Healthcare Financial News

In an hfm magazine web exclusive, Peter Orszag, recently nominated by President-elect Barack Obama to become director of the Office of Management and Budget (OMB), outlines a three-step approach to a better healthcare system.

“It’s clear that we have a payment system, especially within Medicare, that leads to more care rather than better care,” states Orszag. The three steps he sees as essential to reforming the system include dramatically expanding the health IT backbone, using the information that comes out of this IT backbone in a greatly enhanced comparative effectiveness effort, and implementing payment reform that gives providers incentives for more efficient care.

Orszag also discusses the vast differences in cost of care that occur within the U.S. healthcare system. He argues that the correlation between cost and quality often goes the wrong way, with higher cost providers not generating better outcomes than lower cost, more efficient providers. “How can we either get more for the money that we’re putting in or reduce the money that we’re putting in for the same health outcomes?” Orszag asks. He sees significant opportunities for either better outcomes or better savings in the variations that currently exist.

Orszag served as director of the Congressional Budget Office from January 2007 to November 2008, when he resigned his position to accept his nomination as director of OMB.

Read the article.

Fitch Ratings has revised its outlook on the U.S. not-for-profit hospital sector to negative from stable. The outlook revision reflects Fitch's observation and expectation of material weakening in several areas affecting hospital creditworthiness. Fitch expects that rating downgrades will exceed rating upgrades for the next 18 to 36 months.

While bond ratings contemplate a certain amount of performance variability due to business cycles and other reasons, the combined effects of investment portfolio losses, increasing uncompensated care, and higher capital costs are adversely affecting many hospitals' credit profiles. Further, state and federal budgetary pressures stemming from the economic downturn are anticipated to constrain governmental reimbursement programs, while the business sector is expected to continue to shift healthcare costs to its employees. These factors, coupled with projections for increasing unemployment over the next several months and declines in acute care utilization, are expected to depress operating profitability for the next few years.

In response to the events and conditions of the past several months, and in anticipation of continued economic and regulatory stress, most hospitals have taken steps to address the difficult operating environment's effect on creditworthiness by curtailing or deferring capital spending, reducing staffing to bolster profitability, and, in some cases, adjusting investment allocations to limit further equity losses. Fitch believes these actions, as well as the sector's substantial profitability and balance sheet strength built up over the past several years, should mitigate the brunt of the challenging headwinds for many hospitals.

Read the article (registration required).

The Centers for Medicare & Medicaid Services (CMS) has proposed three national coverage determinations (NCDs) to establish uniform national policies that will prevent Medicare from paying for certain serious, preventable errors in medical care. The errors, called Never Events, addressed by the NCDs include a wrong surgical or other invasive procedure performed on a patient, a surgical or other invasive procedure performed on the wrong body part, and a surgical or other invasive procedure performed on the wrong patient.

In 2002, the National Quality Forum (NQF) created a list of 27 Never Events, which was expanded to 28 events in 2006. As part of the ongoing implementation of Section 5001(c) of the Deficit Reduction Act (DRA) of 2005, CMS has addressed some of the NQF Never Events through the Hospital-Acquired Conditions (HACs) provisions in the Inpatient Prospective Payment System final rule for fiscal years 2008 and 2009.  For discharges occurring on or after October 1, 2008, Medicare will no longer pay a hospital at a higher rate for an inpatient hospital stay if the sole reason for the enhanced payment is one of the selected HACs, and the condition was acquired during the hospital stay.  CMS is exploring how to adapt this policy to its other payment systems.

CMS determined that not all conditions included on the NQF list of Never Events can be adequately addressed by the HAC payment provision and therefore determined that the NCD process was appropriate to address coverage for the three types of surgical errors cited above.  Unlike the HAC provisions, which affect only payments to hospitals for inpatient stays, the final NCDs could affect payment to hospitals, physicians, and any other healthcare providers and suppliers involved in the erroneous surgeries. 
           
CMS will accept comments from the public regarding the proposed coverage policies until January 1, 2009.  Get more information.