Although recent discussions regarding the future of the healthcare industry often have a doom-and-gloom feel, from a ratings perspective, the industry is beginning to show signs of improvement, according to a director for Standard & Poor’s.

“Right now, we’re seeing that the healthcare sector has really stabilized in some ways, especially if you look at where we were a year ago,” says Martin Arrick, managing director, corporate and government ratings, not-for-profit healthcare group, Standard & Poor’s.

So far this year, “upgrades are running ahead of downgrades,” Arrick said Saturday afternoon during HFMA’s Executive Conference, and the number of positive outlook changes is outpacing negative outlook changes year-to-date. Ratings statistics for stand-alone hospitals are currently stronger than those for healthcare systems, he says. Non-operating revenues are showing signs of improvement—in FY09, the median non-operating revenue margin was 0.2 percent—as are operating margins (the median operating margin in FY09 was 2.2 percent).

Standard & Poor’s began to see improvement in the healthcare sector in mid-2009 and particularly in the fourth quarter of last year, Arrick says.

“In general, we’re seeing the healthcare sector bounce back from pressures (of the recession) compared with performance a year ago,” he says.

In 2010, Arrick says, Standard & Poor’s anticipates hospitals will continue to show signs of recovery from the recession. Patient volumes are expected to increase, and access to capital will improve, he says. But hospitals will still face a number of incremental pressures. The following pressures are expected to affect healthcare organizations in 2011 and beyond:

• Continued growth in bad debt & charity care
• Medicaid funding pressures
• Broad state budget pressures (and, what happens when stimulus “sunsets”)
• Employer-based insurance trends
• Broad economic issues
• Utilization trends
• Commercial plans that have their own rate pressures
• Increased physician competition
• Changing access to and more expensive capital

In terms of the mix of upgrades and downgrades that Standard & Poor’s will issue this year, “I think we’re probably going to be at 50-50 this year,” Arrick says. “To me, that’s stabilization and, to some degree, improvement.” However, negative outlooks are expected to exceed positive outlooks this year, he says.

Today’s hospitals face increasing pressure to improve clinical quality and comply with government mandates while working toward reducing treatment costs. During a Saturday morning session at HFMA’s Executive Conference, representatives for three low-cost, high-value organizations shared their strategies for achieving cost savings.

Standardization of care and processes. Although some clinicians will balk at standardizing care processes, “At the end of the day, we’re not standardizing care. We’re bringing our care to standards,” says Melinda S. Hancock, FHFMA, vice president of strategic finance, Bon Secours Richmond Health System, Richmond, Va.

Eliminate waste and rework. When waste is eliminated from a process, quality of care is enhanced and cost is decreased, says John Wiest, CPA, chief financial and institutional services officer, Lee Memorial Health System, Cape Coral, Fla. “Walk around your organization. Are the activities your employees are doing adding value and adding to an optimal patient experience?” he says. “Ask yourself, ‘What in this process is wasteful?’”

Establish productivity as a measure of accountability for leadership. At Lee Memorial, the organization developed a way of reviewing historical productivity by department, developed a four-step process for improving productivity, and created a productivity committee that reviewed measures for improving productivity throughout the organization. Productivity measures are also part of the performance reviews of each of the organization’s leaders, and productivity targets are shared with all employees for transparency.

Engage staff in productivity improvement.  Doing so will increase the value of employees to the organization as well as their satisfaction.  “I want people to have a say in their jobs,” Wiest says. “I want to know what it is that keeps them from doing their jobs to the best of their ability. I want them to be satisfied with their jobs.”

Educate employees about the importance of a process or initiative in improving quality of care and/or reducing cost. “Believe it or not, clinicians want to do the right thing, but they don’t always know what the right thing is,” says Lisa Saubermann, associate director, clinical pharmacy services, University of Rochester Medical Center, Rochester, N.Y.

Establish targeted pharmacotherapy rounds. Choose a specific drug, review its use, and talk with physicians regarding why it was prescribed. This creates opportunities for education of physicians and clinicians—and has the potential to reduce cost. “At our organization, targeted pharmacotherapy rounds have had a huge impact on reducing antimicrobacterial costs,” Saubermann says. “Ask the physicians and clinicians to justify why a patient is on a specific drug. Then, show them data that demonstrate results (of using a different protocol), such as reduced length of stay.”

Get the quick wins. “Don’t try to focus on being perfect. Strive for that overtime, but get the quick wins first,” he says. Sharing news of quick wins with employees will energize their efforts to enhance quality and reduce waste—and result in benefits for patients as well as the health of the organization, he says.

Most hospitals do a poor job of measuring quality in their organizations—and finance professionals have the potential to help their organizations develop a better measurement process, one physician administrator told participants of HFMA’s Executive Conference Saturday morning in Orlando.

John Byrnes, MD, senior vice president, system quality, for Spectrum Health in Grand Rapids, Mich., says the quality measures most hospitals rely on measure quality for a very small percentage of their patient populations—just 17 to 18 percent, he says. As payment mechanisms evolve around never events and readmissions, Byrnes advised the hospital finance professionals attending the conference to “get your quality reporting to be as robust and as detailed as your finance reporting."

“This is where you come in,” he told finance professionals at HFMA’s Executive Conference.

At Spectrum Health, the hospital’s quality and safety reporting system is based on the hospital’s chargemaster. “That’s what makes (our detailed quality reporting) possible,” says Joseph J. Fifer, FHFMA, CPA, vice president hospital group for Spectrum Health. The hospital’s quality and safety reporting system has the capability to analyze quality measurement data for an unlimited number of medical and surgical conditions. Currently, Spectrum Health’s system measures quality of care for 70 percent of the organization’s patient volume, Byrnes says. The organization also makes its quality data transparent by sharing the data on its web site.

“While your organization may not be ready to jump into bundled payment, (looking for opportunities to improve quality of care and reduce cost) are things your organization can be doing today,” Fifer says.

Effectively bringing finance and clinicians together to manage clinical and financial risk in a changing payment environment requires a commitment to being good partners for the sake of patients and the long-term health of their organizations. “If you have a mutual respect for each other’s discipline, you’ll be able to solve these issues together,” Fifer says. When finance professionals show clinicians how to use quality data in their work, clinicians will use the data to drive improvements in quality of care—which will better prepare the organization for bundled payment and refusal by payers to cover hospital-acquired conditions and never events, he says.

Other lessons shared by speakers regarding ways to drive quality improvement and better manage financial risk in healthcare organizations include:

• Tie improvements in quality with managers’ performance reviews and incentive bonuses. Jim Schnuck, senior vice president, financial operations, for Ardent Health Services, says his organization bases 50 percent of managers’ incentives on quality of care targets.
• Focused critical event analysis should take place at two levels: a central level (“Is there a hospitalwide problem?”) and a decentralized level (“Where did the problem(s) occur? Who was involved? What could have been done differently?”), says Tobie L. Bresloff, MD, chief quality officer for Hillcrest Medical Center.
• Screen all admissions for conditions that would be considered HACs (urinary tract infections, skin breakdown, fractures, etc.).
  Make risk management aware of process breakdowns as soon as possible—and involve the department in planning changes.

In comments submitted today to the Centers for Medicare & Medicaid Services (CMS) on the interim final definition of meaningful use, HFMA expressed concern that the proposed definition will make it impossible for most providers to qualify for financial incentives and avoid substantial penalties. Although HFMA supports CMS’s efforts in encouraging providers to adopt electronic health records, CMS’ proposed definition will actually serve as a barrier to achieving the agency’s intended outcome in some instances, HFMA said in its written comments.

Specific concerns detailed in HFMA’s comments include the timing and scope of the phases, the reporting burden, the broad definition of hospital-based physicians, the identification of hospitals for incentive payments, and the Medicaid incentive payment requirements.

The proposed rule was published in the Federal Register on January 13, 2010. Comments are due to CMS by Monday, March 15.

During HFMA’s Executive Conference in Orlando Friday afternoon, David Cutler, PhD, economist and healthcare adviser to President Obama, and Maureen Bisognano, executive vice president and chief operating officer for the Institute of Healthcare Improvement, asked attendees: What are the key drivers of cost and revenue in healthcare systems? And, is there an ideal management system to optimize the linkages between cost and quality?

Some of the key drivers of cost and revenue cited by participants include:

• Process failure
• Lack of training
• Variation (and a lack of standardization) in the use of physician preference items
• Variation in the ways a single procedure is performed
• Daily “fires” that take precedence over goals that have been set
• Focusing on short-term wins and not long-term wins

What does it take to achieve lasting change in an organization—change that results in enhanced quality of care while reducing costs and waste? It starts with passionate leadership, Cutler says. “Every organization that has gone through a large transformation has a very strong leader or leadership team,” he says.

• Lessons participants shared on ways to achieve lasting change include the following:
• Engaging senior leaders in the care and service offered by their organizations through frontline round throughout the system
• Getting serious about the need for change—and requiring everyone in the organization to get on board
• Focusing on the quality of the entire patient experience in addition to the quality of care provided
• Moving from a “defend and deny” survey response to embracing surveyors
• Aligning incentives by using a balanced scorecard that include measures for quality, patient satisfaction, and finance
• Setting a strategic direction along the pillars of service, cost, quality, and growth
• Establishing financial consequences relating to whether long-term goals are met

View the Executive Conference agenda.

Medical care is ineffectively provided, and this both lowers quality and drives up cost, says David Cutler, PhD, one of the nation’s most influential health economists and a key presidential adviser for health care.

During HFMA’s Executive Conference Friday morning in Orlando, Cutler discussed the need to enhance value in health care and ways that improved value could be achieved.

Today, the majority of patients are not satisfied with the service aspects of their medical care due to long wait times, an inability to effectively interact with their care providers, and more. “In health care, no one has stepped up to organize the patient care experience. Patients are essentially their own primary care physicians—they decide when they will get care,” says Cutler, Otto Eckstein Professor of Applied Economics at Harvard University.

Meanwhile, the organizations that should be connecting care are not doing so, he says. Cutler predicts that ultimately, someone will step into the role of providing care coordination—and that “whoever handles care coordination will be controlling the care experience, both in terms of care and service,” he says.

“Over the next decade, I would be very surprised if we did not see more of that type of organization going on,” both to reduce costs and improve the quality of care, he says. “Active management of (the care) people need, and the best way to deliver that care, is critical to improving value in care,” he added.

During his presentation, titled “The Value Proposition in Health Care,” Cutler provided five ideas regarding who might step into the role of healthcare coordination:

• Primary care providers (medical homes)
• Phamaceutical companies
• Insurers
• Companies such as Google or Microsoft
• iPhone developers

He asked healthcare finance professionals who attended the conference who they might add to this list of potential healthcare coordinators. “Walmart,” some attendees suggested.

Cutler also discussed several key changes that could result in taking a healthcare system that is haphazard in quality and too costly and focusing it on the core mission of value enhancement:

• Improving the flow of information in health care
• Aligning compensation systems so they reward better care, not just more care
• Stressing organizational structures that lead to improved performance

Changes in the current economic environment are creating a “burning platform” for healthcare reform—and healthcare finance professionals should be lead participants in efforts to improve care while reducing waste, two healthcare leaders told participants at HFMA’s Executive Conference in Orlando Friday morning.

“As healthcare finance professionals, we bring a lot of skills to the table to be able to advance discussions of ways to enhance quality of care while reducing costs,” HFMA Chair Catherine Jacobson, FHFMA, CPA, told attendees of HFMA’s Executive Conference.

During Friday’s opening session, “Reducing Waste and Enhancing Quality: A Case Study Approach,” Jacobson and Maureen Bisognano, executive vice president and COO, Institute for Healthcare Improvement, shared ways healthcare finance professionals could participate in systematically identifying and eliminating inefficiencies while maintaining or improving quality of care.

Early involvement by healthcare finance professionals on clinical improvement initiatives is crucial, Jacobson says. “Healthcare finance professionals are uniquely positioned to be able to encourage other key stakeholders to embrace change,” she says. Finance should  look for ways to communicate quality and performance data effectively and to balance the need for urgent change with a well thought-out strategy—a challenge for healthcare organizations.

The best way to bring CFOs, CEOs, and clinicians together in improving quality of care and processes is to give senior leaders the opportunity to view care and processes from the frontlines, Bisognano says.

She provided examples of ways healthcare finance professionals and clinicians have worked together to provide better care at lower cost.

One Pennsylvania hospital invested $35,000 in reducing the rate of blood infections—and saved more than $2 million, she says. Another hospital developed specific processes for reducing hospital-acquired infections in pediatric patients—and statistics showed that the initiative potentially saved the lives of 20 children per year, she says.

Three strategies for improving value in care, according to Bisognano, include:

• Eliminating quality problems that arise because patients’ expectations are not met
• Reducing costs (waste) significantly while maintaining or improving quality
• Expanding patients’ expectations by providing care delivery perceived as unusually high in value

Throughout the presentation, Bisognano discussed mounting evidence that better care can come at lower cost, and provided a compelling business case for improving quality. “I’m hopeful that the need to improve quality and reduce costs in health care is going to bring finance and clinicians together at the same table,” Bisognano says.

HFMA President and CEO Richard L. Clarke, DHA, FHFMA, advised healthcare finance leaders assembled in Orlando last night for HFMA’s Executive Conference to focus on strategic imperatives for success rather than the ups and downs of the reform legislation process.

Clarke began his remarks by outlining the forces that are driving change in today’s healthcare delivery system, including reduced access to health insurance coverage, a universal demand for improved quality, and exponential growth in healthcare expenditures.

In light of these change drivers, Clarke recommended that healthcare stakeholder value propositions address three major focus areas: access, quality, and cost. As cost pressures increase and hospital revenue streams are squeezed, organizations that are customer-centric and nimble will be well positioned for success, Clarke said. He also discussed innovative strategies to manage risk, reduce cost, price bundled services, and enhance quality while lowering cost, as detailed in HFMA’s newly published report, Healthcare Payment Reform: Accelerating Success.

Featured speakers at HFMA’s Executive Conference, “The Healthcare Imperative: Improving Quality While Driving Down Costs,”  include renowned healthcare economist David M. Cutler, PhD, Institute for Healthcare Improvement Executive Vice President and COO Maureen Bisognano, and Martin Arrick, managing director in Corporate and Government Ratings, Standard & Poor’s. The conference continues through Saturday.

A series of major initiatives to further increase transparency and oversight in the healthcare group purchasing industry have been announced by the Healthcare Group Purchasing Industry Initiative (HIGPII), an organization that promotes high ethical standards and practices for healthcare group purchasing organizations (GPOs). Upon completing its 2010 Best Practices Forum in Washington, D.C., HGPII introduced plans to establish an independent process for healthcare suppliers to file business grievances, as well as the convening of an independent ethics advisory panel to provide objective, independent guidance toward continued compliance with the highest ethical standards in the healthcare group purchasing industry.

“Hosting this annual forum to hold a constructive dialogue with a diverse range of industry and ethics experts is essential to adapting HGPII policies to fit the constantly changing dynamics of the healthcare industry, and we are gratified that congressional staff members and others were able to attend and participate in the conference,” said Lee H. Perlman, HGPII chairman.

In the development of its guiding principles, HGPII consulted with members of Congress, Capitol Hill staff, ethicists, outside industry experts, and leaders in the GPO industry.

Curtis Rooney, president of the Health Industry Group Purchasing Association (HIGPA), said in a statement, “Transparency and accountability in the healthcare sector are essential to reducing costs for hospitals, nursing homes, and patients. HGPII’s initiatives are critical to maintaining transparency in the GPO industry, and HIGPA urges other industries to implement their own policies to increase value in the healthcare supply chain and provide patients with the best care.”

The Senate’s healthcare reform bill would reduce federal deficits by $118 billion from 2010 to 2019, according to a revised estimate of the bill’s budgetary effects. The Congressional Budget Office (CBO) and the Joint Committee on Taxation estimated the direct spending and revenue effects of the bill, the Patient Protection and Affordable Care Act (H.R. 3590), as it was passed by the Senate on Dec. 24, 2009. The updated estimate differs from their Dec. 19 estimate for an earlier version of the bill in that it encompasses all of the amendments that were adopted by the Senate, reflects a revised assumption about its enactment date, and incorporates some technical revisions. The earlier estimate projected the budgetary impact to be a net reduction in deficits of $132 billion.

Expanding health insurance coverage for 2010-19 is now projected at a gross cost of $875 billion, reflecting subsidies provided through insurance exchanges, increased net outlays for Medicaid and the Children’s Health Insurance Program, and tax credits for small employers. Those costs are partly offset by revenues from an excise tax on high-premium insurance plans and net savings from other coverage-related sources, leaving a net cost of $624 billion for the coverage provisions. Other provisions affecting direct spending save $478 billion, on net—mostly in Medicare—and other provisions affecting revenues reduce the deficit by $264 billion, on net. The CBO has not completed an estimate of all discretionary costs that would be associated with the legislation.

Meanwhile, 41 economists signed and released a letter to President Obama and Congress today declaring that the healthcare reform proposals currently under consideration will control costs and lead to deficit reduction. The letter states that the healthcare reforms passed by the House and the Senate “include serious measures that will slow the growth of healthcare spending.”

Read the CBO director's blog entry about the revised estimate.

President Barack Obama today announced a new effort to crack down on waste, fraud, and abuse in Medicare, Medicaid, and other government programs through the expanded use of payment recapture audits, such as those performed by recovery audit contractors and Medicaid integrity contractors. 

In a press release, the White House projected that use of these audits could yield at least $2 billion over the next three years—double the amount of recovered costs currently projected.

A presidential memorandum signed today directs all federal departments and agencies to expand and intensify their use of payment recapture audits under their current authority. Obama also announced his support for the Improper Payments Elimination and Recovery Act, bipartisan legislation that expands the ability of government agencies to fund the audits with recaptured payments.

The Senate has approved a $138 billion bill to push back Medicare physician payment cuts from April 1 to October 1. The bill holds off a 21.2 percent cut in Medicare payment to physicians resulting from the sustainable growth rate formula. Physician industry groups have long been urging the Senate to implement a permanent payment fix.

The Senate had voted 78-19 on March 2 to delay the Medicare physician payment cut for one month. The House has already passed legislation that would permanently repeal the payment formula.

The Senate bill passed today also extends federal COBRA subsidies for laid-off workers’ health insurance premiums through Dec. 31, 2010, and extends additional federal financial assistance for state Medicaid programs for six months.

The bill now heads back to the House, which had passed an earlier version.

Health and Human Services Secretary Kathleen Sebelius called on major insurance companies to publicly justify their proposed health insurance premium increases. In a letter to the CEOs of UnitedHealth Group Inc., WellPoint Inc., Aetna Inc., Health Care Service Corporation and CIGNA HealthCare Inc., Sebelius reiterated a request she made at a meeting last week with these executives at the White House, when she asked them to post on their web sites justification for any individual or small group rate increase for 2010.

In a statement explaining the letter, Sebelius said, “Last Thursday, I asked CEOs to post online the actuarial justification for premium hikes so consumers can see why their premiums are skyrocketing. Now, it’s time for these insurance company CEOs to do their part to make the system more transparent for the American people. If insurance companies are going to raise rates, the least they can do is tell us why.”

The letter comes shortly after an analysis from Goldman Sachs found that competition in the insurance market is so weak, insurance companies can continue to raise rates even if it means losing customers. The analysis found that “price competition is down” and that “incumbent carriers seem more willing than ever to walk away from existing business.”

The Governmental Accounting Standards Board (GASB) is soliciting public healthcare organizations to participate in a field test it is conducting in conjunction with the expected March issuance of an Exposure Draft in its financial reporting entity project. Information about the field test, including how to volunteer to participate, is available from the GASB.

Don't let the current stabilization in the U.S. not-for-profit healthcare sector fool you. Looming financial and operational stresses may make this only a temporary rebound, according to Martin Arrick, managing director for Standard & Poor's Ratings Services' not-for-profit healthcare group, in a teleconference on March 2.

"Right now it's an island of calm," Mr. Arrick said, adding that the long-term outlook remains uncertain.

In Standard & Poor's view, the recession, coupled with difficulties in the investment and debt markets, contributed to 70 downgrades in the sector, more than triple the number of upgrades, and weaker median financial ratios in 2009. Credit stabilization began in the fourth quarter of 2009, Mr. Arrick said, and has continued through early 2010 with an increase in upgrades and favorable outlook revisions.

In particular, Mr. Arrick noted a significant rebound in providers' unrestricted cash and investments from the lows of last March; however, they are still below their peaks of the past two years. In addition, debt service coverage, cash flow metrics, and unrestricted liquidity are improving from last year because many providers took very quick steps to control costs and scale back capital projects.

However, Mr. Arrick stated that, in Standard & Poor's view, the weak economy may continue to squeeze the sector's operating margins, even with managers implementing cost-containment programs. "In our opinion, the single biggest issue is payer mix and how it is changing," he said. Factors that Standard & Poor's sees as contributing to the changing mix include the recession, unemployment levels, lack of sustainable job growth, and related insurance coverage. Potential state Medicaid reimbursement cuts are also an issue for the sector.

Other long-term pressures that Standard & Poor's expects to intensify include rising expenses for providers issuing more fixed-rate debt than variable-rate debt, as well as bank liquidity being less available and more expensive. Patient volumes, while more stable recently compared with last year, still aren't growing.

As a result of these difficulties, according to Mr. Arrick, Standard & Poor's expects the credit quality gap to widen between the haves and the have-nots. He also noted the possibility of a refinancing bubble in 2012, when many hospitals that refinanced 2009 will need to do so again. Mr. Arrick noted that Standard & Poor's is seeing many providers get into the market now to avoid the rush.

Related Topics
HFMA 2010 Executive Conference: The Healthcare Imperative: Improving Quality While Driving Down Costs. Featured guests include Maureen Bisognano, David M. Cutler, Ph.D., and Martin Arrick. 

HFMA’s February 2010 Healthcare Financial Pulse research: "Cost Management: Trends, Outlook, and Keys to Success"

The Centers for Medicare & Medicaid Services’ Medicare Learning Network reminds Medicare fee-for-service providers that effective Jan. 1, 2010, the CPT consultation codes (ranges 99241-99245 and 99251-99255) are no longer recognized for Medicare Part B payment. Effective for services furnished on or after Jan. 1, 2010, providers should report each evaluation and management (E/M) service, including visits that could be described by CPT consultation codes, with an E/M code payable under the Medicare Physician Fee Schedule that represents where the visit occurs and that identifies the complexity of the visit performed.

The Department of Health and Human Services has posted a notice of proposed rulemaking outlining an approach for establishing a certification program to test and certify electronic health records (EHRs). The HITECH Act mandates the development of a certification program that will give purchasers and users of EHR technology assurances that the technology and products have the necessary functionality and security to help meet meaningful use criteria.

David Blumenthal, M.D., M.P.P., national coordinator for health IT, states, “While we are making significant strides toward modernizing our healthcare system, these efforts will only succeed if providers and patients are confident that their health information systems are safe and functional.”

As outlined in an HHS fact sheet, the proposed rule incorporates two phases of development for the certification program to ensure that eligible professionals and eligible hospitals are able to adopt and implement certified EHR technology in time to qualify for meaningful use incentive payments. The first proposed program creates a temporary certification process under which the national coordinator would authorize organizations to assume many of the responsibilities that will eventually be fulfilled under the permanent certification program. For the permanent certification program, the rule proposes transitioning much of the responsibility for testing and certification to organizations in the private sector.

Comments on the proposed rule are due by March 15.

CMS sent the following message to its Medicare fee-for-service provider distribution list on March 3:

“The Temporary Extension Act of 2010, enacted on March 2, 2010, extends the therapy cap exceptions process through March 31, 2010, retroactive to January 1, 2010. Outpatient therapy service providers may now submit claims with the KX modifier, when an exception is appropriate, for services furnished on or after January 1, 2010 through March 31, 2010.

The therapy caps are determined on a calendar year basis, so all patients began a new cap on January 1, 2010.  For physical therapy and speech language pathology services combined, the limit on incurred expenses is $1,860. For occupational therapy services, the limit is $1,860. Deductible and coinsurance amounts applied to therapy services count toward the amount accrued before a cap is reached.

Some therapy providers have been holding claims for services furnished on or after January 1, 2010, for patients who exceeded the cap but qualified for an exception under previous law.  These providers may submit those claims to Medicare effective immediately. Therapy providers, who submitted claims which were denied, for services furnished on or after January 1, 2010, for patients who exceeded the cap but whose services now qualify for an exception, should contact their Medicare contractor to request that their claim be adjusted to add the KX modifier and ensure the appropriate exception applies.

A small number of therapy providers continued to submit claims with the KX modifier for services furnished on or after January 1, 2010, even though the exceptions process had expired on December 31, 2009. Medicare contractors held these claims and will now begin to release them for processing. These providers do not need to take any action on the claims that were held.

Providers who charged beneficiaries for services that exceeded caps, which are now payable under the exception process, should refund the beneficiary’s cost, less the appropriate amount of deductible and co-insurance. Affected claims should be either submitted or, if already submitted, the provider should contact their contractor for an adjustment.”

President Obama signed into law legislation that provides a stopgap, 31-day delay of the 21.2 percent Medicare physician pay cut that was scheduled to take effect on March 1. It was approved by the Senate on a 78-19 vote after Sen. Jim Bunning (R-Ky.) ended a one-man filibuster.

In a statement issued today, American Medical Association President J. James Rohack, M.D., called on the Senate to enact a permanent fix to the flawed Medicare physician payment formula. “Last night, the U.S. Senate voted yet again to delay the 21 percent Medicare physician payment cut for one month, postponing it until April 1," Dr. Rohack wrote. "AMA physicians are in Washington today meeting directly with their senators to urge them to act now on permanent reform. Access to health care for seniors, disabled and military families hangs in the balance. The Senate must honor its obligation before patients are the victim of a complete Medicare meltdown.”

The Senate measure also extended federal COBRA subsidies for health insurance premiums. Under H.R. 4691, the 15-month premium subsidy for laid-off workers extends to those involuntarily terminated from March 1 through March 31. The Senate is considering legislation that would extend the COBRA premium subsidy to employees laid off through Dec. 31, 2010.

In a brief speech to a group of medical professionals gathered at the White House this afternoon, President Obama rejected Republican calls to start from scratch on healthcare reform legislation. “Both during and after last week’s summit, Republicans in Congress insisted that the only acceptable course on healthcare reform is to start over,” Obama said. “But. . . I do not see how another year of negotiations would help. For us to start over now could simply lead to delay that could last for another decade or even longer.”

The president then called for an up-or-down vote on his reform proposal in the weeks ahead, citing historical precedents:
“Reform . . . deserves the same kind of up-or-down vote that was cast on welfare reform, the Children’s Health Insurance Program, COBRA health coverage for the unemployed, and both Bush tax cuts—all of which had to pass Congress with nothing more than a simple majority.”

Legislative language for the president’s proposal has not yet been released. The proposal was unveiled in the form of an 11-page outline before last week’s healthcare reform summit. In a letter sent to Congressional leaders yesterday, the president signaled his willingness to incorporate selected Republican ideas that emerged from the summit meeting into his proposal.

Read a transcript of the President's remarks.

In response to growing economic risks, Moody’s Investors Service is asking rated not-for-profit hospitals and health systems to provide more information about the liquidity of their investment holdings, according to a newly published Special Comment, Moody’s New Liquidity Ratios Increase Transparency. Organizations are asked to fill out a liquidity disclosure form on an annual basis, beginning with data reported in FY09. 

Moody’s will use the additional information to calculate a liquidity ratio that helps reveal what portion of a borrower’s assets can be liquidated within a month, year, or longer. The new ratio will be used in addition to current measures of liquidity, including days cash on hand and cash to debt.

In a letter to congressional leadership released today, President Obama said he is exploring the following ideas for inclusion in the final healthcare reform package:

1. Engaging "medical professionals to conduct random undercover investigations of healthcare providers that receive reimbursements from Medicare, Medicaid, and other federal programs” as an additional tactic for fighting fraud, waste, and abuse
2. An additional $50 million in funding to states "for demonstrations of alternatives to resolving medical malpractice disputes, including health courts"
3. Additional funds for Medicaid payments to physicians “if Medicaid is expanded to cover more people” because these reimbursements are currently "inadequate in many states"
4. An expansion of health savings accounts

These proposals. were set forth by Republican leaders at last week’s bipartisan summit on healthcare reform.

Read President Obama's letter.

Last week, the U.S. House of Representatives unanimously passed a bill to temporarily extend unemployment insurance and COBRA subsidies. In the Senate, however, Sen. Jim Bunning of Kentucky is blocking the extension. Senate leadership has called for the Senate to unanimously move this package on multiple occasions, but Sen. Bunning has blocked the process each time.

The U.S. Department of Labor yesterday released state-by-state figures on the number of individuals who will lose their unemployment benefits in the coming days if Congress fails to extend unemployment insurance benefits.

If Emergency Unemployment Compensation and full federal funding for the Extended Benefit program are not extended, 400,000 Americans will lose unemployment benefits during the first weeks in March. By May, nearly 3 million people could be left without these benefits. If the extension is not approved, an estimated 500,000 workers who lose their jobs will be ineligible for subsidies to cover the cost of health care over this month. Over the rest of 2010, an estimated 5 million workers will be ineligible for the COBRA subsidy that covers 65 percent of the cost of coverage. Without this assistance, many of these families will be forced to join the ranks of the uninsured.

In its March 2010 report to the Congress, the Medicare Payment Advisory Commission (MedPAC) recommends an increase in payment rates for the acute inpatient and outpatient prospective payment systems (PPS) in 2011 by the projected rate of increase in the hospital market basket index, concurrent with implementation of a quality incentive payment program. To recapture overpayments to hospitals resulting from the conversion to Medicare severity diagnosis-related groups, MedPAC recommends reduced payment rates in the inpatient PPS by the same percentage (up to 2 percentage points) each year in 2011, 2012, and 2013. The lower rates would remain in place until overpayments are fully recovered.

The principal focus of the report is MedPAC’s recommendations for annual rate adjustments in fee-for-service (FFS) Medicare. These updates are based on an assessment of payment adequacy taking into account beneficiaries’ access to care, supply of providers, the quality of the care they receive, and Medicare margins.

MedPAC recommends that the Congress update payments for physician services by 1 percent in 2011. The commission calls for a budget-neutral payment adjustment for primary care services billed under the physician fee schedule and furnished by primary-care-focused practitioners. MedPAC recommends no update to payment rates for skilled nursing facilities in FY11. The report also recommends a 0.6 percent increase in payments for ambulatory surgical center services in CY11 concurrent with requiring ASCs to submit cost and quality data.

The MedPAC report also reviews the status of the Medicare Advantage (MA) program, its plan offerings, quality outcomes, and payments. MedPAC remains concerned that in 2010, Medicare’s payments to MA plans will again exceed Medicare FFS spending for similar beneficiaries. This higher spending results in increased government outlays and higher Part B premiums for all beneficiaries while the Medicare program and its beneficiaries are under increasing financial stress. As a result, MedPAC reiterates its recommendation for financial neutrality between the MA and FFS payment systems.

Nearly 58 percent of the surgeries performed in hospitals were done as outpatient procedures, according to the latest News and Numbers from the Agency for Healthcare Research and Quality (AHRQ). The AHRQ analysis of data available from 28 states found that in 2007:

• The average hospital charge for an outpatient procedure was $6,100 in 2007, almost seven times lower than $39,900 charged for an inpatient procedure.
• Hospital outpatient surgery charges totaled $55.6 billion compared with $259 billion for inpatient surgeries.
• Colonoscopies and resulting biopsies were the most frequently performed outpatient procedure (18 percent of all ambulatory procedures), followed by upper gastrointestinal endoscopies and related biopsies (11 percent), lens and cataract procedures (5.5 percent), and diagnostic cardiac catheterization (4 percent).

Escalating globalization, the growing economic importance of small businesses, and the need to develop innovative sources of funding are among the major dynamics expected to converge in the near future to drive new approaches to supporting not-for-profit hospitals and healthcare systems, according to a new report released by the Association for Healthcare Philanthropy (AHP).

Small businesses are highly motivated to provide hands-on support to organizations that benefit their workers and their communities, according to the report, Emerging Trends: The Changing Landscape of Health Care Philanthropy—Redefining the Profession, Donors and Communities. Hospital development professionals should be more entrepreneurial in their efforts to nurture productive relationships with this sector, such as cosponsoring wellness programs with small business associations.

The AHP report also sees increased globalization of health care through telemedicine, cross-border medical cooperation, and international medical travel changing how grateful patient donors view their ties to medical institutions. Fund-raisers in North America should foster cross-border and multinational alliances. An additional factor is the emergence of immigrant households as new philanthropic sources and the opportunity to strengthen these relationships through ties to medical facilities in their native lands.

“American fundraisers need to realize that even local community fundraising efforts will increasingly reflect global considerations. ‘Cultural awareness,’ the ability to understand the attitudes and behaviors of other cultures, will become a key factor to promote donor awareness,” said J. Gregory Pope, FAHP, CFRE, AHP, chairman and vice president of philanthropy for the Saint Thomas Health Services Foundation in Nashville, Tenn.