delivering face-to-face contact with patients. "
"The preponderance of what they are earning is going to be in the space of their traditional compensation model of production. With that being said, on the side of the medical directorship there is a very different modes for how they are being compensated, " he says.
The MGMA survey focuses on medical directors who spend six hour or less on their directorship or administrative roles. " For the primary care folks, for example, about 35% of them are paid at an hourly rate, about 40% are paid at a monthly rate, and 23% are paid at an annual rate in this survey, " Evenson says.
"How they are being reimbursed or compensated is a function of their looking at the clinical aspects of the practice, whether that is patient satisfaction metrics, the quality metrics, " Evenson says.
"That might even be provider and staff satisfaction as well. They are working with a team of physicians to develop policies and guidelines for delivering the care in their organizations. That is really where we are seeing these folks fitting in in terms of how they are being compensated. "
While the roles appear to be same for medical directors at physician-owned practices and hospital-owned practices, Evenson says the biggest difference is the amount of time dedicated to the directorship duties.
"In a hospital, they would spend more time on the directorship role with an annualized amount of compensation as being one of the leaders in the health system, " he says. " They would be directing that clinical care across a multitude of physicians whereas in a smaller single specialty practice the amount of time that can be spent on that is dramatically reduced. "
Two years after an EF5 tornado flattened Joplin, MO and gutted St. John's Regional Medical Center, the new Mercy Hospital Joplin is being built to stand strong against natural disasters with a host of upgrades. Storm-hardened windows will be the facility's centerpiece.
May 22 marks the second anniversary of the devastating EF5 tornado that flattened Joplin, MO, left 161 people dead and injured more than 1,000 people.
The town of about 50,500 souls plans to honor its dead and commemorate the catastrophe at a public ceremony that will include a moment of silence at 5:41 p.m., marking the minute in 2011 when the twister first touched down on the western edge of the town and began its devastating tear.
While the ceremony will honor what the region lost on that horrible day, Joplin city planners say they will use the event to highlight the progress made in rebuilding and to subtly shift the focus toward the future. Rebuilding and looking to the future are also the focus at the new Mercy Hospital Joplin, which is planning a March 2015 opening for the $450 million, 900,000-square-foot, 260-bed hospital that will replace the storm-gutted St. John's Regional Medical Center.
Despite the quick thinking and valiant efforts of St. John's staff two years ago, five patients and one visitor inside the hospital died from injuries and other storm-related factors when the tornado blew out windows, peeled off the roof, and shut down electrical power, back-up generators, and communications.
Immediately after the storm a team of engineers used the unique circumstances provided by the catastrophe to comb the gutted hospital and identify the weak links.
"We arrived a day after the storm and it took us three or four weeks just to assess the damage, make sure the facility was safe to go into, and document all of the issues that the facility had," says John Farnen, who is overseeing the new hospital construction as Mercy's executive director of strategic projects.
"We lost all the power. No utilities. No emergency generator power. We lost the roof and exposed the outside. It was catastrophic damage. They got maybe a 10-minute warning and it was [in] a matter of seconds that it blew past."
Mercy Hospital Joplin is being built with an eye toward those lessons learned at St. John's and includes $11 million in upgrades to "harden" the new hospital against natural disasters, all of which will add about 2% to the total construction cost.
The centerpiece of the storm hardening will be the windows, most of which were knocked out at St. John's and which sent glass shards and 200 mph winds inside the building, blowing out walls, doors and ceilings. The only windows to survive the 2011 tornado were those with a reinforced laminate in the hospital's behavioral health unit, which limited damage and injury inside that unit.
With that lesson learned, Mercy is working with contractors to invent windows and frames with unprecedented strength. "The new window technology actually doesn't exist. We are doing testing right now to get it to pass and achieve our goals, but most of the hardening is just [applying] the good engineering practices in today's world," Farnen says.
The new hospital will have three types of storm-hardened windows. Lobbies and other public areas that can be evacuated quickly will have windows with a rating for 110 mph winds, stronger than the typical 90 mph rating for commercial buildings. Mercy is adding a film of plastic laminate to prevent the glass from shattering. Patient rooms will have laminated glass designed to withstand winds of 140 mph. For the intensive care unit, technicians in Minnesota are developing windows that will withstand impact from a 15-pound, 2x4 wooden missiles at 100 mph, which replicates debris flying in a 250-mph tornado.
"There is a field-applied safety laminate [that] will stand up a lot better than normal glass," Farnen says. "It will keep the glass from breaking up into shards and flying all over so that if the glass does give, the whole piece will pop out and it doesn't become a weapon or projectiles flying through the air."
When tornado warnings are issued, hospital staff will move patients and visitors into the interior.
"Every floor of this hospital will have a center core area where the ceilings will be reinforced and the interior walls will be reinforced and the end of the core area will have metal storm doors," Farnen says. "Everybody who can be moved will be moved into the center core area. The patients that can't move, that is where we have the 250 mph graded glass and we will defend those in place."
Other notable upgrades include:
Refuges on each floor with reinforced walls and ceilings, where tiles and lights are secured as if in an earthquake zone, with heavy storm barriers that can be closed to secure the safe zones. Rods in the door hardware will penetrate into the cement above to hold against intense gusts. Elevators will reach the basement where widened corridors can safely hold staff and patients.
A half-buried building to house emergency generators and diesel tanks, and a reinforced 450-foot tunnel that will provide a conduit for water, power, gas, and data communications lines. Hallways and stairwells will have battery-operated backup lights. Life-support systems such as ventilators and neonatal bassinets will have battery backup systems.
Emergency grab bags strategically placed around the hospital and containing critical supplies such as flashlights, batteries, first aid kits, gloves, crowbars and even snow shovels to clear passageways clogged with rain-soaked debris.
A storm-hardened pre-cast concrete exterior with a poured concrete roof that will hold tight in a gale, unlike the metal decking that blew off the old hospital, and a penthouse holding mechanical units that will be protected by heavy walls of water-proof boards.
Storm hardening is taking place at Mercy hospitals in Springfield, and Oklahoma City, and it's planned for other hospitals with the misfortune of being located along Tornado Alley.
Farnen says the storm-hardening will protect patients, visitors, and staff and will also ensure that Mercy Hospital Joplin will be the last light on for emergency services.
"There is an awful lot of stuff we learned and an awful lot of stuff we are doing and it will be interesting to see how well the facility performs when all of these elements come together and hold up together when they're all assembled," he says. "Saving patients lives is priority No. 1, but if we can keep the building intact that's great too."
When it comes to bond ratings, bigger is still better for not-for-profit hospitals.
Five of six not-for-profit hospitals that saw their bond rating downgraded by Moody's Investor Service in the first quarter of 2013 were smaller providers with less than $500 million in revenues, the ratings analysts said in a new report.
Lisa Goldstein, associate managing director at Moody's, concedes that the report is not breaking news.
"We have said for a while that small hospitals, as we look at them through the lens of a rating, are more vulnerable and susceptible to the changes in the industry which heretofore would go at a glacial pace. Now things are picking up," she says.
Fueling that acceleration, Goldstein says, is the looming implementation of key provisions and reimbursement models in the Affordable Care Act that take effect on Jan. 1, 2014.
"It's interesting to us that in the first quarter, five of the six downgrades were of small providers and two of the three upgrades were of more sizeable providers. The numbers are different from the first quarter of 2012 but the message is not new," Goldstein says.
During the first quarter of 2013, Moody's reported that it affirmed 55 ratings, representing 86% of all rating activity and affecting approximately $25.3 billion in debt. Moody's expects more downgrades than upgrades in the second quarter of 2013, as there are already three hospitals under review for downgrade.
Smaller healthcare providers are at a disadvantage when compared with larger hospitals and systems, Goldstein says, because of their limited leverage with payers and vendors, lack of economies of scale, and over-reliance on a few key physicians.
That is not to suggest that larger not-for-profit hospitals and health systems are skating along. Moody's outlook for the entire sector is negative.
"We would say that over the next one to two years things are going to be challenging for everyone, for hospitals of all sizes," Goldstein says. "It is not that we have 'X' outlook for the big systems and 'Y' outlook for the small guys. It's negative for the whole industry. Things will get tougher. Things already got tougher April 1 with sequestration. That wasn't a change in how healthcare is delivered. That was just a top-line 2% cut. With or without sequestration things will be tougher over the next couple of years. We are in a big transformational period right now."
Moody's rates about 470 distinct borrowers, ranging from individual hospitals to health systems with dozens of hospitals. Goldstein estimates that Moody's ratings "touch about 1,200 hospitals."
In the first quarter, Moody's downgraded $988 million in not-for-profit healthcare debt and upgraded $658.1 million, for a ratio of 1.5 to 1. The ratio for downgraded issuers versus upgraded issuers during the quarter was 2 to 1 ratio—the same ratio as in the fourth quarter of 2012, when there were 10 downgrades and five upgrades. The nine rating changes in the first quarter of 2013 were a decline from the 22 rating changes during the first quarter of 2012, when there was an even split between downgrades and upgrades, Moody's announced.
Goldstein predicts the ongoing rush towards mergers and acquisitions and other provider consolidations will accelerate in the coming months and years.
While there was some softness in M&A activityoverall in the first quarter of 2013, according to a report from research firm Irving Levin Associates, Goldstein is seeing an upswing.
"The climate we are in for consolidation is pretty heavy and it seems like once a week there is an announcement about somebody talking about somebody," she says. "We are in the second wave of heavy M&A activity. The first wave was about 12-13 years ago. Now it is back. A lot of this is driven by reimbursement top-line revenue pressures. People say we are going to be better if we are part of a bigger system, or we are big but we need to be bigger for scale. We are in it as we speak, this rapidly accelerating M&A period."
State regulators in Pennsylvania on Monday approved Highmark Inc.'s $1 billion acquisition of West Penn Allegheny Health System, clear ing the way for the creation of what its backers says will be one of the nation's largest integrated healthcare systems.
Approval from the Pennsylvania Insurance Department came laden with conditions, but Highmark President/CEO William Winkenwerder, Jr., MD, said leadership at the newly named Allegheny Health Network was 'comfortable that we will be able to well comply with all the conditions that have been outlined in the commissioner's order.'
'Let me just say that many of these conditions were things that we would have done in any event,' Winkenwerder told reporters at a Monday afternoon teleconference. 'We also believe that certain of the conditions are very positive in that they set forth certain behaviors and characteristics of a more competitive marketplace in healthcare and are really meant to assure that monopoly-like behavior doesn't occur. That is very consistent with our own thoughts.'
The Allegheny Health Network will employ about 1,200 physicians and will include the five hospitals in the West Penn Allegheny system, Saint Vincent Health System in Erie, pending court approval, and Jefferson Regional Medical Center in suburban Pittsburgh, Winkenwerder said.
'In our case, what we have created with this establishment of Allegheny Health Network with Highmark is arguable the second- or third-largest integrated delivery system in the United States. We quickly move up to the top of the list in terms of size and scope,' Winkenwerder said.
'What that creates, that integration, is an opportunity for clinicians and clinical leaders to work hand in glove with those that finance care for the population when planning things so that there is less duplication and there is better placement of services for the entire population that it serves. Right off the bat you have the opportunity to plan things more efficiently and effectively and with less redundancy.'
'At the patient care level when you have these cooperative entities working together, and that is the key, a cooperative relationship and attitude, there is the opportunity to make the patient care experience better and take some of the hassle and redundancy out of what people typically experience today.'
Highmark's provider division leader John Paul, who was named president/CEO of the new network, said the integrated care model is needed because 'obviously the current system hasn't worked very well.'
'The core of the problems we have as a country is the fact that care is so fragmented,' Paul told reporters. 'Care traditionally has been physician- and facility-focused. With modern technology and information technology, our focus is going to be on prevention and wellness as well as bringing people together to the extent that we can in one location to receive all their care, and when they can't receive it in that location to connect those clinicians and a record of their clinical services through an information technology backbone that can be transmitted internationally, not just locally.'
'Coupled with that we are very unique,' Paul says. 'This is the first time in this country where a very large insurer is entering into the provider business to the extent that we are here at Highmark. So our incentive is to be sure we keep care in the most affordable setting, keep care local, [and] make it very convenient for our enrollees. Thus we can keep that membership.'
The deal is the latest twist in the battle for market share in Western Pennsylvania with rival University of Pittsburgh Medical Center. Winkenwerder said Monday Highmark hopes to have a relationship with UPMC going forward, even though their current contract will expire at the end of the 2014.
UPMC appeared less enthusiastic and issued a statement following the commissioner's approval noting that 'Highmark's ownership of a provider network introduces more complicated insurance choices for employers and consumers.'
'We urge Highmark to immediately join with UPMC in preparing its subscribers for the transition that will take place on Dec. 31, 2014, when the UPMC-Highmark contract expires,' UPMC's statement read. 'It is important that consumers understand these changes so they can take the steps needed to continue accessing their preferred doctors and hospitals. We urge Highmark to work with UPMC now as there will be no new UPMC contract or extension when the current one expires in just 19 months.'
Monday's approval by Pennsylvania Insurance Commissioner Michael Consedine caps a process that began with Highmark's initial filing in November 2011 through its nonprofit corporation, UPE. Consedine called the review of the deal the most complex and extensive in his agency's history, with a record that includes more than 64,000 pages of reports and analytical data, more than 10,000 pages of public comments and more than six hours of public testimony.
'This is a landmark transaction,' Consedine said in prepared remarks. 'We were cognizant that our review and the order we issued today may serve as a model for similar transactions across the state and country going forward.'
Healthcare economist Adam Powell, president of Boston-based consultants Payer+Provider Syndicate, said in an email exchange with HealthLeaders Media that western Pennsylvania now has two major integrated healthcare systems with products that bundle healthcare financing and delivery.
'Highmark has some nascent experience in operating an integrated delivery system, as it previously acquired Jefferson Regional Medical Center in March 2013 and announced the creation of a medical mall in Wexford, PA. Highmark's ownership of multiple sites of service will enable it to more effectively control the cost of care that its health plan members receive,' Powell says.
'The formation of integrated delivery systems is rapidly occurring across the United States. In Massachusetts, Tufts Medical Center is in the process of founding the insurer Minuteman Health Initiative, Partners HealthCare acquired Neighborhood Health Plan in 2012, and Boston Medical Center has offered coverage through its BMC HealthNet Plan since 1997. We also saw somewhat similar activity last year in Texas, with the merger of Baylor and Scott & White. I foresee that we will continue to see vertical integration between the financing and delivery of care.'
The $1 billion deal includes the $475 million in the initial purchase, along with the acquisition of $528 million in outstanding bonds, about $100 million less than initial estimates. Highmark officials said they anticipate refinancing the debt in the coming months.
