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The Congressional "Super Committee" - tasked with finding a politically acceptable way to reduce the federal deficit - threw in the towel on Monday, November 21st. Their failure to develop a compromise package of spending cuts and revenue increases that significantly reduces the deficit means an additional $1.2T in spending reductions will occur over the next 10 years as a result of "sequestration."
The sequestration rules include significant Medicare cuts. Given the reductions in Medicare payments as a result of ACA and now the sequester, providers are rightly asking "are we there yet?" Unfortunately, given the country's fiscal situation and the composition of its projected long-term deficits, the answer is no. It's only a matter of time before Congress is forced to revisit the issue and this time around federally funded healthcare programs are likely to be featured far more prominently. If there's a silver lining in this for providers, it's that they have more time to prepare for cuts by dramatically reducing their cost structures.
The Budget Control Act, which was passed in July and created the "Super Committee" process, reduces the deficit overall by $2.1T. It includes $900B in initial discretionary spending cuts and mandated a minimum of an additional $1.2T in deficit reduction as a result of either the "Super Committee" or sequestration process. The sequester is an automatic, across the board cut to most federal programs. Roughly half the savings will come from the Department of Defense with the remaining coming from all other areas of government. Medicaid, Social Security, and ACA "insurance affordability credits" are exempted and Medicare cuts are capped at two percent in any given year. Exhibit I (click to enlarge) below provides an estimate of how these cuts will impact physicians and hospitals.
Within its legal authority, CMS could soften the blow to certain providers by tinkering with market basket updates, "coding creep" and other technical adjustments. Under this scenario, hospitals and other providers with narrow margins would enjoy some reprieve from the cuts. This would come at the expense of post-acute care providers, who in CMS's estimation have healthier margins.
Additionally, providers with a large Medicare Advantage population will also likely feel "pass-though" cuts from MA plans as they minimize their margin impact by increasing beneficiary cost sharing and putting pressure on provider rates.
Including sequestered amount with the ACA cuts, hospitals are facing approximately $200B payment reductions over the next 10 years. However, given that projected long-term deficits are driven largely by Medicare and Medicaid expenditures (Exhibit II), it's likely we're only half way there.
Exhibit II - CBO Projection of Federal Deficit Under Current Law
On November 16th, the U.S. deficit surpassed $15 trillion. Most economists believe the U.S will require four to five trillion dollars in total deficit reduction to achieve a sustainable debt to GDP ratio. Achieving this overall level of deficit reduction will require at least an additional $2.3 to $3.7 trillion in savings over 10 years (Exhibit III).
Exhibit III: Estimated Additional Deficit Reduction Required to Achieve a Sustainable Debt to GDP Ratio
Given the already significant cuts to defense and discretionary spending it will be hard find significant additional savings in these programs.
Using the various proposals submitted during the "Super Committee" process it's likely that a plan that achieves the required level of deficit reduction could entail an additional $400 to $600 billion in Medicare and Medicaid reductions over 10 years. Below (Exhibit IV) is a menu of items that would impact hospitals and have received significant attention in the various deficit reduction proposals.
Exhibit IV: Potential Sources of Additional Hospital Medicare and Medicaid Reimbursement Reductions
In addition to cuts that directly impact hospitals there are a number of proposals that target beneficiaries (i.e. increased cost sharing - $33 to 100B, Medigap reforms - $2 to $40B) that place additional margin pressure on providers.
While there is much discussion, especially amongst supporters of defense spending, of either softening the sequester cuts or passing a deficit reduction package prior to federal fiscal year 2013, it's not likely. The stumbling blocks encountered by the "Super Committee" remain firmly in place.
Most significant is the looming 2012 elections. Both sides would like to use the issues of deficits, taxes and entitlement spending as campaign cudgels which greatly diminishes the likelihood of significant compromise.
Second, in Washington compromise only occurs when there's no other option. According to projections the U.S. will not reach its debt ceiling limit until early 2013, removing any real sense of urgency. This should allow Congress and the President to "kick the can" down the road until after the 2012 elections. However, if the U.S. experiences a significant double-dip recession - which Moody's forecasts a 40% chance of in the next six to 12 months - we could reach the debt ceiling during late 2012.
Current and anticipated reductions in payments, not just from the public sector, will squeeze already narrow margins. Providers need to move from managing operating costs to redesigning the organization's overall cost structure. These efforts should include re-examining the services offered by the organization, re-engineering how remaining services are delivered, and reducing overall administrative costs.
Service Evaluation: Non-core service lines and activities will need to be eliminated as organizations can no longer afford to be "everything to everyone." Services identified as providing low value to the organization with little chance for improvement should be eliminated. And non-strategic assets should be monetized.
Re-engineering Care Delivery: Organizations need to focus on making sure the care they deliver is cost-efficient for the organization and cost-effective for purchasers. Not only will care teams need to re-engineer internal processes to minimize waste and patient hazards, but the organization will need to collaborate with providers across the care continuum to ensure that avoidable admissions and readmissions are minimized, and duplicative testing and unnecessary procedures are eliminated. Achieving this outcome will require a cadre of engaged physician leaders at all levels of the organization to orchestrate process re-engineering. At the same time, providers will also need to work with payers to ensure that they capture some of the value created through more efficient care delivery. HFMA's Value Reports and related tools (/valueproject/) offer providers resources to help them undertake care process redesign.
Reducing Administrative Costs: Administrative services that do not add value to the organization should be pooled and outsourced where opportunities to reduce cost exist. Organizations also should explore population-health-management pilots with their own heavy users of health care to gain experience with the strategy and better manage benefit costs.
These efforts will take time to achieve the gains necessary to ensure an organization's financial sustainability. Providers would be wise to re-double their efforts given the additional reimbursement reductions on the horizon.
Publication Date: Monday, November 28, 2011
In this Business Profile, Shawn Yates, director of healthcare product management at Ontario Systems, discusses the growing challenge of managing self-pay accounts and provides insight on how providers can successfully collect patient payments.
In this business profile, Cathy Smith, leader of the revenue transformation consulting practice at The Claro Group discusses how the organization helps hospitals and medical groups reimagine their revenue cycle.
In this business profile, Deloitte & Touche LLP executives Anne Phelps, principal and U.S. healthcare regulatory leader, and Daniel Esquibel, senior manager, explain ways health systems, health plans, and physician practices can prepare for MACRA.
In this Business Profile, Bruce Haupt, president and CEO of ClearBalance, discusses how a patient loan program can increase patient collections, reduce bad debt, and speed cash flow.
In this Business Profile, Jerry Bruno, principal with Deloitte Consulting LLP, discusses the importance of choosing revenue cycle solutions that help an organization meet the challenges of a quickly evolving healthcare environment.
In this business profile, Lane Jackson, a partner in the Grant Thornton LLP Health Care Advisory Services practice, with extensive experience in overseeing system implementations and revenue cycle reorganizations, discusses best practices for elevating revenue cycle performance during an EMR implementation. Grant Thornton LLP is a sponsor of the Large System Controllers Council Affinity Group.
Patient financial engagement is more challenging than ever – and more critical. With patient responsibility as a percentage of revenue on the rise, providers have seen their billing-related costs and accounts receivable levels increase. If increasing collection yield and reducing costs are a priority for your organization, the metrics outlined in this presentation will provide the framework you need to understand what’s working and what’s not, in order to guide your overall patient financial engagement initiatives and optimize results.
No two patients are the same. Each has a very personal healthcare experience, and each has distinct financial needs and preferences that have an impact on how, when and if they chose to pay their healthcare bill. It’s no longer effective to apply static billing techniques to solve the complex challenge of collecting balances from patients. The need to tailor financial conversations and payment options to individual needs and preferences is critical. This presentation provides 10 recommendations that will not only help you improve payment performance through a more tailored approach, but take control of rising collection costs.
This white paper, written by Apex Vice President of Solutions and Services, Carrie Romandine, discusses the importance of patient segmentation and messaging specifically related to the patient revenue cycle. Applying strategic messaging that is tailored to each patient type will not only better educate consumers on payment options specific to their billing needs, but it will maximize the amount collected before sending to collections. Further, targeted messaging should be applied across all points of patient interaction (i.e. point of service, customer service, patient statements) and analyzed regularly for maximized results.
This white paper, written by Apex President Patrick Maurer, discusses methods to increase patient adoption of online payments. Providers are now seeking ways to incrementally collect more payments due from patients as well as speeding up the rate of collections. This white paper shows why patient-centric approaches to online payment portals are important complements to traditional provider-centric approaches.
Increased electronic engagement between healthcare providers and patients provides significant opportunities for improving revenue cycle metrics and encouraging patients to access EHRs. This article, written by Apex Founder and CEO Brian Kueppers, explores a number of strategies to create synergy between patient billing, online payment portals and electronic health record (EHR) software to realize a high ROI in speed to payment, patient satisfaction and portal adoption for meaningful use.
Faced with a rising tide of bad debt, a large Southeastern healthcare system was seeing a sharp decline in net patient revenues. The need to improve collections was dire. By integrating critical tools and processes, the health system was able to increase online payments and improve its financial position. Taking a holistic approach increased overall collection yield by 10% while costs came down because the number of statements sent to patients fell by 10%, which equated to a $1.3M annualized improvement in patient cash over a six-month period. This case study explains how.
With the ICD10 deadline quickly approaching and daily responsibilities not slowing down, final preparations for October 1 require strategic prioritization and laser focus.
Read how Gwinnett Medical Center provides clear connections to financial information, offers multiple payment options for patients, and gives onsite staff the ability to collect payments at multiple points throughout the care process.
Read how Orlando Health was able to perform deeper dives into claims data to help the health system see claim rejections more quickly–even on the front end–and reduce A/R days.
To maintain fiscal fitness and boost patient satisfaction and loyalty, healthcare providers need visibility into when and how much they will be paid–by whom–and the ability to better navigate obstacles to payment. They need payment clarity. This whitepaper illuminates this concept that is winning fans at forward-thinking hospitals.
Financial services staff are always looking for ways to improve the verification, billing and collections processes, and Munson Healthcare is no different. Read about how they streamlined the billing process to produce cleaner bills on the front end and helped financial services staff collect more than $1 million in additional upfront annual revenue in one year.
Effective revenue cycle management can be a challenge for any hospital, but for smaller providers it is even tougher. Read how Wallace Thomson identified unreimbursed procedures, streamlined claims management, and improved its ability to determine charity eligibility.
Before launching an energy-efficiency initiative, it’s important to build a solid business case and understand the funding options and potential incentives that are available. Healthcare leaders should consider taking the steps outlined in the whitepaper to ease the process of gaining approval, piloting, implementing, and supporting sustainability projects. You will find that investing in sustainability and energy efficiency helps hospitals add cash to their bottom line. Discover how hospitals and health systems have various options for funding energy-efficient and renewable-energy initiatives, depending on their current financial structure and strategy.
Health care is a dynamic mergers and acquisitions market with numerous hospitals and health systems contemplating or pursuing formal arrangements with other entities. These relationships often pose a strategic benefit, such as enhancing competencies across the continuum, facilitating economies of scale, or giving the participants a competitive advantage in a crowded market. Underpinning any profitable acquisition is a robust capital planning strategy that ensures an organization reserves sufficient funds and efficiently onboards partners that advance the enterprise mission and values.
The success of healthcare mergers, acquisitions, and other affiliations is predicated in part on available capital, and the need for and sources of funding are considerations present throughout the partnering process, from choosing a partner to evaluating an arrangement’s capital needs to selecting an integration model to finding the right money source to finance the deal. This whitepaper offers several strategies that health system leaders have used to assess and manage capital needs for their growing networks.
Announcements from several commercial payers and the Centers for Medicare and Medicaid Services (CMS) early in 2015 around increased efforts to form value-based contracts with providers seemed to point to an impending rise in risk-based contracting. Rather than wait for disruption from the outside in, health care providers are now making inroads on collaborating with payers on various risk-based contracting models to increase the value of health care from within.
Yuma Regional Medical Center (YRMC) is a not-for-profit hospital serving a population of roughly 200,000 in Yuma and the surrounding communities.
Before becoming a ZirMed client, Yuma was attempting to manually monitor hundreds of thousands of charges which led to significant charge capture leakage. Learn how Yuma & ZirMed worked together to address underlying collections issues at the front end, thus increasing Yuma’s overall bottom line.
Kindred Hospital Rehabilitation Services works with partners to audit the market and the facility’s role in that market to identify opportunities for improvement. This approach leads to successes; Kindred’s clinical rehab and management expertise complements our partners’ strengths. Every facility and challenge is unique, and requires a full objective analysis.
As the critical link between patient care and reimbursement, health information enables more complete and accurate revenue capture. This 5-Minute White Paper Briefing shares how to achieve cost-effective revenue integrity by your optimizing HIM systems.
Speedier cash flow starts with better CDI and coding. This 5-Minute White Paper Briefing explains how providers can improve vital measures of technical and business performance to accelerate cash flow.
Qualified coders are getting harder to come by, and even the most seasoned professional can struggle with the complexity of ICD-10. This 5-Minute White Paper Briefing explains how partnerships can help improve coding and other key RCM operations potentially at a cost savings.
The point of managing your revenue cycle isn’t just to improve revenue and cash flow. It’s to do those things effectively by consistently following best practices— while spending as little time, money, and energy on them as possible.
How Lucile Packard Children’s Hospital Stanford increased payments received within 45 days by 20% and reduced paper submission claims by 70% by using ZirMed solutions.
The reasons claims are denied are so varied that managing denials can feel like chasing a thousand different tails. This situation is not surprising given that a hypothetical denial rate of just 5 percent translates to tens of thousands of denied claims per year for large hospitals—where real‐world denial rates often range from 12 to 22 percent. Read about how predictive modeling can detect meaningful correlations across claims denials data.
Emergency Mobile Health Care (EMHC) was founded to be and remains an exclusively locally owned and operated emergency medical service organization; today EMHC serves a population of more than a million people in and around Memphis, answering 75,000 calls each year.
Since the Physician Quality Reporting Initiative (PQRI) introduction, CMS has paid more than $100 million in bonus payments to participants. However, these bonuses ended in 2015; providers who successfully meet the reporting requirements in 2016 will avoid the 2% negative payment adjustment in 2018, so now is the time to act! Included in this whitepaper are implications of increasing patient responsibility, collections best practices, and collections and internal control solutions.
Getting paid what your physician deserves—that’s the goal of every biller. Yet even for the best billers, achieving that success can be elusive when denials stand in the way of success, presenting challenges at every turn. Denials aren’t going away, but you can learn techniques to manage and even prevent them.Join practice management expert Elizabeth W. Woodcock, MBA, FACMPE, CPC, to: Discover methods to translate denial data into business intelligence to improve your bottom line, determine staff productivity benchmarks for billers, and recognize common mistakes in denial management.
Physician practices must improve organizational efficiency to compete in this era of reduced reimbursement and escalating administrative costs.
Many healthcare organizations are pursuing next-generation health information systems solutions. Learn more about Navigant's work with University of Michigan Health System.
The proper implementation of healthcare information technology systems is crucial to an organization’s financial health.
HFMA offers online, email, and print opportunities to help you recruit the most talented healthcare finance professionals. Place your classified ads today.
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