Hospitals will face continued financial stress in the first half of 2021, at least until vaccines are widely available.
The late-year deluge of COVID-19 hospitalizations does not bode well for the financial prospects of the nation's not-for-profit hospitals heading into the new year, according to Fitch Ratings, which on Wednesday revised its 2021 outlook for the sector to "stable" from "negative."
The ongoing pandemic-related public health emergency prompted a shutdown of money-making elective procedures in 2020 for hospitals, Fitch said, and the latest, soaring wave of COVID-19 cases suggest that elective procedures may continue to be restricted in 2021.
"Elective procedures, even at a reduced clip, should not hit hospitals as hard financially as the nationwide shutdown that cut top line revenues by around 40% in Spring of 2020," said Fitch Senior Director Kevin Holloran.
Holloran noted that hospitals are better prepared for this latest wave of COVID-19 hospitalizations than they were during when the first wave of cases struck last spring.
Because of that, going forward, elective procedures may again be limited in some regions, but not to the extent seen last spring, when hospitals nationwide shut down elective procedures.
"It's a case of 'been there, done that' in a sense with hospitals treating COVID-19 patients more efficiently, which is leading to shorter hospital stays," said Holloran.
However, Holloran said hospitals will face continued financial stress in the first half of 2021, until vaccines are widely available.
Hospitals also will face rising operating expenses in 2021 related to the pandemic.
"Providers will need to secure a mini-stockpile of ventilators, masks, gowns, drugs and certain types of beds, though adequate staffing will be the most critical component," Holloran said.
The president-elect is expected this week to formally announce his choices for HHS secretary, CDC director, surgeon general and "coronavirus czar."
Reports that President-elect Joe Biden will nominate California Attorney General Xavier Becerra to be secretary of the Department of Health and Human Services were met with cheers Monday from payers, providers and other stakeholders.
Rick Pollack, president and CEO of the American Hospital Association, praised Becerra for his work as a Congressman, and for in his leadership role in defending the Affordable Care Act in California v. Texas.Which was argued last month before the U.S. Supreme Court.
"We have also worked with him as a longtime former member of the U.S. House of Representatives, including as a member of the Ways and Means Committee's health subcommittee," Pollack said. "He has been a champion for affordable health access and coverage, which the AHA has supported, and he has consistently made people across America and their health a priority."
Federation of American Hospitals President and CEO Chip Kahn also praised Becerra's "staunch support" of the ACA, and called the nomination "a historic choice at a historic time."
"He is a superb pick to lead the agency at the center of the fight against COVID-19," Kahn said. "As the virus continues to wreak havoc from coast to coast, he will step in with the kind of leadership that on day one will immediately impact the pandemic."
"During his time in Congress, I had opportunities to work with Attorney General Becerra on important healthcare issues and know that he brings to his new role a keen understanding of, and deep dedication to, Americans' health and healthcare," Kahn said. "He has a proven commitment to assuring all Americans affordable healthcare coverage as well as an established record of protecting and preserving Medicare for our seniors and disabled."
The Campaign for Sustainable Rx Pricing executive director Lauren Aronson praised Becerra's "demonstrated track record of standing up for consumers."
"CSRxP looks forward to working with him and the administration to advance market-based solutions to lower prescription drug prices, cut through drug companies' blame game by pulling back the misguided Rebate Rule and hold Big Pharma accountable," said CSRxP.
"It will be particularly critical for the next HHS secretary to encourage greater prescription drug pricing transparency, foster generic and biosimilar competition and crack down on Big Pharma's egregious price-gouging and anti-competitive practices," Aronson said.
Media outlets are also reporting that Rochelle Walensky, MD, the chief of infectious diseases at Massachusetts General Hospital, will lead the Centers for Disease Control; Vivek Murthy, MD, surgeon general under President Barack Obama, will return to that job under Biden; and that Jeffrey D. Zients, who led Obama's National Economic Council, will serve as Biden's "coronavirus czar."
Infectious disease expert Anthony Fauci, MD, said last week that he accepted President-elect Biden's offer to continue serving as the White House's chief medical advisor.
Matt Eyles, president and CEO of America's Health Insurance Plans, said payers "look forward to working with the entire diverse, experienced and accomplished group of leaders nominated to and announced for key positions."
"These leaders will face several critical national priorities, including overcoming the COVID-19 crisis, improving health equity, advancing healthcare affordability and access, improving quality of care, and ensuring the stability of markets," Eyles said.
"Strong public-private partnerships are essential to achieving these goals, and health insurance providers are eager to assist the Biden health team," he said.
Pollack acknowledged that Becerra will face a critical issues at HHS, but that "nothing is more critical than the COVID-19 pandemic, and making sure hospitals, health systems and our heroic frontline caregivers have the resources and support they need to care for patients and win the battle against the virus."
"We also need to make important progress on advancing the transformation of healthcare, ensuring access to coverage, making healthcare equitable to all people in America and enhancing the quality of care," Pollack said.
The largest employment gains include an additional 29,000 jobs in clinicians' offices. Hospitals created 4,000 jobs.
Healthcare added 46,000 jobs in November, the seventh consecutive month of job gains for the sector, according to the latest federal jobs report, released by the Bureau of Labor Statistics Friday.
However, the healthcare sector has 527,000 fewer jobs at the end of November than in February, BLS said.
The bulk of the new healthcare sector jobs in November (+29,000) were in physicians, dentists, and other provider offices, and home healthcare services (+13,000). Nursing homes shed 12,000 jobs. Hospitals created 4,000 jobs, BLS data show.
November's numbers mark a decrease from the 58,000 healthcare jobs created in October, and the 53,000 jobs created in September, and well below the 75,000 jobs created in August, 126,000 jobs created in July, and the 318,000 jobs created in June.
Healthcare employed nearly 16 million people in November, down from 16.5 million in February. Hospitals employed 5.1 million people in November, about 100,000 fewer than in February.
The November job report largely reflects the state of the economy in mid-month and is considered preliminary and subject to considerable revision.
In the overall economy, payroll employment grew by a sluggish 245,000 in November, which BLS blamed on the coronavirus pandemic.
"These improvements in the labor market reflect the continued resumption of economic activity that had been curtailed due to the coronavirus (COVID-19) pandemic and efforts to contain it," BLS said. "However, the pace of improvement in the labor market has moderated in recent months."
The unemployment rate dropped from 6.9% to 6.7% for the month.
The voluntary Geographic Direct Contracting Model will create regional integrated relationships with providers and community organizations to address the needs of Medicare beneficiaries.
Medicare on Thursday announced the launch of a voluntary payment model that will test whether regional, value-based care can improve quality and cut costs across geographic areas.
The Geographic Direct Contracting Model, also known as the "Model" or "Geo", will allow "direct contracting entities" to collaborate with providers and community organizations in a region to better coordinate care and address the social needs of Original Medicare beneficiaries in that region, the Centers for Medicare & Medicaid Services said.
"The need to strengthen the Medicare program by moving to a system that aligns financial incentives to pay for keeping people health has long been a priority," CMS Administrator Seema Verma said.
"This model allows participating entities to build integrated relationships with healthcare providers and invest in population health in a region to better coordinate care, improve quality, and lower the cost of care for Medicare beneficiaries in a community," she said.
Under the six-year initiative, which will begin January 1, 2022, DCEs will own the total cost of care for Medicare fee-for-service beneficiaries in their region. Each DCE will cover a minimum of 30,000 beneficiaries, with no maximum number.
Geo requires participants to take full risk with 100% shared savings / shared losses for Medicare Parts A and B services for aligned Medicare FFS beneficiaries in a defined target region.
The DCEs – which may include accountable care organizations, health systems, healthcare provider groups, and health plans – will work under two voluntary capitation payment schemes: total or partial capitation.
Under the total capitation model, DCEs will opt into reducing Geo Preferred Providers' fee-for-service billing paid by Medicare Administrative Contractors by 100%. In exchange, DCEs will get a monthly capitated payment equal to the projected reduction in FFS billings and be responsible for all downstream payments to Geo providers, who will submit no-pay claims to MACs.
Under partial capitation, Geo providers' FFS billing will be reduced by MACs by between 1% and 50%. In exchange, DCEs will get a monthly capitated payment equal to the projected reduction in FFS payments. DCEs will have the option of making additional downstream payments to providers.
The Geo model financial methodology is based on a DCE's performance against a region's Performance Year Benchmark. The model also includes risk corridors, risk adjustment and quality adjustments and a region's Performance Year Benchmarks will be set using a Geographic Rate Book.
The initiative will be tested over six-years in four to 10 regions, and will include two three-year performance periods, starting on January 1, 2022, and January 1, 2025.
CMS has identified 15 metropolitan regions, including Los Angeles, Detroit, Atlanta, and Miami, each of which contains between 150,000 to 700,00 beneficiaries.
The new final rules did not sit well with providers, who complained that the cuts are coming at a critical time for financially strapped hospitals.
Medicare on Wednesday unveiled long-anticipated final rules that will continue cuts to the 340B drug program, expand coverage for some procedures in ambulatory surgery centers, and gradually eliminate all 1,700 inpatient-only procedures under the Outpatient Prospective Payment System.
Eliminating the In-patient Only List
The Centers for Medicare & Medicaid Services said that eliminating the inpatient-only list -- starting with about 300 primarily musculoskeletal-related services, effective January 1, 2021 -- will give patients and physicians more freedom to choose an appropriate and potentially cost-saving care setting.
In the short term, CMS said, providing care in an outpatient setting during the public health emergency will also improve access to care for non-COVID-19 patients.
CMS Administrator Seema Verma said eliminating the in-patient only list will remove an incentive to send patients to hospitals for higher-priced procedures that could be done in lower-cost outpatient settings that will "level the playing field and boost competition at every turn."
"Today's rule is no different," Verma said Wednesday. "It allows doctors and patients to make decisions about the most appropriate site of care, based on what makes the most sense for the course of treatment and the patient without micromanagement from Washington."
The new final rule did not sit well with hospital stakeholders, who complained that the cuts are coming at a critical time for financially strapped providers.
"(The) Outpatient Prospective Payment System final rule takes critical resources away from hospitals as they strain under the heavy financial burden of COVID-19, and it threatens access to health are in underserved communities across the country now and after the public health crisis ends," said Beth Feldpush, SVP of policy and advocacy at America's Essential Hospitals.
"This rule would be bad policy at any time and is especially harmful now, as the public health emergency intensifies and front-line hospitals face unprecedented capacity and cost pressures," Feldpush said.
Tom Nickels, EVP at the American Hospital Association, said the elimination of inpatient-only list over three years has the potential to harm patients.
"The services on the inpatient-only list are often complex and complicated surgical procedures that require the close care and coordinated services provided in a hospital inpatient setting," he said.
340B Cuts Continue
The final rule also continues CMS's ongoing policy since 2018 of reducing payments for 340B drug, using a formula that pays the Average Sales Price plus 6% to an ASP minus 22.5%.
CMS said the policy lowers out-of-pocket drug costs for Medicare beneficiaries by letting them share in the discount that hospitals receive under 340B. Medicare beneficiaries have saved nearly $1 billion on drug costs, since the policy went into effect in 2018, and CMS expects to see an additional $300 million in savings for beneficiaries in 2021.
A federal appeals court in July overturned a district court ruling in a suit brought by hospital stakeholders. In upholding the policy, the appeals court said that CMS was acting within a "reasonable interpretation of the Medicare statute."
The AHA's Tom Nickels said that continuing the 340B cuts "undermines the effectiveness of the 340B program and exacerbates the strain placed on hospitals serving vulnerable communities."
"These cuts conflict with Congress' clear intent, perpetuate the Administration's inaccurate interpretation of the law, as well as its failure to protect the program from continued assaults by drug companies," Nickels said.
Feldpush said "there is no policy justification" for the 340B cuts, which she said "flout congressional intent for the 340B program and undermine the savings it was designed to create for hospitals that care for underserved people and communities."
She urged CMS to "reverse course on this damaging policy and restore support essential hospitals need to meet their safety-net mission."
ASC CPL Expands
The final rule also adds 11 procedures to the ambulatory surgery center covered procedures list, including total hip arthroplasty, and revises the criteria used to add surgical procedures to the ASC CPL.
"Using our revised criteria, we are adding an additional 267 surgical procedures to the ASC CPL beginning January 1, 2021," CMS said. "Finally, we are adopting a notification process for surgical procedures the public believes can be added to the ASC CPL under the criteria we are retaining."
The Iowa-based health system appointed CEOs for UnityPoint Health and its UnityPoint Clinic physician network.
UnityPoint Health has named veteran healthcare executive Clay Holderman as the West Des Moines, Iowa-based health system's new president and CEO.
Holderman, now COO and executive vice president at private, not-for-profit Presbyterian Healthcare Services in Albuquerque, New Mexico, will take over at UnityPoint in February 2021.
Holderman's strategic priorities upon his arrival next year are expected to focus on COVID-19-related workforce recovery efforts, UnityPoint said.
"Clay Holderman is a leader who believes in making a positive and lasting impact on the lives of those we are privileged to care for," said UnityPoint Board Chairman Randy Easton. "It was quickly evident Clay has that unique combination of a values-oriented mindset coupled with a transformative vision for the future."
Interim CEO Sue Thompson will lead UnityPoint until Holderman arrives.
UnityPoint Clinic
UnityPoint also named Sanjeeb Khatua, MD, president and CEO of UnityPoint Clinic, the health system's integrated physicians network, effective January 5, 2021.
Khatua, a board-certified family physician, now holds several leadership roles at Edward Elmhurst Health, a $1.5 billion integrated health system in Chicagoland.
"We are thrilled to welcome Dr. Khatua to our UnityPoint Health family," said Dave Williams, MD, CCO at UnityPoint Health. "As our organization continues to confront the ongoing COVID-19 crisis, we remain focused on delivering the best possible patient care to the patients and communities we serve."
UnityPoint Health is the nation’s 13th largest nonprofit health system with 21 hospitals, and more than 400 care venues in Iowa, western Illinois, and southern Wisconsin.
UnityPoint Clinic includes more than 1,100 clinicians at more than 400 clinics, providing primary and specialty care services across its three-state service area.
CMS Administrator Seema Verma said the extension of benefits is an acknowledgement of "the speed and effectiveness with which the American healthcare system has adapted to telehealth."
Medicare has made permanent nine telehealth services and will extend payments for another 59 services beyond the public health emergency in the ongoing effort to expand remote healthcare access in rural America, the Centers for Medicare & Medicaid Services said Tuesday.
In a media telephone conference Tuesday afternoon, CMS Administrator Seema Verma said the extension of benefits, limited by statutory authority to rural areas, is an acknowledgement of "the speed and effectiveness with which the American healthcare system has adapted to telehealth," which she called "astounding."
"Before the COVID public health emergency, only 15,000 beneficiaries each week receive Medicare telemedicine visits," Verma said. "But between and mid-March mid-October of 2020, early data shows that over 24 million Medicare beneficiaries used telehealth. This explosion represents nothing less than a seismic shift in healthcare delivery."
During the PHE, CMS added 144 services that Medicare will pay for. Now, nine of those services, including group psychotherapy and some visits for patients with cognitive imparities, will become permanent Medicare telehealth benefits.
Medicare payments for another 59 services, including emergency department visits, critical care, and physical and occupational therapy, will be extended beyond the PHE while CMS evaluates the effect on care quality and outcomes, Verma said.
"These additions allow beneficiaries in rural areas who are in a medical facility to continue to have access to a range of telehealth services that we know work for them," Verma said.
CMS has also commissioned a study to examine the efficacy of the remaining 76 telehealth services added during the PHE, Verma said.
"The study will evaluate telehealth as a whole," she said. "In particular, we will examine remote patient monitoring and virtual physician supervision to assess the impact of telehealth on quality, safety and cost as well as potential for fraud and abuse. This study should help inform future efforts the agency undertakes."
The extension of these telehealth services will be limited only to rural areas, Verma said, because "CMS does not have the statutory authority to permanently cover telehealth for beneficiaries living outside of rural areas, nor to generally allow beneficiaries to receive telehealth from their home unless there is congressional action."
"Without a change to statute, telehealth will revert to a rural benefit, albeit with a significantly expanded menu of services," Verma said. "Congress has the opportunity to make telehealth available to beneficiaries across the country and allow them to get telehealth services from the convenience of their home."
Stakeholders pledge to ensure that COVID-19 vaccines are evaluated and approved "through a rigorous scientific and regulatory process."
The nation's largest healthcare professional associations on Tuesday urged continued precautions to stem the spread of COVID-19 until vaccines for the virus make the public "broadly immunized."
In "an open letter to the American people," the American Medical Association, American Hospital Association, and American Nurses Association affirmed their commitment to ensure that COVID-19 vaccines are evaluated and approved "through a rigorous scientific and regulatory process."
"Vaccines have eradicated smallpox, nearly eliminated chickenpox and polio, and minimized the impact of countless other diseases," the letter said.
"To achieve a similar result from COVID-19 vaccines requires trust in the process to develop, distribute and administer a safe and effective vaccine and broad willingness to get vaccinated."
Until the U.S. reaches broad population immunization, the letter urged people to continue to practice three steps to prevent the spread of COVID-19: wear a face mask, maintain social distancing, and wash your hands."
Patients will make the final decision about their care venue, but CMS says the initiative allows patients to stay at home with family without COVID-mandated visitation restrictions in hospitals.
"We're at a new level of crisis response with COVID-19," Centers for Medicare & Medicaid Services Administrator Seema Verma said.
"CMS is leveraging the latest innovations and technology to help healthcare systems that are facing significant challenges to increase their capacity to make sure patients get the care they need." she said.
Six health systems have been approved for the new waivers and include Brigham and Women's Hospital; Huntsman Cancer Institute; Massachusetts General Hospital; Mount Sinai Health System; Presbyterian Healthcare Services; and UnityPoint Health. CMS expects new applications to be submitted.
"With new areas across the country experiencing significant challenges to the capacity of their health care systems, our job is to make sure that CMS regulations are not standing in the way of patient care for COVID-19 and beyond," Verma said.
Patients will make the final decision about their care venue, but Verma said the initiative allows patients to stay at home with family without COVID-mandated visitation restrictions in hospitals.
The new allowances build on the March 2020 Hospitals Without Walls program that provides broad regulatory flexibility for hospitals to provide services in non-traditional care venues.
CMS identified more than 60 acute conditions, such as asthma, congestive heart failure, pneumonia, and chronic obstructive pulmonary disease, that can be treated and monitored safely in patients' homes.
Hospitals adopting the allowances must have screening protocols in place before care at home begins to assess both medical and non-medical factors, including working utilities, assessment of physical barriers and screenings for domestic violence concerns.
Medicare enrollees will only be admitted from emergency departments and inpatient hospital beds, and an in-person physician evaluation is required before starting home care.
In addition, a registered nurse must evaluate each patient once a day either in person or remotely, and two in-person visits must take place every day, by either registered nurses or paramedics, based on the patient's nursing plan and hospital policies.
ASC Flexibility
CMS is also updating its previously announced regulatory flexibility for ASCs during the Public Health Emergency, which will allow them to provide inpatient hospital care for longer periods than the 24-hour period normally allowed.
With the update, ASCs need only provide 24-hour nursing services when there is actually one or more patient receiving care onsite, which allows ASCs to "flex up" staffing as needed to provide a relief valve for overwhelmed hospitals while not mandating nurses be present when no patients are in the ASC.
The flexibility is available to any of the 5,732 ASCs in the United States and will be immediately effective for the 85 ASCs now participating in the Hospital Without Walls initiative.
CMS said the flexibility will allow ASCs enrolled as hospitals to serve as another access point for surgical capacity and other emergent non-COVID-19 procedures, such as cancer surgeries.
The rule finalizes changes to two technical aspects of the HHS-RADV program, the error rate calculation and the application of HHS-RADV results.
The Centers for Medicare & Medicaid Services this week issued a final rule to amend the methodology for the Department of Health and Human Services’ risk adjustment data validation (HHS-RADV) program.
After collecting stakeholder feedback, CMS says the final rule "will give states and insurers more stability and predictability, promote program integrity, and foster increased competition."
*These changes will also promote fairness by ensuring that insurers are not penalized in HHS-RADV when a difference in diagnosis for an enrollee has no effect on risk, as well as by ensuring that insurers that receive adjustments are receiving adjustments in proportion to the errors identified through HHS-RADV," CMS said.
The first change refines the HHS-RADV error rate calculation, which is based on the insurers' "failure rate," a metric that validates diagnoses and conditions associated with enrollees selected for audit.
The final rule will also:
* Modify grouping medical conditions in HHS-RADV within the same hierarchical condition category (HCC) coefficient estimation groups in risk adjustment to determine failure rates for those HCCs. The modification will better account for the difficulty in categorizing some conditions and to refine how the error rate calculation measures risk differences among condition groupings.
* Reduce the magnitude of risk score adjustments for insurers close to the threshold used to determine whether an issuer is an outlier. Now, insurers whose failure rates are not significantly different from insurers just inside the threshold may see significant changes to their risk scores and transfers, creating a "payment cliff" for insurers just outside the threshold.
* Modify the error rate calculation in cases where certain outlier insurers have a negative failure rate. A low failure rate is not always due to more accurate data submission. A low failure rate can also be due to not identifying conditions that should have been reported in risk adjustment.
The changes are based on lessons learned and stakeholder feedback from the initial years of HHS-RADV. It is part of a larger initiative to disincentivize insurers from cherry-picking, younger, healthier, low-risk enrollees.
