As the campaign rhetoric cools and the Patient Protection and Affordable Care Act settles in, there is speculation that governors who've been adamantly resistant to Medicaid expansion under the law's sweeping reforms, may find a way to drop their objections.
"Fall rhetoric does not always match with winter activity," says Ceci Connolly, managing director of the Health Research Institute at PwC. "I would not be surprised if we see more states now taking a second look at the possible Medicaid expansion, in part, because they have been hearing from providers in their states who are worried about uncompensated care costs."
The Supreme Court in its landmark 5-4 ruling on June 28 that upheld key provisions of PPACA also struck down as overly coercive the federal government's demands that states expand their Medicaid rolls.
Resistance to expanding the rolls, particularly among Republican governors, reached a fevered pitch in July when Texas Gov. Rick Perry sent a letter to Health and Human Services Secretary Kathleen Sebelius. Perry, who was running for president at the time, explained that the Lone Star State stood "proudly with the growing chorus of governors who reject the PPACA power grab.... Neither a state exchange nor the expansion of Medicaid under the Orwellian named PPACA would result in better patient protection or in more affordable care."
A lot has changed since then. President Obama was re-elected in a campaign that featured sharp criticisms of "Obamacare" from Republican challenger Mitt Romney, who vowed to repeal the law if elected. He was not elected.
And now, the states that decline to expand their Medicaid rolls risk losing some of the estimated $642 billion in direct federal aid that will be made available over the next decade.
Paul Keckley, executive director of the Deloitte Center for Health Solutions, says polls show that attitudes have calcified over the last two years since shrieking protesters disrupted town hall meetings across the nation after PPACA was signed into law.
Since then the America public has held firm in its views of Obamacare. "About one-third thinks it's the second coming and one-third thinks it is the apocalypse and one-third doesn't care," he says.
Obamacare supporters in Congress were buoyed by their strong performance in last week's elections and are expected to be more aggressive in promoting and defending the plan over the next two years.<
"The group that says it is important is dominated by women and urban professionals and lower-socio economic and labor groups and their numbers are big," Keckley says. "They took most of these races. They helped the Democrats increase their Senate cohort. You are going to see more support and proactive selling of health reform over the next couple of years. Its profile will be substantially higher than it has been in the last year."
Keckley says the Supreme Court ruling on the Medicaid expansion "actually forces into this discussion of Medicaid the notion of some level of flexibility. Getting something done maybe better than nothing, but every state is going to negotiate a different deal."
Keckley sees "two dynamics" playing out in the Medicaid expansion talks, especially as they relate to the eligibility threshold of 138% of the federal poverty level for new enrollees.
"One is there is an expectation that (the Centers for Medicare and Medicaid Services) will negotiate with the states and perhaps there will be some concessions made around the 138% threshold, with some states maybe going up to 100%," he says.
"Because of the Supreme Court's ruling there is a lot of deal making that will be made between CMS and the states. People have pretty much set aside 16 million new enrollees, which was the original number. But the thought now is we might pick up between 9 million and 12 million."
Keckley says the second dynamic surrounds states' negotiations with commercial plans to manage these expanded populations. "I don't think the line in the sand with the feds and the states is 'go' or 'no go,'" he says. "The line is 'we will go some of the way, you've got to come some of the way.' Once they reach some kind of deal you look to the commercial plans and say 'this is the deal we have cut and now we want you to bid on managing that.'"
PwC's Connolly says the Supreme Court's ruling that effectively makes the Medicaid expansion optional should help with the negotiations between the federal government and states. In addition, she says innovative states already have the ability to request waivers for their Medicaid programs.
"If there was a particular state that wanted to try something at a slightly different level they would probably start with attempting a waiver request first," she says.
On a related topic, the nation's safety net hospitals have complained that a failure to expand the Medicaid population could saddle them with $53.3 billion in uncompensated care costs over the next seven years. That's because the lower disproportionate share payments that the safety nets agreed to as part of PPACA were supposed to be offset by expanded Medicaid coverage.
With lawmakers now focused on the so-called "fiscal cliff," Connolly says safety net hospitals should brace themselves for renewed scrutiny of the disproportionate share payments. "We are about to get into a season where people are going to be scouring for every nickel and dime they can find," she says. "The safety net hospitals have a reason to be concerned."
Keckley thinks that DSH payments may not disappear quite as quickly as was originally forecasted, "but there will be offsetting that much more pressure through the back door."
"The front door is reimbursement and the feds will probably get a few of those dollars back, especially for safety net hospitals in light of the fact that not as many people are going to be insured through Medicaid," he says.
"But on the back end I suspect CMS will be more aggressive on fraud and necessary care and accelerate these pilots so they can get the money back in terms of penalties or that they simply don't have to payout as much because of under performers."
"The mood at CMS is that fraud is under-captured and they haven't figured out how to deal with it," he says. "They aren't going to do pay and chase anymore and they think this necessary care issue is big. That there is so much being done that the evidence says is unnecessary that they will have reason to go to the providers and the plans that have allowed it and say 'we need a give back. You can't get away with this anymore."
UPDATED Nov. 13: The deadline for states to submit blueprints for state-based exchanges has been extended to Dec. 14. The deadline for a state to declare it wants to pursue a State Partnership Exchange has moved to Friday, Feb. 15, 2013. The deadline for states to declare whether they plan run a state-based exchange remains Friday, Nov. 16. View details.
The re-election on Tuesday of President Barack Obama removed any lingering doubts about the staying power of the Patient Protection and Affordable Care Act.
With that question settled, states and the federal government are now focusing their attentions on the complex array of programs, policies, and deadlines that will have to be crafted, approved, tweaked, implemented and met before "Obamacare" begins in earnest on Jan. 1, 2014.
The most pressing deadline falls Nov. 16, when states are supposed to submit a "blueprint" of their proposed health insurance exchanges to the Department of Health and Human Services. By some estimates only about 15 states are expected to provide detailed plans for their exchanges by next week, despite having two years to prepare. HHS has said it will operate exchanges in states that cannot or will not do it for themselves but it's not immediately clear how many states that will involve.
"The conclusion we are reaching at this point is probably a couple dozen states will have a significant federal presence," Ceci Connolly, says managing director of the Health Research Institute at PwC.
"Some of them may just defer to the feds entirely and have a federal exchange. Many will have what is being dubbed a partnership model where the feds could be doing a lot of the back office work—technology, infrastructure, records—and the state could handle more of the direct engagement with their citizens, perhaps some of the work around the provider networks in that state that they have a better feel for and have some views on."
As for the federal government's own plans to craft back-up exchanges for states that can't do it, Connolly says "we don't know for certain what progress has been made on the federal level because it has been somewhat quiet about that. There is a ton to be done on the exchanges in a very short period of time."
"I have a suspicion that in the next week or two we will see a flurry of announcements. We will see more regulations being released, more guidance," she says. "There is a certainty in Washington during an election year that from Labor Day to Election Day things just quiet down, and so it's the natural flow of things in this town that post-election you get a flurry of activity. If we were to wait until the end of November, we will have a clearer picture of where we stand."
Paul Keckley, executive director of the Deloitte Center for Health Solutions, says a federal backstop for exchanges "may not have all the capabilities in place to manage enrollment and eligibility and capture people, and they have to have that capability in place by Oct. 1 2013."
"The federal government has a lot of catching up to do," he says. "The reality is 32 to 35 states will end up in a federal partnership and that is many more than originally thought. We may have seven or eight states that simply say ‘I want the federal government to do it for me.' The federal government is going to be ramping up its efforts to get ready because these exchange blueprints are going to come in and they are going to realize they have a lot to do for the states."
Connolly and Keckley say there is no way of knowing what these exchanges will look like or how much they will vary from state to state.
"You've got 30 Republican governors now and most of the Red persuasion will move towards that active shopper model," Keckley says. "It's all over the place on the other states, but the tendency in most states is to allow multiple plans to participate if they hit the metrics on essential health benefits and they can comply with enrollment and eligibility standards."
"I think the feds will relax some of those requirements so it is easier for states to see that plans are stepping up and putting products on the exchange. The worst outcome is if this effort is made but the commercial plans say ‘I'll pass.'"
Connolly predicts that some of the biggest state-to-state variances will center on what benefits are offered based on cultural and regional population health issues.
"There are different demographics in different states," she says. "I could see in Arizona or Florida you may want products geared toward the pre-retiree age group. If you are in Texas or California you might want to think more about an immigrant population."
"Once you begin to understand the specifics of an incoming group of new customers that is when you tailor the products in certain ways, you communicate and educate in different ways, and you help the customers navigate the system. They will require much more tailored, targeted activities by the healthcare sector than it has been forced to do in the past."
The so-called fiscal cliff, which Congress left unresolved, could prove problematic for exchanges. Lawmakers in the coming weeks and months will be looking everywhere for savings, and PwC estimates that delaying implementation of the exchanges for at least one year could save the federal government an estimated $23 billion.
"There will be some pressure on the Obama Administration to consider delay, either from players that are not yet prepared and want more time to prepare or from people that are focused on the federal deficit," Connolly says.
"We know that delay accrues some short-term budget savings because you have one year's worth of subsidies that won't go out the door. There are going to be a lot of different ideas kicked around in the next couple of months about where to save some money, so it's going to be under discussion."
Connolly says delays would not come without a downside.
"The administration will be reluctant to delay because so much work has gone into this and they're in a sense it wouldn't be fair to the insurance companies that have been working hard to compete on the exchanges and it wouldn't be fair to the states that have moved ahead putting everything in place. But that idea is going to be floated," she says.
The exchanges are supposed to generate about $55 billion in premiums in 2014, with most of that money coming from federal subsidies to help consumers offset costs.
"In that first year nine of 10 people shopping on the exchange will be shopping with a subsidy and that is revenue for insurance companies," Connolly says. "Also it's important money for providers because hospitals and large health systems that have big uncompensated care burdens want to transition those patients into coverage. So while there will be voices in support of delay there will be a number of voices on the other side."
Regular readers at HealthLeaders Media will note that we general avoid political stories and commentary related to healthcare.
There are several reasons why, not the least of which is the saturated political coverage elsewhere on the Internet. Most importantly, however, is that people who work in healthcare and those of us who cover it understand that economics, not politics, is the primary force behind the reforms we are fumbling through.
Regardless of who had won Tuesday's presidential election, or which party controls Congress and state governments, the growing cost of healthcare, at two or three times the rate of inflation, requires that our elected leaders in both parties at state and federal levels help the rest of us to keep healthcare affordable.
So, what does the re-election of President Obama mean for healthcare reform? For the most part, it means a continuation and entrenchment of the Patient Protection and Affordable Care Act, aka "Obamacare."
Love it or hate it, this landmark expansion of healthcare coverage has proven itself as sturdy as a supersized bariatric chair.
Since it was passed in March 2010, the PPACA has survived town hall shriek-a-thons, the rise of the Tea Party, emphatic and bitter Republican opposition in Congress, the 2010 mid-term elections that became a referendum on the PPACA, the attempts in Congress to repeal it that followed, an unsuccessful Supreme Court challenge last June, and vows over the summer and fall by just about every Republican presidential and Congressional candidate to repeal it if elected.
And yet, the PPACA remains standing, even as many of its political foes have fallen by the wayside.
Regardless of whether or not you support it, "Obamacare" is the law of the land and it isn't going away. Most people who work in healthcare have already accepted that reality.
Still, there remain nettlesome issues that will likely soon become political flashpoints that, depending upon a state's "Red" or "Blue" status, could leave healthcare providers in a lurch.
One big concern centers on states' efforts and their enthusiasm toward constructing health insurance exchanges that will allow consumers and small businesses to buy health insurance on the open market. The degree to which states are ready to implement these exchanges, which go into effect in 2014, varies wildly.
In May the Kaiser Family Foundation reported that 15 states would develop their own exchanges. Another Seven states said they had no plans to create exchanges, which means that the Department of Health and Human Services will step in to run the exchanges. Because a federal fallback plan is in place, the political intransigence of individual states should not be an insurmountable obstacle for the exchanges to operate.
The more pressing problem is with Medicaid.
Medicaid expansion
While the Supreme Court upheld key pieces of the PPACA in June, the justices struck down as overly coercive the federal government's demands that states expand their Medicaid rolls to millions of Americans who are now uninsured. With the high court's ruling, that expansion now becomes voluntary. At least six states have said they won't extend Medicaid, and another five states have signaled that they may not participate.
If that trend holds true, safety net hospitals estimate that they'll be smacked with about $53.3 billion in uncompensated care costs by 2019. That's because some states won't expand their Medicaid rolls even as the federal government cuts disproportionate share payments to safety nets as part of an agreement etched out in the ACA.
Not unexpectedly, there are signs that the vehement opposition to expanding Medicaid rolls may be cracking. The Wall Street Journal reported in September that several states are looking at a partial expansion of their Medicaid rolls. Expect to read more stories like this in the coming months and years.
Because the individual mandate was upheld by the Supreme Court, Medicaid expansion has become the defining political flash point for Obamacare. In most states the problem will resolve itself as election year rhetoric cools and state-level politicians find themselves staring at the prospect of losing hundreds of millions of dollars in direct federal aid.
In most states, public pressure will mount and opposition will crumble as healthcare providers, advocates and patients bombard the media with heart-wrenching stories about the otherwise preventable pain and suffering inflicted upon their poorest and most vulnerable citizens who can't get Medicaid. Fiscal watchdogs will complain about the money left on the table.
Resistance to Medicaid expansion may hold fast in Texas, Louisiana, and New Jersey, all of which have Republican governors who are expected to consider running for president in 2016.
However, even the most resolute opponent of Obamacare would be hard pressed to reject a windfall of federal dollars, especially as the rest of the nation comes to accept the notion that Obamacare is with us for good.
A federal study estimates that financial incentives tied to physicians' self-referrals for advanced imaging services cost Medicare an additional $109 million in 2010.
For CT services, utilization "more than doubled" with self-referrals, while non-self-referred CTs increased about 30%, the study found.
With the findings, GAO estimated that providers who self-referred ordered about 400,000 more advanced imaging services than they would have if they weren't self-referring, which cost Medicare an additional $109 million in 2010.
"To the extent that these additional referrals were unnecessary, they pose unacceptable risks for beneficiaries, particularly in the case of CT services, which involve the use of ionizing radiation that has been linked to an increased risk of developing cancer," GAO said.
The report got little notice in the media when it was released in the week before the election. However, House and Senate leaders from both parties said in a joint media release that self-referral abuses have to be addressed.
"The results of this report are eye opening," said Sen. Max Baucus, (D-MT), chairman of the Senate Finance Committee. "Self-referrals offer an incentive for providers to order more tests than they would otherwise. It's clear they are driving up costs. Providers' bottom lines shouldn't be getting in the way of their patients' care and best interests."
Sen. Chuck Grassley, (R-IA), the ranking member of the Senate Finance Committee, added that "Medicare payment policy shouldn't incentivize unnecessary tests that drive up costs and even jeopardize the well-being of patients."
"The challenge is to develop a payment system that safeguards beneficiary access to services while preventing self-referrals by physicians who abuse the system," Grassley said.
Rep. Pete Stark, D-CA, ranking Democrat on the House Ways and Means Health Subcommittee, said the report "should serve as a wakeup call to Congress that this is an arena where we can't afford to sit idly by and allow providers to continue these practices."
"It's costing taxpayers millions of dollars, increasing costs on beneficiaries, and exposing patients to radiation that has real health consequences. Once again, we're seeing how money drives behavior," Stark said.
Amy Nordeng, senior counsel in government affairs for the Medical Group Management Association, told HealthLeaders Media there is nothing in the GAO report that would indicate that the increased advanced imaging is inappropriate.
"It might very well be the case that the people who recognize the benefits of advanced imaging decided it just makes more sense to coordinate the care of their patients by having that imaging equipment in their own office or within their group practice," Nordeng says.
"We believe medical group practices are an excellent way for doctors to work together to provide comprehensive coordinated care to their patients. When you have a situation where a primary care physician, a cardiologist and a radiologist form a group practice and have imaging equipment in their practice, it doesn't make sense to say ‘we don't want you to use that imaging' or ‘we are concerned about the use of that imaging.'"
Nordeng says she cannot dispute the methodology of the GAO study. However, she notes that it ends at 2010, when the Centers for Medicare and Medicaid Services began working with providers to recognize efficiencies with multiple procedure payment reductions. In addition, she says the Affordable Care Act has since "locked in place a 75% equipment utilization assumption so reimbursement for all of these services is going down."
"Growth in these services is below the overall Medicare growth. So, while that time period may have reflected certain volume of imaging I don't think that volume will be consistent going forward," she says.
In addition, Nordeng predicts that many of the utilization issues cited in the GAO study will likely disappear as new payment and coordinated care models are rolled out.
"When folks have looked at this issue, they have noted that healthcare is transforming. As we move toward more accountable care-type organizations there will be incentives built into those arrangements to be efficient in the use of imaging," Nordeng says. "So in that sense as the market transforms and the policies transform this will be a non-issue."
"Everyone is interested in coordinated care to the benefit of the patient. To the extent that the payment moves away from fee-for-service, this will not be as big of an issue going forward. If you were to even take that same analysis that GAO did and look at 2011 and 2012 the numbers would be different."
In the meantime, Nordeng says MGMA will continue to advocate for the in-office ancillary services exemption, which provides accountability and review structures that exempt physicians from Stark Law rules against self-referrals. "We believe it provides huge benefits to patients and providers," she says.
One of the best was to a squelch persistent rumor is to acknowledge that it's true.
Last week Henry Ford Health System and Beaumont Health System did just that.
Two of the largest not-for-profit health systems in Michigan publicly confirmed long-swirling speculation that they're pursuing a merger that, if finalized early next year, will create a $6.4 billion integrated healthcare organization serving the southeastern part of the state.
"This kind of change is sweeping every kind of hospital in the United States," Gene Michalski, CEO of Royal Oak-based Beaumont said Thursday in a teleconference confirming the deal.
"Healthcare reform is not going to go away," Michalski said. "There are too many forces that want change in this country to get higher quality, lower cost healthcare for the populations we serve. It is clearly transformative and it is our belief that this collaboration, the joining of these two wonderful health systems, will be transformative in its own right."
"In short, we want to lead events not trail events. These are both strong health systems. We didn't have to partner. We chose to partner."
If the deal passes due diligence and state review, the two not-for-profit systems would combine 10 hospitals, two medical schools, and 200 other patient care sites. The health systems are in exclusive negotiations and a definitive agreement for the new, not-for-profit organization is expected to be completed in the first half of 2013.
Nancy Schlichting, CEO of Detroit-based Henry Ford, called Beaumont "the absolute ideal partner for us."
"We have a common vision for the future of healthcare," Schlichting said at the teleconference. "Patients and their families are the center of our universe. We are national leaders in quality and patient safety. … We like the fact that this is a pure Michigan organization that is going to improve the health of Michiganders and be a role model for the country."
Michalski said the merger talks reflect the "monumental shift" from inpatient care to outpatient care."
"Also there is a growing importance of transforming our organizations from providing sick care to taking care of populations and helping people stay out of hospitals," he said. "The need for strong partnerships has never been greater in our view and even strong industry leading health systems like ours are responding to these challenges by forming very creative relationships with like-minded peers."
South Jersey Health System, Underwood-Memorial Health Finalize Merger
Also last week, South Jersey Health System Inc. in Vineland, NJ, and Underwood-Memorial Health System in Woodbury, NJ signed a merger agreement that finalizes a deal first announced last January.
SJH has more than 3,500 employees and a medical staff of more than 600 physicians. It includes the SJH Regional Medical Center, a 262-bed facility in Vineland; SJH Elmer Hospital, a 96-bed hospital in Elmer; the SJH Bridgeton Health Center that houses 65 mental health and inpatient hospice beds; and outpatient sites in four counties in Southern New Jersey.
UMHS includes the flagship Underwood-Memorial Hospital, a 305-bed, acute care hospital in Woodbury, NJ, and assorted out-patient clinics.
Baptist (KY) Health Buys Trover Health System
Baptist Health announced that it has acquired Trover Health System in Western Kentucky. The Madisonville-based facility the eighth hospital in the Bluegrass state for the Louisville-based health system.
The 410-bed Trover hospital will now be called Baptist Health Madisonville.
No cash was exchanged but The Courier-Journal reports that the deal is valued at about $120 million.
"We couldn't have chosen a finer addition to our already strong, statewide network of hospitals," Baptist Health President/CEO Tommy J. Smith said. "And we're equally proud that Trover chose Baptist when looking for a partner."
The announcement caps a year of negotiations.
"This is a monumental day in the history of healthcare in Hopkins County and the surrounding communities," E. Berton Whitaker, president/CEO of Baptist Health Madisonville, said in a media release. "By joining the Baptist Health family, we are positioning our health system to address the ever-changing needs of providing healthcare in the years to come."
Baptist Health shortened its name from Baptist Healthcare System on Sept. 5.
CHI, Saint Clare's Health End Acquisition Talks with Ascension
Catholic Health Initiatives, Denville, NJ-based Saint Clare's Health System, and Ascension Health Care Network announced on Thursday that they have ended negotiations for the transfer of ownership of Saint Clare's.
In March CHI and SCHS announced they were in exclusive negotiations with Ascension for the transfer of ownership of SCHS to best meet the needs of the communities SCHS serves. CHI said last week it remains committed to Saint Clare's until new ownership is secured.
CHI said that the decision to sell the hospital "was based on the need to better meet the demands and requirements of the communities served by Saint Clare's and the recognition that, as health care reform rapidly evolves, it is critical for health care providers to be part of regional networks of coordinated health care delivery organizations including physicians, health facilities, payers and other related health care entities."
No explanation was given for why the talks broke off.
CHI and SCHS said they will continue to explore opportunities for regionally clinically integrated networks of providers and payers in New Jersey.
The American Hospital Association and four health systems are suing the federal government for allegedly refusing to pay for "hundreds of millions of dollars for necessary care" in Medicare claims that were flagged by private contract auditors.
The suit, filed Thursday in U.S. District Court in Washington, D.C., claims that the Centers for Medicare & Medicaid Services has violated the Medicare Act by declining to reimburse the audited claims of hospitals, even though the claims were ultimately acknowledged by CMS to be reasonable and medically necessary.
AHA President and CEO Rich Umbdenstock said in an interview Thursday that the suit was prompted by "member frustration with the policy and with the hit they take after these medically necessary services have been provided."
"We pointed this out to CMS and have been in conversation with them, but we were not able to get a resolution," Umbdenstock said.
At the center of the conflict are the private recovery audit contractors that comb hospital records months and years after care is delivered to flag questionable payments. RACs, which are paid a percentage of the money they recover from hospitals and other providers, often retroactively determine that procedures billed as inpatient hospital care under Medicare Part A should instead have been delivered as an outpatient procedure under Medicare Part B.
Re-billing Prohibited
However, when Part A reimbursements are denied or rescinded, AHA says, CMS refuses to allow hospitals to re-bill the care under Part B.
"They have put in their policy manual that you are not allowed to re-bill. Period," Umbdenstock says. "They determined that it was medically necessary, but shouldn't have been billed under Part A. We're saying 'if it is medically necessary we should be able to bill under Part B' and they are saying 'no you can't bill.'"
The suit states that "CMS has made no effort to articulate a statutory justification—or any justification—for this policy. Nor could it. Put simply, when a hospital furnishes reasonable and medically necessary items and services, if payment cannot be made under Part A, it must be made under Part B."
AHA says that in the first quarter of 2012, hospitals reported that they were forced to pay $236 million for medically necessary inpatient items and services that RACs later determined should have been provided in an outpatient setting.
Estimated Costs: 'Hundreds of Millions'
AHA General Counsel Melinda Hatton, reached by phone Thursday, said that it's hard to determine exactly how much the CMS denial policy is costing hospitals. "We expect it is in the hundreds of millions but we just don't know the exact number," she said.
"Some hospitals chose not to appeal claims that should and could have been paid under Part B. There is not a good way for us to know the exact number other than that it is large and it is growing."
Joining AHA in the suit are: Missouri Baptist Sullivan Hospital, in Sullivan, MO; Munson Medical Center, in Traverse City, MI; Lancaster General Hospital, in Lancaster, PA; and Trinity Health Corp., in Livornia, MI.
The hospitals complain that the CMS policy creates "prolonged uncertainty about whether Medicare will ultimately pay for the services previously provided (and) wreaks havoc on hospital financial planning, including the ability to assess capital and staffing needs. Both the uncertainty and the actual loss of Medicare funds ultimately may adversely affect patient care."
The hospitals want a federal judge to strike CMS' payment denial policy because it is "contrary to federal law, arbitrary and capricious, and invalid for failure to undergo notice and comment."
The hospitals also want CMS to repay them for the "reasonable and medically necessary services they provide to patients. No matter whether it was provided in the inpatient or outpatient setting, Medicare must pay hospitals for such medically necessary care."
RACs have been a continuing source of friction between hospitals and the federal government every since they were created as part of the Medicare Modernization Act of 2003. CMS reported in May that RACs collected $1.86 billion in overpayments from October 2009 through March 2012, but identified only $245.2 million in underpayments.
Hospitals say that RACs are incentivized to aggressively and unfairly flag hospitals bills because the auditors keep a percentage of the money they identify, even if the billing classification is later proved to be justified.
A CMS study found that about 40% of RAC findings are appealed, but providers win those appeals about 75% of the time. Despite the good odds of winning an appeal providers complain that the process is too costly and cumbersome.
"If you look at the complaints from the individual hospitals you see how costly it is for them to appeal these RAC decisions," Hatton says. "There are some great examples that hospitals have of the number of employees they have had to hire and outside services they have had to retain. It is no small undertaking to challenge every improper denial of a RAC. There is no provision that I am aware of that pays you for the cost of the appeal. You'd be lucky if you got paid under Part B."
Audit Reform Bill Pending
The Medicare Audit Improvement Act of 2012, introduced in the House in October, calls for a number of improvements and financial penalties for—among other things—overturned appeals. The Office of Inspector General has announced plans to examine the Centers for Medicare & Medicaid Services payment policies to hospitals under Part A and Part B next year.
Umbdenstock says AHA supports the legislation in Congress that would curb RAC abuses.
"It tries to bring some balance to the numbers of records RACs can demand at one time and the burdens on hospitals of meeting all of this, which members find so onerous. It puts some boundaries around the process and brings it to a more reasonable level of scrutiny and accountability," he says.
Hatton says the AHA suit is similar to a recent suit settled last week by Medicare beneficiaries that dealt with scope of services. "It has the same basis – that CMS had a policy for which they had no statutory authority that was denying in that case services – in this case for services rendered," she says. "It is very similar... in that there it is a policy based on an absence of statutory authority."
Hackensack University Health Network President and CEO Robert C. Garrett spoke with HealthLeaders Media on Wednesday afternoon to offer an update on the three-hospital health system's recovery efforts following Hurricane Sandy.
HLM: How did you fare in the storm?
Garrett: "It's been a busy and stressful time but I have to say our team here has performed magnificently. We started the preparation a week before the storm hit, as soon as the models showed it coming up the East Coast and hitting New Jersey as a direct target.
We had a delivery of fuel for our diesel generators to make sure that if we were on emergency generator for several days we were prepared. Our disaster plan went into effect on Monday.
We had an incident command center set up. We lost power about 6:00 p.m. and we immediately switched to the emergency generators which remained on until late Tuesday night.
About 85% of our power has now been restored, but we still have about 15% out including our ambulatory operating rooms, our diagnostic center, and a breast imaging center which are located in a building with a different power feed. That is still operating on generator power."
HLM: What challenges did the storm present?
Garrett: "A sister hospital, Palisades Medical Center which is located a few miles from here on the Hudson River, started to flood mid-day Monday. By Monday evening they had to evacuate the facility, which was led by the National Guard. The evacuation was completed by about 9 a.m. Tuesday. We received and treated 60 patients from the evacuation; 43 remain here and 17 were sent to an affiliate hospital.
That was a real challenge for us because the patients came over with some of the caregivers from Palisades, but it was in the middle of the night and early morning and we were already pretty full.
We had to make arrangements where we could on where we could take care of them appropriately. Our care team came up with a great contingency plan. We were able to empty out our observation unit and relocate them to another area where we could make room for the patients from Palisades."
HLM: Given Palisades' proximity to the Hudson, did you already have a contingency plan for their evacuation?
Garrett: "They had a similar evacuation, though not quite as big last year when a storm hit one of their clinical buildings. So they were on the radar screen and with the predictions of storm surge and where the storm was hitting and the impact it would have on the Hudson River, we definitely were in close communication with them.
On Monday night when they decided to evacuate, their CEO called me directly and said they were going to put the evacuation plan into effect. We worked all night long on it."
HLM: Who was involved in the evacuation?
Garrett: "We coordinated this with our EMS community and the National Guard as part of the state response. There was good coordination in advance of the evacuation. But even with good coordination when you are evacuating so many patients it is still a very difficult process. But I was proud of our team and the way they responded."
HLM: Is Hackensack University Medical Center in a safe area?
Garrett: "We are on pretty high ground on the top of the hill. In Hackensack there are parts that flood, so our biggest issue is getting around the streets when we need to respond to a particular emergency or situation. One reason why we don't have complete power back is that one of our power lines runs through a substation that is currently under water."
HLM: Have you suspended non-emergency operations?
Garrett: "No. We are moving forward with a full schedule. In fact it is very busy today because there were so many cancellations on Monday and Tuesday. We are fully functional and operational. Most of our operating rooms are on regular power and some of the ambulatory operating rooms are on emergency power but we are able to proceed with a full schedule."
HLM: Was there any damage to your hospital?
Garrett: "Just minor. Here in Hackensack we had a little bit of wind damage. A piece of our cancer center building roof was damaged and a sister hospital at Mountainside got through it well.
There are some branches and down trees but they didn't destroy or damage any hospital assets. It's pretty much the same story up in Pascack Valley; trees and limbs down but not damage to property."
HLM: What areas might be reassessed as you examine HUMC's response to the storm?
Garrett: "The things that can always improve are communications. Not just internally in the medical center, but also the external communications that come to us. That is something I want to review with first responders and the state and federal responders.
There is a lot of information that comes in at the height of a storm and sometimes it is conflicting. Obviously you want to act on good information and that can always be improved."
HLM: Is the full staff back on duty?
Garrett: "We never had an issue with staffing. People stayed if they had to and people came in early to make sure they were here. If they were in doubt, many staff members packed a bag and stayed overnight.
We had cots available for people to sleep in shifts. As a matter of fact, in a couple of areas we had so many volunteers who wanted to stay longer or came in earlier that we had more than enough staff."
HLM: How will you be compensated for treating the patients transferred from Palisades?
Garrett: "With an emergency situation the sending hospital, the receiving hospital and the insurance companies get together to work out a fair settlement. There is nothing really prescribed ahead of time when something like this happens because usually they don't make those contingencies.
Whether it is Medicare or a private insurance company, those will be worked out. With Medicare it will be worked out through a fiscal intermediary and with the private insurance companies it will be worked out directly with those insurance companies—in our case Palisades and Hackensack together."
HLM: There have been some suggestions in the media that New York University Langone Medical Center in Manhattan was not adequately prepared for this disaster. Is that criticism fair?
Garrett: "It's tough. It is always easy to be the Monday morning quarterback. But these are tough decisions to make. If you overreact, people criticize you as well. You can be accused of disrupting patient care. At NYU they had to move a lot of critical care patients, even patients who'd just had liver transplants.
You can imagine that if they overreacted and the storm didn't come or wasn't as bad as it turned out to be there would be criticism on the other side that you might have endangered patient care by overreacting.
These are difficult decisions. My advice would be, let the dust settle. Once everything gets back to normal in a couple of weeks let's do a fair critique. Let's see what information was available at the time and come to see how we can do things better."
HLM: Do you have advice for other hospital leaders who may someday face a disaster threat?
Garrett: "Always prepare for the worst and get ahead of it. As much as you may think you are ahead of it use the time wisely to really plan and get staff involved. We here have a great team effort and team culture. That helps. If you can build that culture when you have a disaster of this magnitude it is enormously helpful."
The dangers and costs of cigarette smoking have been widely known for decades. It would be difficult to find any credible source that would defend smoking in the workplace or in other public areas. The only question left unresolved is the quantifiable effectiveness of workplace smoking bans.
The answer may be better than expected.
New studies suggest that workplace smoking bans are proving to be remarkably effective tools for reducing a number of smoking-related illnesses, both among smokers and those affected by second-hand smoke.
A study out this month in the Journal of the American Medical Association provides impressive findings. Researchers in Olmsted County Minnesota, home of the Mayo Clinic, examined public health data in the county in the 18 months immediately before and after a smoke-free workplace law ordinance was passed by the Olmsted County Board of Commissioners in 2007.
The JAMA study found that myocardial infarction fell by 33%—from 150.8 to 100.7 per 100,000 population, and sudden cardiac death fell by 17%, from 109.1 to 92.0 per 100 000 population.
The study concluded that the extent of the decline could not be explained by "community cointerventions or changes in cardiovascular risk factors with the exception of smoking prevalence. As trends in other risk factors do not appear explanatory, smoke-free workplace laws seem to be ecologically related to these favorable trends. Secondhand smoke exposure should be considered a modifiable risk factor for MI. All people should avoid secondhand smoke to the extent possible, and people with coronary heart disease should have no exposure to secondhand smoke."
Also this month, a separate study in the American Heart Association's Circulation magazine examines the relationship between smoke-free legislation and hospital admission or death from cardiac, cerebrovascular, and respiratory diseases.
Examining dozens of previous studies and using a dizzying methodology, the Circulation report determined that "smoke-free legislation was associated with a lower risk of smoking-related cardiac, cerebrovascular, and respiratory diseases, with more comprehensive laws associated with greater changes in risk."
Barbara Yawn, MD, a family physician and director of research at the 66-bed Olmsted Medical Center in Rochester, MN, calls the findings, particularly those in JAMA, "really very impressive."
"Most of us thought we'd see a reduction of maybe 10% or 15%, but the studies have been quite remarkable," Yawn told HealthLeaders Media.
Yawn did not take part in the JAMA study but says those findings are consistent with a study she conducted that examines cardiac and respiratory events related to smoking and air pollution. The study will be published in the American Journal of Public Health.
"We looked at air pollution levels before and after the smoking ban in public places and there is a substantial difference," she says. "Even when we have fairly high air pollution levels, all of the cardiac and breathing problems don't go up nearly as high any more. It was the combination of air pollution and these smoking in public places that were giving us a double whammy. Now we have at least taken the one away that we can control."
Minnesota's hospitals have been smoke-free for more than 10 years. That public smoking ban has been extended to restaurants, bars, and retail stores. "You pretty much can't smoke anywhere except outdoors and away from buildings," Yawn says.
As a result, she says "we have seen a decrease in asthmas, asthma exacerbations, asthma visits to the emergency room, asthma hospitalizations, and chronic obstructive pulmonary disease. We have seen a decline in the visits to our offices for acute problems and urgent care and emergency rooms and hospitalizations."
It's intriguing to consider what other public health problems out there might be dramatically reduced with well-crafted legislation. Could we see the same sorts of reductions in medical events with laws or public policies that tackle obesity?
"We would love to cut back on the availability of high-calorie lunches in schools," Yawn says. "There are other ways to get them those fruits and vegetables besides sugary juice and fried foods. We would all like to turn to school lunches because those kids are captive. What can we do to help in that arena because we know that obesity doesn't start when you are 25 or 30 or 40? It starts in school and you eating habits there."
The leaders and medical professionals in the nation's community hospitals, who are among the most trusted and respected people in their communities, are particularly well suited to press for these sorts of public policy changes.
Imagine, for example, the cost savings and the quality of live improvements that millions of Americans would enjoy if we could see a 33% reduction in obesity-related chronic illnesses such as diabetes.
Yawn says anti-smoking ordinances provide the blueprint for cost-effective, preventative public healthcare policy. She believes the lessons learned can be applied elsewhere, the results replicated.
"Stopping smoking in public places has to be one of the most doable and effective tools that we have," she says. "This is really an important instance of where we need to be going with improving people's health. I can give them medication and I can improve one person at a time but if we do these public health measures we can improve the lives of hundreds and thousands of people over a period of time by something like this public approach to smoking."
Hospital and health system mergers, acquisitions and collaborations continue at a brisk pace during the week of October 21-26.
Missouri Hospitals Form Collaborative
Missouri's Saint Luke's Health System of Kansas City, BJC HealthCare of St. Louis, CoxHealth of Springfield, and Memorial Health System of Springfield, IL, have created a joint BJC Collaborative, LLC. The four health systems will remain independent under the collaborative, which will have a combined "footprint" of 4,821 hospital beds in Missouri, Illinois, and Kansas, and combined annual revenues of almost $7 billion.
The health systems forecast that the anticipated savings generated by the collaboration will allow them to deploy clinical programs and services to improve access and quality of care while lowering costs.
Saint Luke's is the largest non-profit healthcare provider in the Kansas City area and includes 11 hospitals and several primary and specialty care practices. BJC HealthCare is a 13 hospital system serving eastern Missouri and southern Illinois.
CoxHealth is Springfield, MO's only locally owned not-for-profit health system, and includes three hospitals and more than 65 clinics in 20 communities. Memorial Health System is a three-hospital, non-profit health care organization serving Illinois patients in a 40-county region.
Illinois' Advocate Health Care Acquires Sherman Health
Also last week, Advocate Health Care announced that it had signed a letter of intent to acquire Elgin, IL-based Sherman Health Systems. The deal is expected to be formalized sometime next summer. No financial information was disclosed in the media release announcing the acquisition.
Advocate is the largest health system in Illinois with 10 acute care hospitals, the state's largest integrated children's network, five Level I trauma centers, two Level II trauma centers, the state's largest home healthcare company and more than affiliated 6,000 physicians.
Sherman Health Systems includes the 255-bed Sherman Hospital, three immediate care centers, a skilled nursing and rehabilitation facility; and home health services. The system employs more than 2,200 people and more than 600 physicians on its medical staff.
"We're pleased that we will offer our patients the expertise of one of the top 10 health systems in the country," Sherman Health President/CEO Rick Floyd said in a joint announcement. "Through this partnership, Sherman will be able to grow and expand our services at an accelerated pace to become a distinctive, regional destination for care."
St. Joseph's MC, U of MD Medical System Finalize Merger
Baltimore Business Journal is reporting that the University of Maryland Medical Center in Baltimore will finalize its long-expected merger St. Joseph's Medical Center around Nov. 1.
HealthLeaders Media contacted the press office at UMMC on Friday but they said they weren't ready to announce the details of the deal.
The assets only acquisition has been underway since March, when St. Joseph's parent Catholic Health Initiatives announced it would negotiate exclusively with the University of Maryland to acquire the Towson hospital, the Business Journal reported. However, the closing date has been delayed for three months for unspecified reasons.
McKesson Corp. Buys PSS World Medical Inc. in $2.1B Deal
Of course, hospitals aren't the only corner of the healthcare marketplace that is seeing acquisition and consolidation.
Healthcare HIT giant McKesson Corp. announced last week that it will purchase PSS World Medical, Inc. for $29 per share in cash. The total transaction, including the assumption of PSS World Medical's outstanding debt, is valued at approximately $2.1 billion, but is still subject to approval by the PSS shareholders.
"The unified organization will bring extensive distribution capabilities, deep product and technology expertise and a broad portfolio of business services to an expanding industry, helping our customers improve efficiency and productivity, and deliver better care," McKesson CEO/Chairman John H. Hammergren said in a joint media release.
Leonard Green & Partners Acquires CHG Healthcare Services
Salt Lake City-based CHG Healthcare Services, a healthcare staffing firm, was acquired by Leonard Green & Partners, a private equity firm, and Ares Management LLC, an assets manager, the companies announced jointly.
CHG is now majority-owned by funds affiliated with J.W. Childs Associates, LP. The transaction is expected to close by the end of December. Financial terms were not disclosed.
CHG is one of the largest temporary healthcare staffing firms in the nation and is the largest locum tenens staffing firm in the nation. The company has more than 1,400 people in seven offices nationwide.
The U.S. Supreme Court ruling last summer that lets states opt out of Medicaid expansion under the Patient Protection and Affordable Care Act could saddle the nation's safety net hospitals with $53.3 billion in uncompensated care costs by 2019, according to the National Association of Public Hospitals and Health Systems.
"It's a projection based on [Congressional Budget Office] estimates of the additional number of uninsured as a result of the Supreme Court's decision," Beth Feldpush, vice president, policy and advocacy, at NAPH told HealthLeaders Media.
The June 28 landmark 5-4 ruling by the Supreme Court upheld key components of the PPACA, including the individual mandate. However, the justices struck down as too coercive the law's attempts to get states to expand their Medicaid programs.
Feldpush says the high court's ruling skewed a balance in the law under which disproportionate share hospital payment cuts to safety net hospitals would be offset by expanded Medicaid coverage.
"Certainly the Supreme Court's decision changed the landscape. What was assumed to be Medicaid expansion in every state can't be assumed any longer," Feldpush says.
"When you think back to the assumptions that were made when the Affordable Care Act became law, at that time CBO said 'we expect 'X' number of people to get coverage and therefore the dollars in uncompensated care costs absorbed by hospitals will decrease.' The law was written with some sense of a balance between those two factors," she said.
"The Supreme Court decision now says Medicaid expansion is voluntary, but those cuts are hardwired into the law and we don't necessarily see a rise in the coverage on the other side to make a balance."
NAPH represents about 200 hospitals and health systems that are often the primary source of healthcare to Medicaid and uninsured patients. Typically in the communities that these hospitals serve 15% of the population is uninsured and nearly one-third of the population relies on government-sponsored healthcare coverage.
The CBO estimates the court's decision will result in six million to 10 million more uninsured people than estimated when Congress passed the PPACA in March 2010, bringing the total number of uninsured individuals to 29 million by FY 2019, NAPH said in a new report.
"This unexpected new level of cost to hospitals and health systems dramatically amplifies the impact of the Medicaid DSH cuts, which will total $14.1 billion over the same period.
The combined effect will jeopardize access to important healthcare services for vulnerable people and shift additional and burdensome uncompensated care costs onto state and local governments, providers, and taxpayers," NAPH said.
NAPH noted that DSH now doesn't cover all uncompensated care costs and Medicaid payment shortfalls and hasn't kept pace with the growth in the uninsured population and the cost of caring for them.
A NAPH survey of 87 safety net hospitals for 2010 found that they had incurred more than $8.4 billion in uncompensated care costs but received only $4 billion in Medicaid DSH payments.
The DSH payment cuts go into effect in federal fiscal year 2014, which starts on Oct. 1, 2013.
"Our reason for putting this out now is that Congress is going to be having a lot of tough discussions around making some considerations for the budget and we expect healthcare issues to be on the table during those discussions," Feldpush says.
"We want to remind folks that we have another issue that is coming down the pike pretty quickly that was not anticipated when the Affordable Care Act was written into law."
The PPACA gives the secretary of the Department of Health and Human Services discretion in how the DSH cuts are distributed across states.
"Given this discretion, it is crucial for regulatory decisions to address the uncertainties created by the imbalance between anticipated uncompensated care needs and the level of federal support to hospitals that shoulder the majority of this work," NAPH said in the report.