The uncertainties around a sputtering economy have prompted the nation's healthcare workforce to delay retirement, a new study shows.
Research by The Conference Board shows that the healthcare industry experienced the largest decline in retirement rates among all workforce sectors in the U.S. economy. In 2009-2010, only 1.55% of full-time workers aged 55-64 retired within 12 months, compared with almost 4% in 2004-2007.
"Retirement rates declined significantly during and after the great recession," Gad Levanon, associate director of macroeconomic research at The Conference Board, and author of the report, said in a media release. "However, we see that delayed retirement has been more prevalent for some occupations and industries. For example, the healthcare industry experienced the largest decline in retirement rates in recent years. Jobs in this field are also in great demand. On the other hand, there was almost no retirement delay among government workers, who are more likely to receive defined benefit pension plans."
Nancy Jennings, a vice president of clinical operations at Chesapeake Regional Medical Center in Chesapeake, VA, told HealthLeaders Media she was not surprised by The Conference Board's findings.
"I probably have 90 people right now who could walk in right now and hand in their papers. They just can't afford to. They're worried about the economy and whether or not they can live off their retirement," she says. "Maybe the 401(k) took a hit, or the husband might not have a job, or their kids have moved back home because they're unemployed."
Even with the uncertainty, Jennings says, the aging demographic can't be denied. "And as the economy improves those people are going to slowly retire and leave the rest of us hanging," she says. "This has helped the nursing shortage, no doubt. Unfortunately, from an economic standpoint it hasn't helped anything else. As these folks retire it's just going to widen the gap. There is no way that the rest of us baby boomers are going to stay home and not seek health services, and there aren't enough nurses in the pipeline to manage the rest of us."
Marcia Donlon, a vice president/CNO at Holy Family Memorial Hospital told HealthLeaders Media it's the same story at the Manitowoc, WI-based hospital, where the average age of the nursing staff is 47. "A big piece is economic. But a lot of them love what they do," she says. "They're saying 'I don't want to give everything up. I would just like not such a hectic pace, maybe work four-hour shifts. Maybe do education for patients or staff, different types of roles.'"
Donlon says Holy Family is doing a lot of "role transitioning" for nurses on the cusp of retirement. "We have had some groups looking at, 'if you want to stay in the workforce, what would keep you here?' We don't want to lose those years of experience. We are looking at different roles and that has been well received," she says.
Some ideas that have surfaced include more flexible working hours, including four-hour shifts, seasonal work, or teams that allow veteran nurses with years of experience to coordinate patient care.
Donlon says she's even more concerned about a looming gap in nurse leadership. "It's very difficult to find nursing leaders. People are somewhat intimidated by it," she says. "I was talking to the dean of nursing at a nearby school and she said only 10% of nurses are interested in a leadership position. We have a lot of work to do there. As leaders, what are we modeling?"
The Conference Board also found several trends in the overall workforce:
The construction industry experienced a large decline in retirement rates. This is likely the result of a long slump in the industry, which resulted in many laid-off workers trying to stay in the labor force to make up for lost income.
There was no retirement delay among government workers. That is expected, since these workers are more likely to receive defined benefits, making them more insulated from the decline in financial asset values in their pensions.
Mature workers in high-paying occupations were much more likely to delay retirement than workers in low-paying ones. Those in higher-paying jobs tend to have higher financial expectations for their retirement years. Also, high-paying occupations tend to have limited physical requirements, making it easier to continue working. Among lower-paid workers, there is often an increased physical demand, and unemployment rates tend to be much higher. As a result, even if those workers wanted to continue working, finding replacement jobs is often extremely difficult, forcing them to retire.
Delayed retirement has affected the demographic distribution within the U.S. Part of the decline in net migration to states like Florida and Arizona is likely due to the trend of delayed retirement. Fewer individuals are leaving the labor force and moving to retirement destinations.
Those who suffered from a significant decline in home or financial asset values, lost a job or experienced a compensation cut during the recession were much more likely to delay retirement. Workers in states where home prices suffered especially large slumps (such as California, Michigan, Florida, Arizona) were more likely to delay retirement.
"Overall, the macroeconomic implications of delaying retirement are largely positive," Levanon said. "Delayed retirement allows households to consume more today and reduce the probability of a prolonged slowdown in the U.S. economy, and enables households to reach retirement with more financial resources."
The American Federation of Government Employees on Monday rapped the Department of Veterans Affairs for continuing to pay "exorbitant bonuses" to managers in VA hospitals and benefits offices while medical staff struggle to meet growing demand.
"The idea that frontline employees have to stretch resources with limited staff, while executives continue to receive large bonuses is mindboggling," Alma Lee, president of AFGE's National Veterans Affairs Council, which represents 160,000 employees in the VA, said in a media release. "If the VA is serious about recruiting and retaining highly trained and capable staff, it should reinvest in frontline staff, not top level bureaucracy."
The VA did not return telephone calls on Monday afternoon from HealthLeaders Media.
AFGE said in a media release that the VA was "rightly reprimanded" by Congress two years ago when media reports exposed that it was paying bonuses to executives, despite mounting claims backlogs, reports of poor patient care and suspicious deaths in VA hospitals. "However, despite the Congressional reproach, the agency has continued to shower executives with lavish bonuses.
According to the union, these bonuses, when coupled with the already high salaries of medical and benefits executives, represent a misguided approach to compensation lacking fairness and transparency," AFGE said.
The union said that media reports from 2007 showed that the VA performance review boards, which make determinations about who receives bonuses, were stacked with the same executives who were scheduled to receive the incentive payments. These members had input on bonus recommendations involving themselves, fellow members and spouses that made questionable performance claims and neglected agency problems.
AFGE says its field members report no signs that such conflicts of interest have been corrected since that time. In fact, members report that even when frontline staff members are rewarded with bonuses, the awards are disseminated arbitrarily and with favoritism, AFGE said.
AFGE has also opposes legislation that would increase the maximum amount of nurse executive and pharmacist executive incentive pay to $100,000 and $40,000 respectively. Amendments introduced to S.252 would allow VA executive nurses who are not involved in direct patient care to receive a 400% increase in incentive pay. These amendments also move to exempt VA executive physicians and dentists from the fair pay setting process established by Congress in 2004, the union said.
Congress in 2004 enacted a system for setting physician and dentist pay that relies on a panel of peers in the same medical field to set market pay. "If the VA is serious about maintaining a secure and sustainable workforce, it should apply its rules of compensation equally," said Lee. "The newly proposed provision would exempt healthcare executives from the same balanced process and pay standards that apply to their counterparts on the frontline, who actually provide direct patient care."
An earlier version of this article incorrectly identified the journal in which the NPA study will be published.
A study in an upcoming issue of the Archives of Internal Medicine has created a field-tested "Top 5" list of potentially unnecessary cost drivers for primary care that -- if limited -- could improve cost and efficiency.
Stephen R. Smith, MD, a family medicine physician in New London, CT, and a lead author of the study published Monday in the online edition of AIM – told HealthLeaders Media that primary care physicians are often motivated to perform unnecessary and costly practices either out of habit, or because of defensive medicine. Patients also pose a challenge.
"The other thing is we heard from a lot of field testers that looked at this list and gave us an opinion was 'Yes the evidence is there and we agree, But it's going to be difficult to get the patients to go along with this too,'" Smith says. "Sometimes patients come in with misunderstandings. So, it's a matter of also changing patient perceptions."
The list of recommendations – compiled by the National Physicians Alliance project -- suggest limiting antibiotics for some respiratory infections, avoiding imaging for low back pain and osteoporosis screening for certain patients, and not ordering cardiac screening tests in low-risk patients.
The NPA, working on a grant from the American Board of Internal Medicine Foundation, held a Good Stewardship Working Group teleconference to identify cost-saving, efficiency improving practices in family medicine, internal medicine, and pediatrics. The list of suggestions was culled after they were weighed against evidence in scientific literature.
Members of the specialty working groups recruited other physicians to test the suggestions in the field; each of the 83 testers rated the activities by way of an online survey. A mass e-mail to all NPA members recruited 172 other physicians for a second round of field testing, which involved completing the same survey that the initial testers completed. "Each activity was to be well supported by evidence, have beneficial effects on patient health by improving treatment and/or reducing risks, and, where possible, reduce costs of care," the article said.
According to the study, the field testers agreed with the following practices:
Family medicine—limit early imaging for low back pain, avoid routinely prescribing antibiotics for sinus infections, avoid ordering electrocardiograms or other cardiac screening in low-risk patients with no symptoms, reserve Pap tests for patients age 21 years or older who have not had hysterectomy for benign disease, and reserve dual-energy X-ray absorptiometry osteoporosis scans for women ages 65 years and older and men 70 years and older or who have risk factors
Internal medicine—limit early imaging for low back pain, do not order blood panels or urinalysis for screening in healthy adults with no symptoms, avoid ordering ECGs or other cardiac screening in low-risk patients with no symptoms, limit initial statin prescriptions to generic medications, and reserve DEXA osteoporosis scans for women ages 65 years and older and men 70 years and older or who have risk factors
Pediatrics—avoid prescribing antibiotics for sore throats unless tests for streptococcus are positive, limit diagnostic imaging for minor head injuries without loss of consciousness or other risk factors, do not refer middle-ear infections (otitis media with effusion) to specialists too early, tell parents to avoid giving children over-the-counter cough and cold medicines, and ensure that inhaled corticosteroids are used properly by patients with asthma
The NPA plans to distribute the Top 5 lists for each specialty to its members in those fields, create training videos to help doctors communicate the value of these behaviors, and create videos that explain to patients why the steps on the Top 5 lists should be taken, and reach out to consumer groups and patient-safety groups for their endorsements.
Although the study focuses on primary care physicians, Smith says he hopes that specialists will take up the challenge and identify cost-savings and inefficiencies in their own realms. "The specialists have just as much responsibility. But this is where we wanted to start. It seems like a good beginning and hopefully it will lead to other specialists doing the same," he says.
It's one of the great ironies of healthcare human resources.
There is arguably no other labor-intensive industry that is so reliant upon a highly skilled, highly educated, high-cost, and high-in-demand workforce that literally makes life-or-death decisions every day. And yet, in many hospitals and health systems HR remains an afterthought in the C-suite. HR is considered the domain of pencil-pushing functionaries whose job descriptions do not include strategic planning, and who are better suited for tactical tasks and processes.
There is a growing sense, however, that changes in healthcare brought on by the commercial market and by the federal healthcare law, the inevitable and growing shortages of skilled healthcare professionals, and the newfound and measurable importance of patient satisfaction scores for reimbursements will prompt a reassessment of HR in strategic planning.
Stephanie Drake, executive director of the American Society for Healthcare Human Resources Administration (ASHHRA), concedes that healthcare HR has traditionally been "reactive and not necessarily proactive" around long-term planning and other strategic aims.
"It's all over the board. Some of our ASHHRA members are quite engaged at the board level, looking at turnover and performance issues as they relate to patient safety and experience. But we have other members who might be at the board table but they aren't sure what they should be contributing," she says.
That mindset must change.
"HR needs to understand what the CEO needs, where the organization is headed to better prepare itself," Drake says. "I know we talk about workforce shortages, but many of our hospitals haven't seen it yet and if they aren't paying attention. Five years down the road they are going to hit a wall where they don't have enough nurses or physicians. People will be retiring at an astronomical rate and maybe HR hasn't done enough to prepare or even to understand that this is coming down the pike."
Perhaps the biggest single impetus for expanding the strategic role of healthcare HR will come from the Hospital Consumer Assessment of Healthcare Providers and Systems (HCAHPS), which attaches cold, hard cash to the once-fuzzy term "patient satisfaction."
"HCAHPS will go a long way in changing attitudes," says Michael DiPietro, with HealthcareSource, which has created a brief survey for ASHHRA that address the strategic role of healthcare HR. "Now there is transparency. Now there is so much more focus on patient satisfaction and quality outcomes. Patient satisfaction is directly impacted by the competencies and behaviors of employees. That is a key driver. As CEOs get more pressure to improve HCAHPS scores, there are certain things you can do on the clinical side, but they are going to turn to the VP of HR and say 'you need to help solve this.'"
The ASHHRA survey asks healthcare HR executives what they're doing in three strategic areas -- patient safety, patient satisfaction, cost containment -- and what technologies they're using to support initiatives in these areas.
"We are always trying to figure out what is the connection between talent management or the role of HR as it links to quality and patient safety, and where we fall in," Drake says. "We have a variety of groups working in hospitals and in the pursuit of excellent and quality and patient safety roles, but we struggle as a professional society to figure out where we fit in. This study will help us find more linkages."
If you've got a few minutes, take the survey. It provides an opportunity to assess where you are as an HR executive, and what your strategic role will be for your healthcare organization. You'd better prepare, because HR is going strategic, with or without you.
A critical shortage of drugs, especially chemotherapy and pain relief medications, is endangering patient safety and costing hospitals an estimated $200 million per year as they scramble to procure substitutes, often at higher prices.
Now Sen. Herb Kohl (D-WI) wants the Federal Trade Commission to examine the impact that consolidation in the pharmaceutical industry may be having on the nation's drug supply.
Kohl said in a letter to FTC Chairman Jonathan Leibowitz that he was prompted to make the request after fielding numerous complaints from healthcare providers about widespread drugs shortages. Kohl is chairman of the Subcommittee on Antitrust, Competition Policy and Consumer Rights, which oversees the FTC.
"As you know, pharmaceutical industry consolidation in recent years has left fewer manufacturers for both branded and generic drugs," Kohl said in his letter. "There have been at least nine major pharmaceutical mergers since 2000, most of them valued at over $40 billion each. Just two years ago, in 2009, for example, there were three major mergers – the $68 billion Pfizer/Wyeth merger, the $ 41 billion Merck/Schering Plough merger, and the $47 billion Roche/Genetech merger. And just a few weeks ago, two of the leading generic drug companies, Teva and Cephalon, announced their intention to merge, a transaction valued at $7.5 billion. The impact of this consolidation may be having a serious effect on the availability of prescription drugs."
Roslyne Schulman, director for Policy Development at the American Hospital Association, told HealthLeaders Media that healthcare providers have been dealing with drug shortages for years, but that the problem has grown considerably in the last year or so. "It's a huge and growing issue. As the Senator mentioned, the number of shortages is unprecedented and it's affecting the ability of hospitals to provide care. They sometimes don't find out about a shortage until they try to place an order and they're told there is a backlog, with no idea when the shortage will be resolved," she says.
Schulman says the biggest shortages are linked to "the old standby generic drugs, many of them are what are referred to as sterile injectable drugs." Those are the biggest issue with regard to shortages now. A couple of generic manufacturers have been working with this coalition. They have been part of the discussion, looking at potential solutions.
Karl Uhlendorf, the deputy vice president of the Pharmaceutical Research and Manufacturers of America, said in a statement that "myriad factors contribute to drug shortages, including natural disasters; shifts in clinical practices; wholesaler and pharmacy inventory practices; raw material shortages; changes in hospital and pharmacy contractual relationships with suppliers and wholesalers; adherence to distribution protocols mandated by the Food and Drug Administration; individual company decisions to discontinue specific medicines; manufacturing challenges and consolidations.
"Regardless of the cause, in order to provide patients with uninterrupted access to medicines it is important for all of us who provide life-saving medications to work collaboratively to minimize unexpected disruptions in the supply of vital medicines," Uhlendorf said.
Schulman said the AHA supports Senate bill (S.296), which would strengthen FDA oversight of the nation's drug supply. The bill requires drug manufacturers to notify FDA at least six months in advance of a planned discontinuation or interruption to the drug supply, with penalties in place for noncompliance; requires the FDA to post on its Web site information about drug shortages and to distribute that information to providers and patients' advocacy groups so they can plan ahead; and requires FDA to develop criteria to identify drugs that are vulnerable to shortages, and plan for ways to mitigate or prevent the shortage.
Government action, however, may not be enough.
"It's going to be a combination of industry actions, regulatory change, and some legislative change," Schulman says. "I don't think FDA has the authority it needs to mitigate these issues."
Kohl, who has served four terms in the Senate, announced this month that he will not seek re-election next year.
The average per capita cost of healthcare services covered by commercial insurance and Medicare grew 5.77% over the 12 months ending in March 2011, continuing a nearly year-long deceleration of cost growth, Standard & Poor's Healthcare Economic Indices show.
March's results represent the lowest cost growth in the six-year history of the measure, and reflect a deceleration in healthcare cost growth from the +6.17% in annual growth posted in February, and +6.31% in January 2011 for this index, S&P said.
Even with the deceleration, healthcare costs grew by more than double the 2.7% growth in overall inflation as measured by the Consumer Price Index for the same 12-month period ending in March, Bureau of Labor Statistics data show.
In its six-year history, the highest annual growth rate for the S&P Composite index was during the 12-months ending May 2010, when it posted +8.74%. With March's report of +6.19%, claims costs growth rates have decelerated 2.97 percentage points in 10 months, S&P said.
A further breakdown shows that, over the 12 months ending March, healthcare costs covered by commercial insurance rose +7.57%, down from +7.97% for the 12-month period ending in February, as measured by the S&P Healthcare Economic Commercial Index. Medicare claim costs rose at an annual rate of +2.78%, for the 12-month period ending in March, down from of +3.22% for February, as measured by the S&P Healthcare Economic Medicare Index. This is also the lowest annual rate of growth posted for the Medicare Index in its six-year history, S&P said.
"If you look over the last year or so of data, it is apparent that the rates of increase in healthcare costs continue to slow down," David M. Blitzer, Chairman of the Index Committee at Standard & Poor's, said in the report. "While there was some volatility within months, the general trend has been a slowdown across all nine of the indices we publish. Most of the annual growth rates peaked in the late winter/early spring of 2010. Since then, most of these rates have fallen by 2 percentage points or more."
Blitzer said the biggest slowdown has been in the Hospital Medicare Index, where the annual growth rate fell from +8.30% in August 2009 to +1.18% in March 2011. "On the other hand, we have not seen an equal trend for the Hospital Commercial Index, where the annual growth rate peaked at +9.36% in May 2010, and is still reporting a healthy +8.36% as of March 2011," he said. "This phenomenon could be the possible result of two things: (1) costs for Medicare patients are being better contained than those covered under commercial insurance plans and (2) hospitals are using more procedures and services covered under commercial plans, contributing to the increase in total costs. We see a similar differential across the Professional Services Indices, but not as severe."
The S&P Healthcare Economic Indices estimate the per capita change in revenues accrued each month by hospital and professional services facilities for services provided to patients covered under traditional Medicare and commercial health insurance programs. The annual growth rates are determined by calculating a percent change of the 12-month moving averages of the monthly index levels versus the same month of the prior year, S&P said.
Community Health Systems Inc. said Wednesday it is fighting legal battles on several fronts that include subpoenas from two federal oversight agencies.
In a filing with the Securities and Exchange Commission, Franklin, TN-based CHS disclosed that it has been has been subpoenaed separately by the SEC, and the Department of Health and Human Services Office of Inspector General in Houston.
The SEC subpoena, dated May 13, requests "documents related to or requested in connection with the various inquiries, lawsuits, and investigations regarding, generally, emergency room admissions or observation practices at our hospitals," CHS CFO W. Larry Cash said in the SEC filing. "The subpoena also requests documents relied upon by the company in responding to the Tenet litigation, as well as other communications about the Tenet litigation."
The May 10 subpoena from HHS OIG calls for 71 patient medical records from a CHS hospital in Shelbyville, TN to be sent to the Assistant U.S. Attorney handling the OIG investigation of a CHS hospital in Laredo, TX. "We are unaware of any connection between these two facilities other than they are both affiliated with us. We will cooperate fully with the Department of Justice and the Office of the Inspector General in this investigation," Cash said in the SEC filing.
Also Wednesday, Cash said in the SEC filing that rival Tenet Healthcare Corp. -- until last week the subject of a hostile takeover attempt by CHS -- has filed an amended lawsuit in federal court in Dallas that "expands on the unverified facts set out in its prior complaint (filed April 11, 2011) and continues to assert that a mathematical difference between our observation visit rate and/or inpatient admission rate and industry averages is, in and of itself, fraudulent."
Cash said the refiled suit seeks an award of costs and disbursements that Tenet purportedly incurred in analyzing alleged false and/or misleading disclosures in CHS' proxy solicitations and related statements. "The suit arises out of the now withdrawn offers to acquire the common stock of Tenet and notification of an intention to nominate directors at Tenet's annual meeting of stockholders," Cash said in the filing. "We believe the allegations are without merit and will vigorously defend this suit."
Finally, Cash said in the SEC filing that CHS is a defendant in at least two shareholder lawsuits filed in federal court in Nashville. "Although we have not yet been served in either case, we are aware that two lawsuits have been filed, both in U.S. District Court for the Middle District of Tennessee. Norfolk County Retirement System v. Community Health Systems, Inc., Wayne T. Smith, and W. Larry Cash was filed on May 9. De Zheng v. Community Health Systems, Inc., Wayne T. Smith, and W. Larry Cash was filed on May 12," Cash said in the SEC filing.
"Both suits seek class certification on behalf of purchasers of our common stock between July 27, 2006 and April 11, 2011 and allege that misleading statements resulted in artificially inflated prices for our common stock. We believe these suits are without merit and will vigorously defend them."
In a somewhat related filing with the SEC earlier on Wednesday, CHS said that shareholders had overwhelmingly reelected three board members this week, including Cash, despite the call by one investor group to toss them out.
William Patterson, executive director of CtW Investment Group, in an April 21 letter to fellow shareholders, had called for the ouster of Cash, and board members James S. Ely III, and John A. Fry, "given their culpability for the growing scandal surrounding proper oversight of Medicare billing practices, which has precipitated a 25% decline in Community's market value."
Patterson was referring to Tenet's allegations in a lawsuit filed in April that CHS overbilled Medicare by as much as $377 million using medically unnecessary admissions that improved its bottom line and appeal to investors.
CHS abandoned its hostile takeover bid for Dallas-based Tenet earlier this month, after the Tenet board unanimously rejected what CHS called its "best and final offer" of $7.25 per share cash, or about $4.1 billion. Tenet CEO Trevor Fetter and Tenet board chair Edward A. Kangas said in a letter to Smith that the offer "grossly undervalues the company and is not in the best interests of Tenet or its shareholders."
Employers will see healthcare costs increase by 8.5% in 2012, up slightly from 2010, as the economy continues to rebound, according to the annual Behind the Numbers report on medical cost trends from the PwC Health Research Institute.
That financial hit could be "contained" to about 7%, however, with increased cost-shifting to employees, PwC Principal Michael Thompson told HealthLeaders Media.
"There are three levers that employers are looking at. One is certainly cost-sharing. It has been demonstrated that cost sharing does influence how people use services," Thompson says. "On the negative side, part of the reason they mandated that cost sharing be eliminated for preventative services was so that people would use preventative services.
"Secondly is education on how to use the system more effectively. Thirdly, there has been a dramatic and continued focus from employers on making employees much more conscious and accountable for their own health behaviors," he says.
Containing healthcare cost growth to 7% will likely puts it on a track that is more than double that of overall inflation as measured by the Consumer Price Index, which grew at 3.2% between April 2010 and April 2011.
Healthcare inflation has been slowed over the last two years by the weak economy, Thompson says, but as the economy recovers, costs are increasing too. "To some degree we have found that healthcare costs actually grow as a percentage of the economy during down cycles," Thompson says. "Interestingly though, this year we found more of a reaction than we typically find. That has been reflected in somewhat decreased levels of utilizations, more than we have seen in past recessions. We attribute some of that to the fact that there has been much more cost sharing in the plans than we've had in years. As a result, employees have experienced more of the cost of services during the downturn and consequently have used fewer services during the last year or so."
Based on interviews with health plans, PwC had projected a 9% increase in employer medical costs for recession-wracked 2010 and 2011. However, low utilization led to adjusted estimates in the medical cost trend to 7.5% for 2010 and 8% for 2011 before benefit plan changes.
The end of subsidized COBRA coverage in 2010 is offsetting otherwise rebounding utilization growth rates so far in 2011, but employers and health plans expect pent-up demand to put upward pressure on the medical cost trend to continue into 2012, the PwC report said.
"Employers in particular continue to be very concerned about healthcare costs that are growing at substantially higher than the economy or their businesses or their wages," Thompson told HealthLeaders Media. "As a result they are continuing to focus efforts to dampen the increases that they are seeing."
The PwC report includes survey data from 1,700 employers in 32 industries, and interviews with hospital executives, health plan actuaries, and other healthcare sector executives. The medical cost trend is the projected increase in the cost of medical services assumed in setting premiums for health insurance plans.
PwC identified three factors that will inflate the medical cost trend in 2012:
1.Consolidation among hospitals and physicians. This trend is expected to accelerate as health reform incentivizes hospitals and physicians to align and form Accountable Care Organizations. Health plans are concerned that consolidation will reduce competition among providers and drive up payment rates.
2.Increasing cost shifting from Medicare and Medicaid. In 2012, the increase in Medicare inpatient hospital rates is expected to be 3.3 percentage points below the expected growth in their costs. Hospitals and health plans agree that much of the difference shifts to private payers.
3.Post-recession stress on workers. Money, work, and the economy -- found by the American Psychological Association to be the top three causes of stress among the American workforce between 2007 and 2010 -- are taking a toll. Health plans and employers interviewed by PwC say they are beginning to see more claims for stress-induced illnesses, which are highly correlated to unhealthy behavior and adverse health conditions such as heart disease.
Several factors will deflate medical costs for health plans and employers in 2012 -- but not necessarily for consumers. These factors are:
More cost shifting. Employers are increasingly shifting the burden of rising medical costs to employees through higher cost sharing. High deductible plans were the fastest growing plan designs in 2011, according to PwC's Touchstone survey. Seventeen percent of employers surveyed said high deductible plans were their most common benefit design, up 4 percentage points from 2010. The PwC study also notes that healthcare reform could contribute to cost shifting by further discounting Medicare rates for inpatient care.
Blockbuster brand-name drugs going off patent. In 2012, the cumulative sales of drugs going off patent will be the largest in history, representing approximately $28.1 billion in pharmaceutical sales according to PwC estimates. Increased use of generics will moderate health spending growth.
Tiering on out-of-network providers. Employers are increasing deductibles, making it far less attractive for workers to use out-of-network physicians and hospitals. Forty-four percent of employers in 2011 compared to 29% of employers in 2010 said that their out-of-network deductible had crossed the $1,000 threshold. In some markets, payers are becoming more selective about which providers are in the network, choosing to exclude higher-cost and premier hospital systems.
Thompson says the federal health reform law will have minimal effect on the medical cost trend in 2012. Provisions of the Patient Protection and Affordable Care Act that took place prior to 2012 were small changes for which employers already have fully accounted. Medicaid expansions, health insurance exchanges, subsidies to buy private insurance, mandates for employers to offer insurance and mandates for individuals to buy insurance don't take place until 2014 or later.
HealthSouth Corp. announced Wednesday that it will sell its six long-term acute care hospitals to LifeCare Holdings, Inc. for approximately $120 million, in a deal that is expected to be completed by September.
"The sale of these six long-term acute care hospitals to LifeCare reinforces HealthSouth's strategic focus on its 97 core, inpatient rehabilitation hospitals," HealthSouth President/CEO Jay Grinney said in a media release.
Grinney said Birmingham, AL-based HealthSouth will use the money from the sale to "invest in the retirement of our 10.75% senior notes and our accelerated de novo strategy. Most importantly, this divestiture does not change the company's outlook for 2011: We still expect our 2011 full-year results will be at the high end of, or greater than, the Adjusted EBITDA range of $440 million to $450 million."
Based in Plano, TX, LifeCare operates 20 long-term acute care hospitals in nine states. In a media statement, LifeCare chairman and CEO Phillip B. Douglas said, "Our company’s primary focus is the operation of long-term acute care hospitals. We look forward to sharing best practices across all of our hospitals and continuing to advance care for medically complex patients who require intensive treatment over an extended period of time.”
Coker Group analyst Mark Reiboldt said in an e-mail to HealthLeaders: "This one is probably more straightforward and perhaps less strategic relative to broader market trends. I imagine HLS recognizes where reimbursement and costs are heading for long-term care and they would likely be better served to focus on their core strengths in PT, rehab and other ancillary services. I read this as an opportunity to divest these assets, retire debt, and refocus on the company's core profitability. "
HealthSouth will work with LifeCare to transition the hospitals' employees and ensure there will be no interruption to patient care during the transfer to the new ownership. "We want to recognize and thank our highly skilled employees at these hospitals for their years of service and wish them the best under LifeCare's leadership," Grinney said.
The hospitals in the sale include:
HealthSouth Hospital at Tenaya, Las Vegas, NV;
HealthSouth Hospital of Houston, Houston, TX;
HealthSouth RidgeLake Hospital, Sarasota, FL;
HealthSouth Hospital of Pittsburgh, Pittsburgh, PA;
HealthSouth Specialty Hospital of North Louisiana, Ruston, LA, and two satellite locations, HealthSouth Hospital of North Louisiana — Farmerville, LA, and HealthSouth Hospital of North Louisiana — Homer, LA.
These hospitals contributed $121.7 million of net operating revenues and $17.5 million of Adjusted EBITDA to HealthSouth Corporation in 2010. They will be treated as discontinued operations beginning in the second quarter of 2011, HealthSouth said.
HealthSouth, which specializes in inpatient rehabilitative healthcare services, operates in 26 states and in Puerto Rico, with a network of inpatient rehabilitation hospitals, long-term acute care hospitals, outpatient rehabilitation satellite clinics and home health agencies.
Shareholders at Community Health Systems this week ignored the urging of one investor group and overwhelming re-elected three members of the board of directors – including CFO W. Larry Cash – during the company's 2011 annual meeting.
William Patterson, executive director of CtW Investment Group, in an April 21 letter to fellow shareholders, had called for the ouster of Cash, and board members James S. Ely III, and John A. Fry, "given their culpability for the growing scandal surrounding proper oversight of Medicare billing practices, which has precipitated a 25% decline in Community's market value."
Patterson was referring to Tenet Healthcare Corp.'s lawsuit filed in April claiming that Franklin, TN-based CHS overbilled Medicare by as much as $377 million using medically unnecessary admissions that improved its bottom line and appeal to investors.
A CHS filing with the Securities and Exchange Commission, however, showed that Cash easily won re-election on Tuesday by garnering 90.4% of the votes. Ely and fry each received 82.9%.
The vote appeared to be a vindication for Cash, Ely, Fry, and CEO/President/Chairman Wayne T. Smith, who vigorously campaigned for their re-election. However, it was also clear that the CtW campaign made some shareholders leery. Two other board members who were not the subject of the CtW ouster campaign, William Norris Jennings, MD, and H. Mitchell Watson, Jr., were reelected with 99.5% and 98.4% of the vote, respectively, the SEC filing showed.
CHS abandoned its hostile takeover bid for Dallas-based Tenet earlier this month, after the Tenet board unanimously rejected what CHS called its "best and final offer" of $7.25 per share cash, or about $4.1 billion. Tenet CEO Travis Fetter and Tenet board chair Edward A. Kangas said in a letter to Smith that the offer "grossly undervalues the company and is not in the best interests of Tenet or its shareholders."
