Moody's Investors Service's dollar value downgrade of not-for-profit healthcare debt increased by 213% in 2012—the largest one-year drop by the rating agency since it began tracking the sector in 1995.
In total, a record $20 billion in not-for-profit debt was downgraded in 2012 by Moody's compared with a $6.4 billion downgrade in 2011. The downgrades were driven largely by falling patient volumes and weak revenue growth. Other factors included declines in liquidity, more competition, increased debt load, pension fund pressures, and management and governance problems.
The $20 billion downgrade was more than double the $9.7 billion in upgraded debt for the not-for-profit healthcare sector for 2012. Nonetheless, Beth Wexler, Moody's vice president and senior credit officer, downplayed suggestions that the not-for-profit healthcare sector was teetering.
"There is a lot of headwind but this isn't a signal on our part that the whole industry is going to collapse onto itself," Wexler told HealthLeaders Media.
"In spite of the fact that the dollar amount seems large, the number of debt downgrades and upgrades, the increase wasn't precipitous the way the dollar amount was. It's in a sense the way the data got cut this way and who the downgrades impacted as opposed to this being the beginning of Armageddon, which is not the case at all."
Wexler says three large health systems: Catholic Health Initiatives in Colorado, Dignity Health in California, and Memorial Sloan-Kettering Cancer Center in New York accounted for nearly $13 billion of the $20 billion total.
"Some of this has to do with consolidation activity, ramping up of debt not necessarily for reasons that have to do with credit deteriorations," Wexler says.
"Sometimes as organizations grow they swell a little bit and if the judgment bears out to be the right strategy they go back to where they were. If you take something like Memorial Sloan-Kettering and the downgrades that affected almost $2 billion, that does aid in skewing the dollar downgraded debt but certainly the rating they remain at it's very healthy. They have a lot of strategies that they're executing upon. It creates more risk but risk is relative—Aa2 versus Aa3. But at the end of the day, it still speaks to the downgrade of a large amount of debt."
Wexler says Moody's expects that if the cost of floating bonds remains at near-historically low levels, then there will be more financing of future strategies. "That has contributed to organizations executing on what seem to be very healthy strategies at maybe a pace that has them swell a little bit more."
"Sometimes," Wexler says, "strategy costs upfront. It's not necessarily the wrong thing to do. It's just the risk profile changes because of it and if it's the right strategy it is going to bear itself out over time with the credit profile."
Linda MacDonald, vice president of treasury services at Catholic Health Initiatives, says the downgrades were not completely unexpected, but come as the health system grapples with major strategic moves that necessitated floating about $1.5 billion in bonds.
"Our financials were quite good last year. However, we did experience those volume declines and weaker or negative revenue growth," MacDonald says. "We are not immune to those types of occurrences, but what really caused our downgrade was the issuance of debt in such a large amount."
"It was a large issuance of debt that pretty much changed our profile. We were able to access the market with a $1.5 billion issuance, the largest issuance of an organization of our type ever done, so we were a little bit in unchartered territory."
MacDonald says CHI used about $550 million of the new debt to finalize the "sponsorship" of the remaining 50% of Omaha-based Alegent Creighton Health.
"The remainder continues to sit on our balance sheets today," she says. "We've made investments in an insurance company, Soundpath, as well as looking at other opportunities, some of which aren't public yet," she says, adding that the risks of taking on bond indebtedness in a volatile market have been offset by "the exceptional capital market environment that we were in."
"At the time we issued the debt the cost was only slightly greater than that which we could achieve with the exempt debt and we have much more flexibility in how we spend these proceeds. We issued a five-year tranche, a 10-year tranche and a 30-year tranche and each of them were index eligible, which means they were at least $250 million each," she says.
"We decided to enter the debt market last fall because we saw in our future strategic opportunities that we wanted to be ready to avail ourselves of. The issuance of the magnitude of the debt that we put into the market last fall can cause something like this to occur. We certainly realized there was a possibility."
For every dollar spent investigating Medicare fraud and abuse in the last three years the federal government recovered $7.90. That return on investment is the highest three-year average in the 16-year history of the Health Care Fraud and Abuse Program, federal officials announced on Monday.
"Our historic effort to take on the criminals who steal from Medicare and Medicaid is paying off: We are gaining the upper hand in our fight against healthcare fraud," Health and Human Services Secretary Kathleen Sebelius said in prepared remarks.
"This fight against fraud strengthens the integrity of our healthcare programs and helps us fulfill our commitment to our seniors."
The HCFAC—a joint initiative of the Department of Justice and HHS—in its annual report said that the government recovered $4.2 billion in fiscal 2012 and $4.1 billion in fiscal 2011.
Over the last four years federal officials have recovered $14.9 billion—up from $6.7 billion in the prior four year period—from drug companies, hospitals, physicians, healthcare executives, vendors and assorted scam artists. Since 1997 HCFAC has returned more than $23 billion to the Medicare Trust Funds.
Sebelius and U.S. Attorney General Eric Holder in a joint media release credited enhanced screenings and enrollment requirements, expanded recovery efforts for overpayments, increased data sharing among government agencies and greater oversight of private insurance abuses for the improved rates of recovery.
Sebelius and Holder also credited:
The ongoing expansion of the coordinated Medicare Fraud Strike Force teams, which now operate in nine regions, including Medicare fraud hotbeds in Miami, Detroit, Houston, and Brooklyn. Using more advanced data analysis the teams can now fly red flags on irregular or suspiciously high-billing patterns that could signal fraudulent activity. In May 2012, for example, the strike force arrested 107 people, including doctors and nurses, in seven cities who were charged in schemes involving about $452 million in bogus billings to Medicare. Strike force teams in nine cities worked investigations against 278 defendants who allegedly attempted to bilk Medicare of more than $1.5 billion.
A new automated provider screening system that screened all 1.5 million Medicare-enrolled providers and flagged nearly 150,000 of them as ineligible or fraudulent.
On the civil front, Holder and Sebelius said the federal government recovered more than $3 billion in fiscal year 2012 under the False Claims Act, including price rigging by drug makers, illegal marketing of medical devices and drugs for uses not approved by the Food and Drug Administration, Medicare fraud by hospitals and other providers, and Stark Law anti-kickback violations.
In addition, the federal government collected nearly $1.5 billion in fines and forfeitures, and obtained 14 convictions under the Federal Food, Drug and Cosmetic Act.
The American Medical Association has outlined five key responsibilities physicians should adopt when providing care for patients recently discharged from the hospital.
The recommendations listed in the report were developed to improve safety and reduce hospital readmissions for patients returning home, according to the AMA Center for Patient Safety, which is attempting to build a bridge between inpatient and outpatient settings.
With the new guidelines, The Center for Patient Care study says it hopes to break a historic trend that left the responsibility for transition plans almost solely in the hands of the inpatient clinical teams.
"There has been relatively little attention paid to exploring specific roles and responsibilities for outpatient clinics and other ambulatory practices during care transitions," the study says.
"But one thing we know is that patients leaving the hospital too often return to ambulatory care settings that are not well connected to the hospital team and this can result in inefficient, confusing and sometimes unsafe conditions."
"Inpatient teams face important limitations in ensuring safe transitions to ambulatory settings," the report continues. "Given the great variability of inpatient and ambulatory care team resources and capabilities, there can be no 'one-size fits all' model for safe care transitions; but certain tasks during care transitions are probably best carried out by members of the ambulatory rather than the inpatient care team, since the ambulatory practice will be responsible for providing ongoing care to the patient in the ambulatory setting."
The five responsibilities outlined in the report include:
Assessment of the patient's health;
Goal-setting to determine desired outcomes;
Supporting self-management to ensure access to resources the patient may need;
Medication management to oversee needed prescriptions;
Care coordination to bring together all members of the health care team.
The report was issued this month shortly after Medicare announced that it will accept the newly created Current Procedural Terminology codes for care coordination to pay physicians for the management of patients who have recently been discharged from a hospital or skilled nursing facility, the AMA said.
The AMA's CPT Editorial Panel built the codes to catalog care management services, including time spent talking about a care plan, connecting patients to community services, transitioning them from inpatient settings and preventing readmissions.
Improving care coordination and transitions is expected to become more important in the coming years, the report says, "as new models of care delivery, improved methods of communication, and changes in payment systems will each propel an emphasis on understanding optimal roles for ambulatory practices in supporting safe care transitions for patients entering and leaving hospitals and other inpatient facilities."
"When a patient leaves the hospital to go home, they are transitioning back into the care of their outpatient primary care and specialty physicians,"
AMA President Jeremy Lazarus, MD, said in prepared remarks issued with the report that care coordination between inpatient and outpatient physicians is critical to ensure success.
"Physicians in ambulatory care settings must first have access to information about their patients' hospital stays to ensure continuous, high quality care," Lazarus said. "The lists of actions recommended in this report can then serve as a guide as physicians care for recovering patients."
One in five flu patients exhales so much more of the airborne virus than other flu patients, that researchers are asking whether these "super emitters" pose a greater likelihood of transmitting the virus to the people near them.
Werner Bischoff, MD, assistant professor of infectious diseases at Wake Forest Baptist Medical Center in Winston-Salem, NC, and lead author of a study published in the Jan. 31 online edition of The Journal of Infectious Disease, told HealthLeaders Media that more research is needed before he can determine the potential threat that super emitters may present to healthcare providers.
"It's too early at this stage to offer any broad recommendations to healthcare providers or caregivers overall," Bischoff says. "The study looked at the release of the influenza virus. We did not look at the transmission patterns. We need to take a further step to find out how influenza is transmitted and what we can do to prevent it."
The study examined 94 patients at Wake Forest Baptist who were screened for influenza symptoms during the 2010-2011 flu season. Nasal swabs were taken, and air samples were obtained from within one foot, three feet and six feet of patients during routine care.
Of the 94 patients, 61 tested positive for the flu virus and 26 released influenza into the air. Five of the patients emitted up to 32 times more virus than the others. Those patients also reported a greater severity of illness.
Bischoff says researchers could not find a way to proactively identify the super emitters. "We collected a lot of data from these individuals and we looked into that, but it was a pilot study so we had a very limited amount of participants," he says.
"So, we tested pretty much everything that we collected from them: from vaccinations to other medical conditions they may have had to age-related factors. Nothing could be matched, but that doesn't mean there couldn't be a link between some of these factors and the super emitters' status by itself. Next would be to look at that in a larger study overcoming the limitation of the pilot study."
"If we can identify them we can implement some preventive measures, be it face masks or anything else we can come up with to protect any caregivers that come into close contact with them."
It is generally believed that the flu virus spreads mostly through large particles emitted within three to six feet of the infected person. As a result, existing infection-control efforts for bedside providers have required the use of fitted respirators during bronchoscopies, intubations, cardiopulmonary resuscitation, and other aerosol-generating procedures.
However, Bischoff says that most of the influenza virus in air samples collected for the study was found in small particles during routine care up to six feet from the patient's head. Those small particles float in the air for hours and can travel relatively long distances, and can more easily penetrate non-fitted protective masks.
"Everybody emitted the virus up to six feet from the patient's bed. It was pretty much at the end of the patient bed when you stood in front of it," Bischoff says.
This article appears in the January/February 2013 issue of HealthLeaders magazine.
In our October Intelligence Report, 19% of leaders said that they still need to pull 11% or more out of their operating budget. When making budget cuts, especially deep cuts, what can the C-suite do to avoid harm to quality care and staff morale?
Terrie P. Sterling
Executive vice president and COO
Our Lady of the Lake Regional Medical Center
Baton Rouge, La.
The first thing you already should have in place is a good communication channel. We have two strategies that we use a lot. One is town hall forums, face to face with an executive. We developed a script in those town hall meetings to ensure that specific topics are discussed. Every year, as we have seen it coming, we have talked about everything from value-based purchasing to changing reimbursements to the impact of the current climate. It sets the tone and informs your staff in real time about what is going on through true communication and sharing.
Second, we have a controlled blog that has an online Q&A with me. For example, as we manage labor productivity and overtime, we talked about Medicaid cuts and the reasons why we have to review labor productivity to get to better, lower benchmarks. And as we are managing overtime, we talked about every department being a target.
Establishing trust and communication long before you need it in difficult times is what you have to do; be transparent and honest. I expect to be able to explain to our 5,000 team members what we are doing in simple terms and our rationale and how it fits our values and how we are going to do it. Thus far we have been able to hold to those principles.
Michael D. Williams
President and CEO
Community Hospital Corporation,
Plano, Texas
So many folks say if one hospital has X number of FTEs per adjusted occupied bed, then another hospital can have the same. That is really not true. It needs to be hospital specific relative to what areas have the opportunities for improvement in process, maintenance, or clinical outcomes and a reduction in costs.
Second, any time there is any level of reduction in an organization, it is so important—maybe the most important factor—to be transparent with the medical staff and the community and the hospital employee population about why this reduction is necessary.
Along the way, celebrate success. When those goals are met, in some fashion it is important to acknowledge the role that the staff has had in achieving the results. To have some type of low-key celebration or whatever is appropriate that says, "We are in this together, we recognize the contributions you have made, now let's celebrate this success."
Also, you have to take the time and not just say "We had a bad month and so consequently we are going to have to cut something," but what are the trends in that particular institution that say we have to do something differently? Is it reaction to something happening in the industry? Or is it specific to the strategic financial plan of the organization that is being looked at?
Chris D. Van Gorder
President and CEO
Scripps Health
San Diego
On budget cuts in a changing landscape: It's hard to know how much needs to be pulled out of operating budgets yet, and it will be an issue dictated by federal, state, and local reimbursement cuts and competitive issues. I think many organizations will need to reduce their operating budgets between 10% and 20%—some maybe even more.
On the need for transparency: It's important to be open and transparent with employees about these issues and to engage them in the process of reducing costs. It's also critical that physicians be engaged in the process with management. Everyone wants a successful organization and wants to continue the mission so it's critical to engage everyone in the process. We have to do everything we can to protect jobs right now.
Why would any employee help to reduce costs or engage in the process if that means they will lose their own job?
On morale and displaced employees: We place any employee impacted by a position elimination into a career resource center. While we can't always promise the same job or the same work location, we can help an impacted employee find another position in the organization. The key to maintaining employee morale is to do everything we can to retain jobs while we design new work processes that will be more efficient, eliminate waste in operations, and restrain hiring so we have positions in which to place loyal Scripps employees who have their jobs impacted by these changes.
John R. Sigsbury
President and CEO
Emanuel Medical Center
Turlock, Calif.
We are going through some of this right now. The sentiment is that you have to really pull out of the management staff before or during any other cuts you make in the rank and file. A lot of the mistakes that organizations make and the misread they have with culture in their organizations is you have to put everybody on the same plane.
For the cuts, 5% is a great target. The pain you go through in the organization isn't worth anything less than that. In terms of quality care, you have to rely on the people at the bedside. If you haven't engaged them in a conversation and you haven't explained the realities, you are in big trouble. You have to look at the patient types, the complexity of care, and you have to understand what the needs of the caregivers are in providing that bedside support.
You have to make sure that every day on every shift those issues are being covered. Then management that remains has to be very visible with patients. They have to engage patients. And you have to make adjustments as you get feedback from patients.
The magnitude of the cost cutting that we need to do requires us to look at all the relationships in the organization, and our medical staff is a key player in maintaining the standard of care. No cost cutting would be effective without the support of the medical staff.
Reprint HLR0213-1
This article appears in the January/February 2013 issue of HealthLeaders magazine.
A Congressional Budget Office analysis released this week lops $107 billion from the cost of eliminating the Sustainable Growth Rate funding formula, and that new estimate has resuscitated efforts by some in Congress and the physicians' lobby to repeal the reviled but unenforced mandate.
The new projection, found on page 31 of the CBO's 77-page Budget and Economic Outlook: Fiscal Years 2013 to 2023, explains that repealing the SGR would cost $138 billion over the next 10 years—significantly less than the $248 billion priced in previous estimates. CBO attributed the lower cost to a decline in the rate of Medicare spending growth when compared with historic trends, and lowered estimates for spending for physician services.
Although the SGR has been around since 1997, the reimbursement cuts under the formula have never taken effect thanks, to the repeated interventions of Congress at the behest of physicians.
Most recently, SGR cuts of nearly 30% were scheduled to take effect on Jan. 1 to account for years of "kick the can" delays of smaller, incremental annual cuts. However, as it has done every year since the SGR went into effect, Congress on Jan. 1, 2013 stepped in to delay the cuts until Jan. 1, 2014.
The American Medical Association and other physicians' professional associations, weary of the annual Congressional sideshows and last minute repeals of looming SGR cuts, have for years made repeal of the mandate a top legislative priority. This week they were quick to line up behind the new CBO projections.
"The new cost of ending this problem is $138 billion, more than $100 billion below the previous projection and less than the $146 billion Congress has already spent on short-term patches to the SGR over the past decade," AMA President Jeremy Lazarus, MD, said in prepared remarks.
Anders M. Gilberg, senior vice president, government affairs, with the Medical Group Management Association, says the new estimates are a game changer that could finally lead to the permanent repeal of the decade-old SGR after years of stop-gap fixes and toothless threats of Medicare reimbursement cuts.
"That is a significant shock to the environment in which we were having this discussion," Gilberg told HealthLeaders Media. "In Congress it is hard to say you are going to take a bill, drop it in and it is going to pass. But the climate for something like this has improved significantly because the impediment to passing this hasn't been the substance because there is near universal support for this. It was the cost. So, it's still a lot of money but that CBO report on is a significant catalyst. I don't think anyone has ever seen a drop like that—of $100 billion."
On Wednesday, U.S. Reps. Allyson Schwartz (D-PA) and Joe Heck, DO (R-NV) filed the Medicare Physician Payment Innovation Act to repeal the SGR and to create what they called "a clear path toward comprehensive reforms of Medicare payment and delivery systems."
"There is no single greater threat to the long-term solvency of Medicare and seniors access to healthcare than the broken Medicare payment system, or SGR. Each year, healthcare practitioners are faced with devastating cuts that could make it nearly impossible for them to continue providing care for Medicare beneficiaries. And each year Congress has avoided coming up with a serious solution to this problem," Heck said in a media release touting the bill.
"This bill is that solution. Our seniors and their healthcare providers deserve a program that is immune to Congressional dysfunction and that would provide stability by replacing the currently flawed formula with a system that promotes efficient, cost-effective healthcare."
The bill would:
Permanently repeal the SGR formula.
Provide annual positive payment updates for all physicians for four years.
Ensure access to preventive care, care coordination, and primary care services through increased payment updates for those services.
Aggressively test and evaluate new payment and delivery models.
Identify payment models to provide options for providers across medical specialties, practice types, and geographic regions.
Stabilize payment rates for providers who demonstrate a commitment to quality and efficiency within a fee-for-service model.
Ensure long-term stability in the Medicare physician payment system through predictable updates that accurately reflect the cost and value of providing health care services in coordinated care models.
The repeal bill has the support of key physicians associations, including the AMA and the American Academy of Family Physicians.
"By permanently repealing the SGR formula, we end repeated threats to physicians' ability to provide care for Medicare beneficiaries," Jeff Cain, MD, president of the AAFP said in a media release.
"Equally important, this bill paves the way for innovations such as the patient-centered medical home. In doing so, it moves toward a system that improves quality while it restrains the growth in costs. We need to make sure our patients can get the right care from the right health care professional at the right time."
Richard "Buz" Cooper, MD, director of the Center for the Future of the Healthcare Workforce at New York Institute of Technology and a healthcare economist at the University of Pennsylvania, calls the new estimates and the legislation to repeal the SGR "an essential step." However, he urged caution.
"It will be important to remember why there was a problem in the first place," Cooper wrote in an email exchange with HealthLeaders Media. "The SGR was predicated on the belief that the growth of medical spending could be held to the overall U.S. economic growth rate. This was applied specifically to the physician portion, but there is no reason to think that it would be different from the rest. And after 15 years, we see the result of faulty logic. It will be important not to engraft that logic into current reform efforts. Healthcare spending grows more rapidly than the economy overall. To plan differently will be to repeat the pain caused by the SGR."
Gilberg says that even with the lowered cost projections, finding $138 billion in the midst of ongoing budget battles would be no small feat. "The impetus exists in a larger package, not in isolation," he says.
"Will $138 billion materialize out of nowhere in this environment to pass this bill? No. But if there is growing support for repealing SGR along the lines of what was outlined here, then could it realistically exist in some larger package? I certainly wouldn't write it off. I think it is serious. That CBO score is a pretty big catalyst that didn't exist ever before."
It's easy for federal officials to acknowledge with great fanfare the special concerns of rural healthcare stakeholders. Making good on promises to address those concerns, however, is never guaranteed.
Still, it was hard not to be impressed this week after listening in on pledges made to rural healthcare stakeholders during a teleconference that included Health and Human Services Secretary Kathleen Sebelius, Agriculture Secretary Tom Vilsack, and Patrick Conway, MD, CMO and director of clinical standards and quality at the Centers for Medicare & Medicaid Services.
The three senior officials detailed Medicare reforms that they determined were obsolete or excessively burdensome on hospitals and healthcare providers. Eliminating those bewhiskered regulations, by CMS estimates, could save nearly $676 million annually—$3.4 billion over five years—and would greatly ease regulatory and staffing burdens for rural providers in particular.
Conway ran through a list of already implemented reforms and proposed reforms that:
Eliminate a requirement that critical access hospitals provide diagnostic, therapeutic, laboratory, radiology, and emergency room services directly by staff. Those services can now be contracted out, Conway says, "to provide high-quality care and better access to care when staffing becomes a challenge."
Eliminate a requirement that critical access hospitals, rural health clinics, and federally qualified health centers have a physician on site at least biweekly to provide medical direction.
"Many physicians in extremely remote areas found it difficult to comply with this biweekly schedule. Specifying a specific timeframe for a physician to visit a rural facility does not ensure better healthcare," Conway says. "With the development of telemedicine a physician should have the flexibility to utilize a variety of options to provide medical direction."
Allow registered dieticians to order patient diets directly rather than relying on approval from clinicians. "As a practicing hospital medicine physician I have personally—including while working in a hospital this past weekend—seen the potential for medical errors if physicians misunderstand dieticians' recommendations," Conway says.
"This will provide hospitals with the flexibility to allow dieticians to practice to the full extent of their scope of practice and enter orders directly."
Allow rural hospitals with swing beds to be surveyed when the hospital is surveyed, rather than being surveyed separately.
No longer require for one director of outpatient services. "Each hospital can determine the most efficient and effective way to manage outpatients. This change is critical for small, low volume rural hospitals with more limited staff resources," Conway says.
In addition, Conway says the Obama administration has already implemented key reforms that were recommended in May 2012 during the White House Rural Stakeholder meeting.
Those include the final rule of the physician fee schedule, which was amended to allow nurse practitioners and physicians' assistants to order portable X-rays.
"This recognizes the important role these providers play in rural clinics and hospitals and the need for flexibility," Conway says. "Lastly we made changes to the electronic health records incentive payments. We now allow cause to include capital lease costs for the purpose of determining their electronic health records incentive payments."
Vilsack, the former Iowa governor, told the teleconference that the reforms and proposed reforms "reflect an understanding that rural America—and those who serve, live, work, and raise in rural America—is potentially a different place than suburban and urban areas and requires a different thought process as it relates to regulations."
"Providing greater flexibility, expanding the leverage of resources, recognizing the various professions that are engaged in healthcare providing in rural areas from dieticians to physicians' assistants and others, allowing flexibility in outpatient services, recognizing that swing beds in hospitals may need different survey requirements, all of that is reflective of an attitude that we are trying to make life easier and at the same time improve health services," Vilsack says.
Sebelius, the former governor of Kansas, told the teleconference that the reforms are a response to the feedback generated by the White House rural stakeholder meeting last spring.
"We understand that one size doesn't fit all when it comes to healthcare and this reflects that understanding," Sebelius says. "For rural providers, the proposals not only save money, they will help ensure that doctors and nurses have more time to devout to their patients."
Sebelius asked rural providers to help CMS educate the 8.5 million uninsured people in rural America who may be eligible for health insurance under the Affordable Care Act.
"Starting October 1, new health insurance marketplaces open for enrollment. Expanding access isn't enough. We need your help to reach out to your communities to get people signed up," she says. "We know that a lot of people are so used to being locked out or priced out of the market, they don't even think about coverage anymore."
"There are also a lot of uninsured young people who may not understand why health insurance is important for their future," she says.
"Reaching them is about more than ensuring that everyone has a chance to get healthy and get the care they need. It's also about reducing the burden of uncompensated care and making sure that fewer people show up in our emergency rooms with illnesses that could have been prevented. The more successful we are in getting people enrolled the more we will reduce the strain on providers and hospitals across the country."
So what can the rest of us in "the flyover" make of all of this outreach?
It appears to be well-intentioned and sincere. Why would it be otherwise? Sebelius and Vilsack are former governors of largely rural Midwestern states, and they know firsthand the lay of the land.
And fortunately, improving quality and access for rural healthcare appears to be one issue that Republicans and Democrats embrace enthusiastically. They understand that healthcare providers fill critical access needs, create jobs, and generate economic activity.
CMS says it wants feedback from rural providers on the proposed rules changes during the 60-day public comment period. Now is the chance for those providers to step up and help shape federal rural healthcare policy.
It's easy to get cynical about all of this and just assume that the Obama administration is just playing politics or that the federal government will ignore recommendations and screw things up. Admittedly, federal healthcare policy can be hard to defend.
It's a lot tougher, however, to weigh in with thoughtful suggestions about how we can improve healthcare delivery in rural America. The stakes in this game are too high to sit on the sidelines. Make sure that CMS hears from you.
The federal government's long-delayed rollout this month of the "Sunshine Act" mandate to disclose financial relationships between drug and device manufacturers and healthcare providers is getting a mostly guarded reception from key groups that will be affected by it.
For the most part, when it came to commenting on the 287-page final rule, those lobbying groups and professional associations avoided trash talking the final rule.
Instead, they followed the cautious lead of PhRMA Senior Vice President Matthew Bennett, who says the drug makers' lobby "is currently reviewing the final regulation of the Physician Payments Sunshine Act and looks forward to seeing how CMS addressed key concerns that were previously raised."
"PhRMA remains committed to the principles of the Sunshine Act and continues to believe that careful implementation is essential to ensuring that Sunshine fulfills its objective of usable, transparent, and understandable sharing of information," Bennett said in prepared remarks.
American Medical Association President Jeremy A. Lazarus, MD, said the nation's largest physicians' association "will carefully review the new Physician Payment Sunshine Act rule."
"Physicians' relationships with the pharmaceutical industry should be transparent and focused on benefits to patients," Lazarus said in prepared remarks. "Our feedback during this rulemaking process was aimed at ensuring the new registry will provide a meaningful picture of physician-industry interactions and give physicians an easy way to correct any inaccuracies. As the rule is implemented, we will work to make sure physicians have up-to-date information about the new reporting process."
The "National Physician Payment Transparency Program: Open Payments"—was mandated under the Affordable Care Act to improve transparency in the healthcare market. The final rule was scheduled to be published 15 months ago and federal officials this week offered no explanation for the late issue, which comes three months after the November election.
"You should know when your doctor has a financial relationship with the companies that manufacture or supply the medicines or medical devices you may need," Peter Budetti, MD, deputy administrator for Program Integrity at the Centers for Medicare and Medicaid Services, said in a media release. "Disclosure of these relationships allows patients to have more informed discussions with their doctors."
The rule requires makers of drugs, devices, medical supplies, and biotech firms covered by Medicare, Medicaid, or the Children's Health Insurance Program to disclose payments or other "transfers of value" to doctors and teaching hospitals.
It also requires manufacturers and group purchasing organizations to disclose to CMS physician ownership or investment interests. CMS will post the data on a public website next year. Budetti says more transparency will reduce the potential for conflicts of interest that physicians or teaching hospitals face because of their relationships with manufacturers.
Data collection will begin on Aug. 1, 2013. Manufacturers and GPOs will report the data for August through December of 2013 to CMS by March 31, 2014 and CMS will make the data public by Sept. 30, 2014.
Physicians, teaching hospitals, manufacturers and GPOs may review and correct reported information before its publication. CMS is developing an electronic system to facilitate the reporting process.
Reaction to the final rule was mixed at Public Citizen. Michael A. Carome, MD, deputy director of the Health Research Group at the public advocacy group said it "strongly support[s] this new rule and [is] disappointed that it took CMS so long to issue it in final form, now more than a year after the statutory deadline for issuing the final rule has passed."
"We are further disappointed that the date for compliance with the requirements of the new rule are also significantly delayed: initial reports from manufacturers are not due until March 31, 2013 (covering a reporting period that begins in August 2013 and end December 2013) and the initial posting of reported data on a publicly available website will not occur until September 30, 2014. Such delays are unnecessarily long," Carome wrote in an email exchange with HealthLeaders Media.
However, Carome says, the rule is needed because "financial relationships between physicians and industry can subtly and not so subtly influence the opinions and recommendations of healthcare providers in a variety of settings."
"Such payments and other transfers of value to physicians from drug and medical device companies are intended to influence physician prescribing behavior in order to benefit the companies' bottom line and do not serve the best interests of patients," he says.
"Ideally, many forms of such payment would not be permitted, and indeed, some medical schools have taken steps to restrict such payments to their faculty members. Neither CMS, nor any other agency, has the authority to ban such payments, and it's unlikely Congress would pass a law prohibiting them."
Mary R. Grealy, however, president of the Healthcare Leadership Council, whose members include drug and device makers and biotech firms, said in a statement that "it is important that the public have a clear understanding of the nature of physician-industry interactions."
"The overwhelming majority of these collaborations are focused on developing safer and more effective medical innovations and helping physicians better understand how to utilize new medications and technologies for the benefit of their patients," Grealy said.
"And, in fact, physicians and medical innovation companies alike regularly demonstrate their commitment to transparency, researcher independence and a patient-centered focus."
Blair Childs, a senior vice president with the group purchasing organization Premier, was one of the few with skin in the game to offer a full-throated endorsement of the final rule. He said it "brings sunlight to an area where consumer confidence has been undermined by conflicts of interest."
"With these new requirements, patients will have the information so they can feel more confident that the treatments they receive are based on evidence-based care and their physicians' best judgment, rather than inappropriately influenced by financial relationships," Childs said in prepared remarks.
"We know that even small gifts can be associated with physicians' positive attitudes toward sales representatives, and can increase their rate of administering particular drugs or devices. These regulations are a long-overdue step toward greater transparency in healthcare."
Despite the delays, Carome says that once the rule is implemented it should bring greater transparency to the financial relationships between physicians and the drug and medical device industries.
"Such transparency will allow consumer advocates, patients and other stakeholders to better assess the potential influence such relationships have in (a) the development of recommendations by the advisory committees of the FDA, CMS and other regulatory agencies; (b) the development of clinical practice guidelines by professional associations and government agencies; (c) the opinions expressed by medical school faculty and attending physicians during graduate medical education training; and (d) the medical decision making of healthcare providers in the context of clinical care."
Ultimately, Carome says, the worth of the final rule will be determined by how well companies comply with reporting requirements, how vigorously CMS enforces the rule, and how user-friendly and accessible the database will be for the general public.
"Given the delays in implementation, we won't be able to assess the impact of the rule for at least a few years," he says.
Prime Healthcare Services to Buy Hospitals in NJ, KS
Ontario, CA-based Prime Healthcare Services has announced two separate acquisitions of financially troubled hospitals in New Jersey and Kansas. Financial terms of the deals were not disclosed.
In Kansas, Prime has agreed to buy Providence Medical Center in Kansas City, and Saint John Hospital in Leavenworth, from SCL Health System, a faith-based, nonprofit system. Under the terms of the deal, Prime will make "significant investments" to financially stabilize the hospitals and allow them to maintain current levels of charity care.
The hospitals will maintain their current acute care and emergency department services for at least five years, invest $10 million toward capital improvements, and employment offers will be extended to "substantially all employees."
The deal calls for Prime to hire all current St. Mary's Hospital employees. Prime will invest $30 million in capital improvements over the next five years beyond routine replacements and additions. Prime will maintain a local governing board. The APA also calls for Prime to assume the existing Collective Bargaining Agreement with JNESO which represents nurses and clinical employees.
"From the financial support to the terms of the APA, it is clear that Prime offers the best way forward for St. Mary's," Edward J. Condit, St. Mary's president/CEO, said in prepared remarks. "Prime has given St. Mary's an excellent opportunity to not only be viable, but to grow and prosper. We must proceed as quickly as possible to finalize this sale in order to protect and secure the healthcare needs of the Passaic community."
"We are appreciative of the wonderful legacy the Sisters of Charity of Leavenworth leave these hospitals and our communities," Michael Parra, MD, a board member for Providence Medical Center and Saint John Hospital, said in prepared remarks. "Yet, now is the time to embrace a new direction and Prime Healthcare Services has a strong reputation for quality, excellence and growth."
In New Jersey, Prime said it will keep the St. Mary's Hospital in Passaic open as an acute care hospital for at least five years and it will continue to operate the hospital in a manner that is consistent with its ethical and religious directives. That includes adopting charity care policies which are at least as generous as those currently used by the hospital.
Tenet's San Ramon RMC in Joint Venture with John Muir Health
Dallas-based Tenet Healthcare Corporation and Walnut Creek, CA-based John Muir Health have announced the creation of a joint venture partnership between San Ramon Regional Medical Center, a 123-bed acute care hospital in San Ramon, CA and John Muir Health. John Muir Health is an integrated system of doctors, hospitals and other healthcare services in the San Francisco Bay area.
Under the deal, John Muir Health will spend $100 million to acquire a 49% ownership interest in San Ramon RMC. The two organizations will expand and improve the efficiency and coordination of care in the TriValley area and nearby communities, including San Ramon.
The transaction is expected to close by March 31. John Muir Health and Tenet will also jointly develop outpatient services, such as Ambulatory Care Centers and other projects to be determined, in the Tri-Valley area and nearby communities, including San Ramon. John Muir Health's existing hospitals, facilities and other assets are not included in the partnership agreement.
"In the midst of healthcare reform and a very competitive local environment, we will offer better, more accessible and integrated care together than we can apart. Together, we will pursue new and innovative ways to improve patient care, access to services and affordability," Cal Knight, president/CEO of John Muir Health, said in prepared remarks.
MA's Jordon Health Systems to Join Beth Israel Deaconess
Plymouth, MA-based Jordan Health Systems, Inc. has signed a letter of intent to become part of Boston-based Beth Israel Deaconess Medical Center. The two systems are expected to finalize the deal later this year, under which Jordan Health Systems would become part of Beth Israel Deaconess Medical Center, but retain local management and board governance.
"For more than 100 years, Jordan Hospital has been a vital part of the communities we serve," Jordan Board of Trustees Chair Clark Hinkley, said in prepared remarks.
"This decision was not just about finances. It was about finding a healthcare affiliation that gives us the scale we need to compete in an ever-changing environment and ensure that local care will stay just that...local. By joining BIDMC, we will gain long-term financial stability without sacrificing who we are and what we believe in."
The affiliation will align with the resources of Harvard Medical Faculty Physicians at BIDMC. Also, under terms of the agreement, JHSI would continue to maintain its not-for-profit status.
Boston-based Steward Health Care System posted an operating loss of $14.6 million in 2011 and ran a total deficit of $56.9 million for the year, according to a report from Massachusetts Attorney General Martha Coakley's office.
However, the for-profit system, which is owned by the private equity firm Cerberus Capital Management, obeyed mandates set down by state regulators before they approved Steward's November 2010 acquisition of the six hospitals owned by non-profit Caritas Christi Health Care, according to the 70-page compliance monitoring report.
State monitors do not appear to be overly concerned about the red ink in Steward's first year of operation.
"The review reinforces previous findings that Steward acquired community hospitals in deteriorating financial condition and with significant deferred capital investment needs," the report says.
"The first year review indicates that Steward is striving to meet its stated goal of keeping more care in the community. One year of performance information is not enough to predict how Steward will perform in future years."
The AG's review also found that:
Even though outpatient volume generally increased, profits overall declined from FY10 because expenses outpaced revenues.
Steward spent heavily on capital improvements and hospital and physician acquisitions. To support this spending, the system supplemented the initial Cerberus investment of $246 million with a revolving bank line of credit, under which it had borrowed $96.3 million as of the close of FY11.
Steward's financial condition, even more so than Caritas's, is complicated by special expenses such as necessary contributions to its significantly underfunded pensions and its commitments in connection with its provider acquisitions. It will be important to monitor how these expenses affect Steward's long-term financial performance.
Healthcare economist Adam Powell, president of Boston-based Payer+Provider Syndicate, says the first-year losses were anticipated.
"Steward Health Care has built its business model around acquiring financially struggling hospitals. Substantial changes are needed to bolster the financial strength of the hospitals that it has acquired. While Steward is in the process of weaving its newly acquired hospitals into a system that can deliver value in part through economies of scale, it is still a work in progress," Powell wrote in an email exchange with HealthLeaders Media.
"Building shared assets, like the centralized ICU command center mentioned in Atul Gawande's article in The New Yorker, requires substantial capital expenditures. These shared assets have high upfront costs, but also have the promise of boosting profitability in the future. It is impossible to change processes or culture on a dime and some investments will take time to fully implement."
Because Steward is focusing on value, Powell says, it can only deliver on that promise by efficiently delivering care at a lower price than its competitors.
"This market positioning limits Steward's ability to improve its profitability by raising prices, and instead requires it to work on reducing costs and increasing volume. Neither of these changes can happen overnight," he says.
As Steward Health Care is still in the early stages of its development, Coakley is prudent in her assertion that it is too soon to draw any conclusions about Steward's future financial performance.
