Healthcare Financial News

Last week, Vermont Gov. Jim Douglas signed into law a healthcare reform initiative that is expected to insure 25,000 residents through state-subsidized insurance offered by private insurance companies. The second state to pass such legislation (Massachusetts passed a similar bill in April), Vermont has a goal of providing near-universal health insurance to its residents by 2010. Currently, approximately 10% of the 620,000 Vermonters are uninsured. Under the new Catamount Health program, low-income earners will pay premiums on a sliding scale beginning in October 2007. Some of the funding for the low-cost insurance will come from an assessment on employers who do not offer their employees insurance, and from a higher excise tax on cigarettes, reports Reuters.

Primary care physicians practicing in areas with a high concentration of specialists and medical facilities are less satisfied with the quality of care they are providing their patients as well as their own careers compared with physicians in areas with fewer resources, according to a study by Dartmouth researchers published in the May 2 issue of Annals of Internal Medicine. Areas of the country associated with high medical spending led to high patient demand that physicians felt they could not meet. The Chicago Tribune reports that physicians in high-intensity medical areas had more difficulty obtaining specialty referrals, adequate hospital stays, elective surgery, and imaging services for their patients than physicians in areas with lower medical spending. In an earlier study, Dartmouth researchers found that 30% of Medicare spending is not warranted.

“The implications [of the study] are important; it’s not that we need to pour more money into the system and it’s not that we need more hospital beds and more specialists,” Lawrence Casalino, MD, PhD, professor of health studies at the University of Chicago, told the Tribune. What is needed, Casalino said, is to reward physicians for spending more time with patients so they can treat them more effectively.

As the population ages and fewer medical graduates are choosing primary care, the demand for internists has jumped 46%--and 55% for family physicians--from March 2005 to April 2006, according to physician recruiting firm Merritt, Hawkins & Associates as reported in an AP story. And as demand keeps rising, so will salaries. In the past few months, internists’ salaries--the average is $162,000--have increased 10% to 15%, according to a Merritt Hawkins executive.

A Kaiser Family Foundation survey of steel company retirees and dependents who had lost health benefits as a result of bankruptcies of their companies found that 74% of respondents younger than 65 obtained new health insurance but at a significant disruption to savings and retirement plans. Forty-nine percent of retirees of LTV Corporation and Bethlehem Steel who lost health coverage after the bankruptcies said they or a spouse delayed retirement in order to afford new health insurance, and a quarter of those younger than 65 said they had to dig deep into savings to pay the premiums. But even with new health insurance, 29% of respondents younger than 65 said they postponed hospital care and 49% went without physician care due to cost. More than half of Medicare-eligible respondents without supplemental coverage skipped medications, and 28% did not get recommended hospital treatment because of concerns over cost. Survey respondents also reported being less satisfied with their new health insurance than they were with their retiree health benefits.

The number of claims filed electronically has increased substantially from four years ago, decreasing processing costs and speeding up payment, according to a survey of 25 million claims by America’s Health Insurance Plans. Seventy-five percent of claims are now submitted electronically, compared with 44% in 2002, and cost almost half as much to process--$0.85 for a clean electronic claim versus $1.58 for a clean paper claim. Yet although 69% of electronic claims are processed within seven days versus 29% of paper claims, the percentage of providers who wait to submit claims until 30 days after service--29%--is virtually unchanged from four years ago. For the 14% of all claims that are delayed, 35% are slowed because duplicate claims were submitted, 12% lack complete information, and 1% contain invalid codes. Read the survey.

In related news, athenahealth, Inc., a billing and practice management software company for physicians, has ranked national and regional health insurers on their ability to efficiently pay claims. The rankings consider such measures as the length of time an insurer takes to pay a claim, the percentage of claims that get paid in full the first time they are submitted, and denial rate. Among the results: Aetna denied claims twice as often as Humana, Cigna led all carriers in requiring providers to resubmit claims because the insurer says they are not on file, and Wellpoint was the most aggressive in requesting physicians to secure payments from patients directly.

Two class action lawsuits alleging that two South Dakota hospitals charged uninsured patients excessive prices are before the South Dakota Supreme Court for reinstatement after being dismissed by a circuit court judge, reports the Sioux City Journal. At issue are charges for intestinal surgery at Sioux Valley Hospitals and Health System and for a broken hip at Avera Health. A lawyer for the two patients says that charges must be reasonable according to law--not two to three times higher than insured patients pay--and, as charitable institutions, the hospitals should bill what patients are able to pay. Sioux Valley said the patient was charged the standard rate, that the hospital lists prices for its procedures on its web site, and that the patient could have asked for a charity care discount. Justice Steven Zinter told the Journal that he believes patients should be able to challenge excessive hospital charges under the law.

The Massachusetts Hospital Association and Massachusetts Organization of Nurse Executives are opposing a bill, passed last week by the state House, requiring the state to determine how many patients would be assigned to each registered nurse. In a joint statement, the MHA and the MONE said, “We believe that the entire caregiving team must be included in the development of flexible staffing guidelines. The union [the Massachusetts Nurses Association], by contrast, believes government should set RN-only ratios.” As the bill passes to the Senate, MHA and MONE reiterated their message to the state’s senators: “Let government hold hospitals accountable for their performance and patient care. Don’t let government micromanage how that care is delivered.” Prior to the vote, MHA and MONE had sent a letter signed by every hospital CEO in the Commonwealth opposing the legislation.

However, Beth Piknick, president of the Massachusetts Nurses Association, said, “We are very pleased with this vote for patient safety.” The nurses group cites Massachusetts physician and patient surveys attributing compromised care to nurses having to take care of too many patients. “The scientific research clearly shows that when nurses have fewer patients, patients get better care, medical errors are reduced, and millions of dollars are saved,” said the MNA. Only California has a law regulating nurse staffing limits in hospitals, but 14 other states currently have similar legislation pending, according to the MNA.

CMS has issued a proposed rule designed to improve the accuracy of payments under the ambulance fee schedule and incorporate changes in geographic adjustments based on the most recent census data. The proposed rule would resolve several issues that have arisen since April 1, 2002, when CMS began phasing in the ambulance fee schedule. One change would revise the designation of areas as urban or rural to incorporate changes made by the Office of Management and Budget to reflect the 2000 census data. The proposed rule would lead to some redistribution of aggregate Medicare payments among ambulance services, since trips originating in a rural area are generally paid at a higher rate than urban trips. But in newly designated urban areas, an ambulance company would be expected to have a greater volume of business.

The proposed rule would also clarify that the extra payment for specialty care transport applies only to hospital-to-hospital ambulance transportation. In addition, the rule states that the extra payment for emergency responses is available not only to ambulances responding immediately to a 911 call, but also to ambulances available in a hospital setting when a 911 call is unnecessary to respond to an emergency. CMS is also proposing to discontinue formal annual reviews of “low billers” and air ambulances to determine whether adjustments are needed in the ambulance fee schedule conversion factor.

In an analysis of Medicare drug benefits, a study by Mathematica Policy Research, Inc., for the Kaiser Family Foundation found that drug coverage provided by Medicare Advantage plans had lower premiums and deductibles than stand-alone prescription drug plans. Medicare beneficiaries who choose a Medicare Advantage plan receive a drug benefit in addition to Medicare Part A and B and supplemental coverage. The average premium for the stand-alone drug program is $37/month compared with an average premium of $18 for all Medicare Advantage plans, which include HMOs, PPOs, and private fee-for-service plans. The lowest-cost stand-alone drug plan carries a $29/month premium, but the lowest-cost Medicare Advantage HMO charges $10/month for drug coverage. And 49% of Medicare Advantage HMOs charge no additional premium for a drug benefit. In addition, 79% of all Medicare Advantage plans have no deductible for prescription drugs, but 72% have maintained the “donut-hole” gap in coverage where beneficiaries are responsible for 100% of drug costs above a certain threshold. Download the study.

A plan to offer basic health insurance to low-income uninsured residents of Tennessee has been approved by the state’s legislature and is expected to be signed into law by Gov. Phil Bredesen, reports the Associated Press. Beginning in January 2007, eligible adults under the plan will pay an average of $150/month for basic insurance, with the state paying $50 of the premium and employers having the option to contribute $50. By eliminating catastrophic coverage, deductibles will be modest. “The idea is to set a large-deductible plan on its head,” Dave Goetz, the state finance commissioner, told the AP. Private insurance companies will offer the plan, which will be limited to individuals who earn $24,500 or less or a family of four with an income of less than $50,000. Cover Tennessee is expected to provide insurance to 100,000 adults, 75,000 children, and 15,000 chronically ill individuals. The state has 600,000 uninsured people.
 

Young adults--those 19 to 29 years old--are rapidly becoming one of the largest groups of uninsured people in the United States, according to a new Commonwealth Fund study. In 2004, 13.7 million young adults had no health insurance--a jump of 2.5 million in four years. Although young adults make up only 17% of the population under age 65, they represent 30% of the nonelderly uninsured. Young people are often thrust into the world or college without health insurance because, after age 19, they may be dropped from their parents’ health insurance unless they are full-time college students. Medicaid and the State Children’s Health Insurance Program also cut off benefits to children at age 19. As a result, 40% of part-time students and nonstudents are uninsured, compared with 20% of full-time college students. And two out of five recent college graduates will lack health insurance as they work in entry-level jobs, are employed by small companies, or frequently change jobs.

Yet young adults suffer a greater proportion of injuries requiring emergency department visits than the rest of the population, many will get pregnant, and they are at high risk for HIV. The study’s authors recommend that businesses extend parents’ health coverage to dependent children beyond age 18 or 19; that all college students be required to have health insurance and that colleges offer insurance; and that Medicaid and SCHIP continue coverage beyond age 18. Read the study.

Intensivists caring for ICU patients will be in short supply through 2020, predicts a report to Congress by the Department of Health and Human Service’s Health Resources and Services Administration. Aging baby boomers alone are expected to increase demand for the specialty by approximately 38%. And if hospitals maintain optimal staffing of intensivists treating two-thirds of critically ill patients--they currently care for only one-third of ICU patients--there will be a shortage of 1,500 intensivists in 2020, or 129% above the projected supply. According to the report, recruiting physicians to critical care is difficult because of the specialty’s low reimbursement and lifestyle issues. Also, a large percentage of critical care fellows are international medical graduates who leave the United States after their visas expire.

Nearly three-quarters of hospital executives (71%) say that healthcare IT initiatives have been an important factor in enhancing quality, particularly in delivering more timely clinical information, diagnosis, and treatment, according to a survey by Mathematica Policy Research, Inc. The survey assessed use of six types of health IT: electronic lab results, electronic clinical notes systems, electronic images available hospital-wide, electronic lab orders, electronic reminders for guideline-based interventions, and e-prescribing.

Electronic lab results were the most commonly used type of IT (88% of hospitals), while CPOE was least common (21%). Among hospitals that had implemented fewer IT initiatives, 22% said better patient safety through the reduction of medical errors was the most important benefit of IT. Ten percent of executives cited improved communications among staff as the primarily benefit. Larger hospitals were more likely to be using healthcare IT by a wide margin, prompting concern that smaller hospitals were missing out on associated quality improvements. Reduction in the amount of labor required to report quality measures to the Centers for Medicare and Medicaid Services for Hospital Compare was another advantage of healthcare IT, cited by 69% of executives.

The Department of Health and Human Services has announced that 22 states and territories have entered subcontracts with RTI International, Inc., a private, not-for-profit corporation, to address privacy and security policy questions affecting interoperable health information exchange. Additional states are expected to sign subcontracts within the next two weeks. ONC and the Agency for Healthcare Research and Quality jointly manage and fund AHRQ’s contract with RTI for this work.

Subcontractors will be working with healthcare professionals, patients, and others to address privacy and security issues and proposing solutions, including identifying variations in privacy and security practices and laws affecting electronic clinical health information exchange; developing best practices and proposed solutions to address identified challenges; and increasing expertise about health information privacy and security protection in communities. The states will also work to develop implementation plans for future health information exchange activities. The solutions that are ultimately crafted will provide a foundation for future work by ONC and AHRQ and facilitate health information exchange across states.

A coalition based in Annapolis, Md., hopes by early 2007 to develop a prototype of an electronic network that would link physicians and hospitals in Maryland and Washington, D.C. The Washington Business Journal reports that the Maryland/D.C. Collaborative for Healthcare Information Technology wants to implement a secure network to provide practitioners with faster access to patient information and help them reduce medical errors. If the collaborative meets its deadline, it would be one of the nation's leaders in electronic medical record use. President Bush has established the goal of universal electronic medical record adoption by 2014 as a way to reduce between 100,000 and 200,000 deaths annually that are attributed to preventable medical mistakes. Read the Washington Business Journal article.

The North Carolina Hospital Association is considering new guidelines that would ask the state’s 107 hospitals to report the amount of community benefit they provide in terms of costs rather than charges, according to the Triangle Business Journal. Many hospitals give the full retail price of a procedure rather than what it costs them in equipment and physician time when reporting how much free care they provide for indigent patients. Some experts say the practice is misleading because many patients pay discounted fees that are negotiated through insurance carriers. Ken Morris, chief financial officer of the Duke University Health System, was quoted in the Journal as saying that the new guidelines are “long overdue.”

The bill for unnecessary medical tests in the United States could exceed $200 million, according to a new study in the American Journal of Preventive Medicine (view abstract). Researchers from Georgetown University Medical Center and Johns Hopkins University examined how often more than 4,600 adults received screening tests that the U.S. Preventive Services Task Force rates as “C” tests--where evidence isn’t strong enough to recommend for or against their use in asymptomatic patients--and “D” tests--those that aren’t recommended for asymptomatic patients because risks outweigh benefits.

At least one of the “D” tests--urinalysis, electrocardiogram, and x-ray--was ordered against recommendations for 43% to 46% of patients. Extrapolated nationally, the annual cost for these inappropriate tests is between $47 million and $194 million. The “C” tests added another $12 million to $63 million. And the cost of follow-up care for false positive tests add millions more.

The publicly traded Triad Hospitals Inc. will give physicians an opportunity to own a share of most of its hospitals, reports Reuters. The chain currently has physician owners in five of its hospitals and will make ownership an option in five to 10 hospitals each year, according to the report. The chain’s CEO is quoted by Reuters as saying that when physicians become owners, the hospital typically has higher efficiency, better outcomes, and greater patient satisfaction. "We see it expanding to every community we work in," said Denny Shelton, Triad's chief executive. "We are finding ways to align ourselves with physicians who are actively seeking ways to supplement their income."

House Republicans will introduce or consider several bills next month that are in line with the Bush administration’s healthcare agenda, according to The Hill. One bill on health savings accounts would give tax incentives to those who purchase high-deductible plans, a tax credit to those with low income, and increase the yearly maximum contributions to HSAs. Another bill would make HSAs available to seniors. The House will also debate a bill on healthcare information technology sponsored by Nancy Johnson (R-Conn.), chair of the Ways and Means Health Subcommittee. Johnson’s bill is expected to face little opposition from House Democrats and has a chance of passing. Another bill would require hospitals and physicians to publicly post prices, and House Republicans may introduce legislation to cap jury awards in medical malpractice cases and create association health plans. Read the article in The Hill.

The Missouri Hospital Association has posted online dollar amounts for each Missouri hospital in the following categories: uncompensated care costs (charity care and bad debt), unpaid costs of Medicare program beneficiaries, unpaid costs of Medicaid program beneficiaries, free medical services clinics, health professions education costs, financial contributions, and taxes paid. Hospitals participating in this voluntary report submitted data from their 2004 fiscal year on eight common community benefit elements. For the reporting period, the total dollar amount of benefits provided by Missouri ’s hospitals was $1.8 billion in these categories. Individual hospitals’ contributions are provided on the web site. However, each hospital provides additional benefits not listed in the report.

Low infection rates in Philadelphia-area hospitals are questioned by some experts, reports the Philadelphia Inquirer. According to the Pennsylvania Patient Safety Authority’s annual report, Philadelphia hospitals had 149 hospital-acquired infections in 2005 compared to 2,054 for Pittsburgh-area hospitals. Philadelphia hospitals also reported lower rates of serious events. The Delaware Valley Healthcare Council said that Philadelphia hospitals have lower infection rates because they have reduced medication errors and the area has more specialty hospitals, such as psychiatric facilities, where infections are less common. Confusion over what to report may also have skewed the numbers, Andrew Wiggleworth, president of the Council, told the Inquirer.

In a widely watched appeal of a hospital antitrust case, Evanston Northwestern Healthcare told the Federal Trade Commission that breaking up its 2000 merger with Highland Park Hospital would damage the suburban community’s patient care, reports the Chicago Tribune. Evanston Northwestern said that in six years it has spent $160 million at Highland Park Hospital, creating new heart and cancer programs and improving quality. But although at least one of the five commissioners who heard the appeal called divestiture “a drastic measure,” the FTC attorney maintained that Evanston Northwestern raised Highland Park’s  prices after the merger, which resulted in higher insurance premiums and could lead to more uninsured patients. 

In a statement, Evanston Health System said, "Today’s oral arguments are yet another step in the process for Evanston Northwestern Healthcare’s appeal of the Federal Trade Commission ruling citing ill effects on select managed care companies as a result of ENH’s merger with Highland Park Hospital. No decisions by the FTC are expected from the presentation of these arguments for some time. What’s important to understand is that we remain confident that the evidence we presented--namely that we have improved the quality of care at Highland Park Hospital, our prices never increased beyond market rates, and competition remains healthy in our service area--will ultimately prevail."

At a hearing on specialty hospitals, Senate Finance Chairman Charles Grassley (R-Iowa) and Sen. Max Baucus (D-Mont.) expressed their displeasure that 40 specialty hospitals have opened since 2004, despite a moratorium on new specialty hospitals, reports The Hill. Grassley told CMS administrator Mark McClellan that, “It is time for CMS to make a serious commitment to oversight of specialty hospitals,” besides CMS merely outlining policies to regulate specialty hospitals. But McClellan said CMS was only charged with denying payment to physician owners who improperly refer patients to their own facilities, not to ban new specialty hospitals. McClellan said that CMS’ new policies will require all institutions defined as hospitals to provide emergency services and treat the uninsured and future payments will remove incentives to cherry-pick patients. Grassley stated that he wants a requirement that physicians must disclose any ownership interests in a hospital when referring patients. Access article in The Hill. Access testimony from the committee hearing. 

Last Thursday, the House passed a $2.7 trillion 2007 budget that did not include the Medicare and Medicaid cuts and health savings account incentives President Bush had proposed, according to an Associated Press story. House legislators passed the budget only after conservatives agreed to moderates’ demands for an additional $3.1 billion in funding for health and education programs, which represents a 2% increase in spending for those programs. Bush had initially proposed a $4 billion cut in spending for labor, health, and education. Yet The New York Times calls the House’s budget approval “more symbolic than substantive,” because the House is unlikely to reconcile its budget with the one the Senate has already passed.

Beneficiaries in poor health can pay more out of pocket for care in Medicare Advantage managed care plans than in traditional Medicare with Medigap supplemental coverage, a new Commonwealth Fund report finds. (Click here to download the report.) The report says beneficiaries in poor health can spend up to $2,195 more in annual out-of-pocket costs for their care in 19 out of 88 plans than they would have in fee-for-service Medicare with Medigap supplements. Costs for beneficiaries in good health, however, were lower in all 88 MA plans and, for those in fair health, all but two MA plans had lower costs than fee-for-service plans.

"These findings raise questions about what Medicare is achieving with extra payments to private Medicare Advantage plans, which totaled more than $2.7 billion in 2005 over fee-for-service costs," said Fund President Karen Davis. The authors note that "if Medicare were to offer a true alternative to private coverage—such as a more comprehensive fee-for-service option—market forces could be expected to work more effectively, and beneficiaries could choose between comparable alternatives on an equal footing."

“The bars are going in the right direction,” said one CFO, and that summarized the financial presentations of 37 leading healthcare hospitals and systems at the Seventh Annual Non-Profit Health Care Investor Conference in New York May 17 and 18. The conference was sponsored by Citigroup, the American Hospital Association, and HFMA. By and large, the presenting organizations showed modest growth in margin and cash flow, along with plans for new construction to facilitate increased volume and investment in medical and information technology.

In addition, the systems emphasized their focus on clinical quality improvement, with many highlighting performance related to broad-based patient safety and quality indicators, along with specific projects to improve quality. However, keynote speaker Brent James, MD, M.Stat Executive Director of the Institute for Health Care Delivery Research of Intermountain Health Care, strongly asserted the need for a sea change in the approach to quality of care. “American health care gets it right 54.9 percent of the time,” he said, referring to quality and appropriateness of care. “I wonder what we could achieve if we got it right 98 percent of the time.” He challenged hospital leaders to manage the core business of clinical care using the same approach as they use to manage business functions, creating a “shared baseline” that will transform patient care from “craft-based practice” to “profession-based practice.” Hospitals that make that transformation, he said, would be the ones able to demonstrate strong financial performance.

California consumers without health insurance can shop online for a doctor who offers discounts and get a price quote based on physicians’ stated rates through a partnership between National Healthcare Exchange Services, Inc. and the California Medical Association. NHXS Direct will allow physicians to build a fee schedule for self-pay patients to view on the web and generate a discount offer at the time of service. “Consumers without health insurance need a way to find affordable care without having to pay a monthly fee to access physicians willing to offer discounts for prompt payment,” said Jack Lewin, CEO of the CMA. “The CMA's goal is to lower access costs for consumers while at the same time give physicians control over the terms under which they offer discounts for services."

Hospital spending on IT as a percentage of overall capital spending increased over the past few years, regardless of hospitals' revenue base and geography, according to findings released yesterday by Fitch Ratings. The majority of hospitals reported IT spending at about 25% of total capital investment. The spending has focused on electronic medical records, computerized physician order entry, and picture archiving and communication systems. The findings are in a new report, Quality and Patient Safety Spending in the Not-for-Profit Hospital Sector. The report says that although the quest for improved quality and safety motivate this spending, the link between quality of care and reimbursement does not. Hospitals reported that ROI for IT investments is difficult to determine and “almost never” entered into the decision making process for IT spending. For more information on the report, contact Fitch at (212) 908-0684.

Strategies for improving quality and safety will likely improve operating results for hospitals in the short term, according to the Moody’s Investors Service report Improving Clinical Quality and Patient Safety of Greater Importance to Not-for-Profit Hospitals, released yesterday. In the long term, however, Moody’s analysts say hospitals that demonstrate a sustainable link between quality investments and better clinical outcomes will likely gain competitive advantage, thereby improving financial profit and possibly their bond ratings. Demonstrating quality, according to Moody’s, is not just meeting a particular quality indicator, but demonstrating improved consumer demand and preference, which drives market share, and payer reimbursement that rewards better outcomes, which drives performance. For more information on the report, contact Moody’s at (212) 553-4431.

Tenet Healthcare Corporation agreed to a $21 million civil settlement to resolve the long-running criminal case brought by the U.S. Attorney in San Diego against Tenet, one of its hospitals--Alvarado Hospital Medical Center--and Alvardo’s former CEO. Tenet also agreed to close or sell Alvarado Hospital. In return, the U.S. Attorney in San Diego will dismiss criminal charges against all three defendants and will not file any civil litigation.

Two separate federal juries had deadlocked over whether Alvarado had improperly paid physicians excessive relocation packages to entice them to refer patients. While Tenet and Alvardo maintain that physician relocation agreements are a common practice in the hospital industry, as part of the settlement agreement, they stated, “We were distressed to learn that certain host physicians had obtained excessive payments by representing that they needed money to make tenant improvements to accommodate new physicians when, in fact, they never made improvements. We regret that the hospital did not take adequate steps to assure that money provided to relocated doctors, including money earmarked for tenant improvements and office overhead was in fact used for those purposes and in all instances was justified.” The case, said Tenet, has led to “significant reforms” of its physician relocation arrangements.

A group of U.S. senators and representatives said they would launch legislation to waive the financial penalty for Medicare beneficiaries who enroll in Medicare Part D later this year, The New York Times reports. The program is providing drug coverage for 29 million Medicare beneficiaries. Charles Grassley (R-Iowa), chairman of the Senate Finance Committee, and Max Baucus (D-Mont.) authored the Senate bill, and Nancy Johnson (R-Conn.) said she would introduce a bill in the House. Grassley compared enrollment in Medicare Part D with getting employees to contribute to 401(k) plans, saying, “It takes time for people to learn about benefits available to them.” The Bush administration has not been in favor of extending the enrollment deadline, and officials said that although 4.5 million seniors are currently without drug coverage, as many as two-thirds are low-income beneficiaries who would be exempt from late enrollment penalties.

Hospitals that treat patients more intensively and spent more Medicare dollars did not get better results, according to a new study by the Center for the Evaluative Clinical Sciences at Dartmouth Medical School. The Dartmouth Atlas Project compiled a database of claims data for 4.7 million Medicare enrollees who died during the period of 2000 to 2003 and had at least one of 12 chronic illnesses and were treated at one of 4,300 hospitals in 306 regions. The database allows, for the first time, a comparison of how states, regions, and individual hospitals and associated physicians treat patients with chronic illness.

The study found that patients in regions with low-cost, high-quality care --such as Salt Lake City, Utah; Rochester, Minn.; and Portland, Oreg.--are admitted less frequently to hospitals, spend less time in intensive care units, and see fewer specialists. If over the four-year period, every hospital and all physicians used practice patterns like those in Salt Lake City--primarily based on care provided by Intermountain Healthcare--the $123 billion Medicare spent for these patients would have been reduced by $40 billion, nearly one-third. The study report calls for a reimbursement system that rewards, rather than penalizes, provider organizations that successfully reduce excessive use of services, and proposes that hospitals take leadership in redesigning how they care for the chronically ill. The study also emphasizes the need for academic medical institutions and federal agencies, such as the National Institutes of Health, to perform patient-level studies to produce detailed evidence defining efficient clinical practices.

New Hampshire’s hospital association became the few in the country to publicly post its state’s hospital charges for inpatient services, according to the Nashua Telegraph. Hospital associations in Wisconsin and Oregon also have web sites that provide comparative price data for hospitals. The New Hampshire Hospital Association’s web site details the number of patients who received a particular inpatient service at each of the state’s 26 hospitals; the average length of stay and average and median charges for that hospital; and aggregate payments by Medicare, Medicaid, and other payers, so consumers can see how hospitals’ charges compare with the amount of revenue hospitals actually collect for those services. The Telegraph article, however, cautions readers that the web site lists charges, not the actual price they will pay for an inpatient procedure. The NHHA told the Telegraph that the web site is a first step to greater price disclosure for all providers and that, eventually, it hopes to offer pricing information that is tailored to individual consumers. 

Patients who seek relief at emergency departments for intense pain often experience long waits, receive inadequate treatment, and feel physicians did not take their symptoms seriously, according to MedPage Today reporting on presentations at the American Pain Society meeting. In one study of 842 patients who had come to the ED for out-of-control pain, only 61% of patients received analgesics, the mean wait time was 90 minutes, and staff typically did not reassess patients’ pain. Patients need to do a better job of communicating pain to ED staff, said the researcher, but ED physicians are also at fault for discharging 40% of the patients who continued to have pain. An online study of 258 patients conducted by the American Pain Society found that 47% described their ED experience as “poor,” “terrible,” or “the worst experience of my life.” Twenty-one percent of pain patients waited more than three hours to be treated, 30% said the ED physician didn’t believe they were in severe pain, and only 44% of patients said they were treated with dignity. ED physicians, say pain experts, often don’t have a good understanding of pain, and they react suspiciously to reports of chronic pain, suspecting that the patient is abusing pain drugs.

Health care in New Orleans post-Katrina continues to be a nightmare for patients, physicians, and hospitals, reports the Baltimore Sun. With many residents losing their jobs after the hurricane, the ranks of the city’s uninsured have doubled to 40% and now include professionals like teachers, who must, for the first time, rely on charity care. A mere 1,200 of the city’s 4,500 physicians have returned to New Orleans, 2,300 beds have been reduced to fewer than 500 as more than half the city’s hospitals remain closed, and estimates are that heart attacks have increased by 25% because patients with cardiac problems can’t get care.

The situation for suburban hospitals isn’t much better as they cope with overcrowding and providing large amounts of uncompensated care. East Jefferson General Hospital, for example, says it has lost approximately $3 million each month treating uninsured patients after Katrina. East Jefferson’s CEO warns that without federal help, the hospital will have to turn away patients. Emergency-department waits at suburban hospitals are twice or three times what they were before the storm, and with most of the nursing homes and home health aides gone, hospitals are having trouble discharging patients. John Matessero, CEO of the Louisiana Hospital Association, told the Sun that the federal government has provided scant help to repair hospitals and bring physicians back to the city. “There’s no quick solution, but we have to do something quick,” said Matessino. “The whole situation is getting out of control.” 

On May 12, CMS issued a proposed rule that replaces the occupational mix section of the proposed FY07 hospital inpatient prospective payment system rule of April 12. To comply with a Court of Appeals order, the proposed rule applies the occupational mix adjustment to 100% of the wage index for FY07 using new data collected on the 2006 Medicare Wage Index Occupational Mix Survey. The proposed rule also modifies hospitals’ procedures for withdrawing requests to reclassify for the FY 2007 wage index and for supplementing the FY 2009 reclassification application with official data used to develop the FY 2007 wage index. The 30-day public comment period expires on June 12, 2006. Click here to download the proposed rule.

CMS has issued a proposed rule that would update payment rates for services by inpatient rehabilitation facilities and modify payment policies for fiscal year 2007. The proposed rule would update the IRF PPS by the full market basket of 3.4%, but most of that increase will be reversed by a 2.9% reduction in the standard payment amount for FY07 to offset the effect of changes in coding that do not reflect real changes in patient acuity. Payments to IRFs would remain virtually flat in 2007, increasing by $40 million for the approximately 1,240 IRFs. The proposed rule would also increase the outlier threshold for high cost outlier cases from $5,129 to $5,609.

In addition, the proposed rule would amend existing regulations regarding the three-year phase-in of a 75% compliance threshold, which requires at least 75% of an IRF’s patient population have one of the 13 designated medical conditions, as well as a need for intensive inpatient rehabilitation services. As provided in the Deficit Reduction Act, the proposed rule delays the imposition of the full 75% threshold by one year.

Hospitals and wireless phone service providers showed significant improvements in customer perceptions of quality during the first quarter of 2006 compared to the first quarter of 2005, while energy utilities and airline industries received low overall quality marks, according to the Quarterly Quality Report released today by the American Society for Quality. The report is based on data from the American Customer Satisfaction Index produced by the University of Michigan.

Hospitals increased their perceived quality score by nearly four percentage points--from 78 to 81 on the ACSI’s 100-point scale--this quarter compared with the first quarter of 2005. The jump in consumers’ perception of quality was among the highest for all industries measured during the quarter. The report credits hospitals as having the highest commitment to and actual measurement of performance management among industries studied. And consumers have become aware that hospitals are measuring and making transparent meaningful outcomes from CMS’s Hospital Compare website and from increasing numbers of pay-for-performance plans. In contrast, utilities’ reputation has been tarnished by rising fuel costs and disruptions in energy supplies as a result of last season’s record number of hurricanes, and airline bankruptcies have resulted in airlines cutting passenger amenities, flying smaller jets, booking more passengers per flight, and reducing flights on many routes.

While considering eliminating its traditional insurance plan, Target Corporation--with 338,000 employees--is currently offering workers two new options: a high-deductible plan with a health savings account and a high-deductible plan with a health reimbursement account, reports the Minneapolis Star Tribune. Although Target has said it hasn’t yet decided to drop traditional coverage for which the corporation picks up 80% of the cost, employees received a health plan guide earlier this year stating that the tradition plan will be offered for a “limited time in the future.”

For employees who choose a high-deductible plan with an HSA, Target would contribute $400 for individuals and $800 for families, and employees would pay premiums of about $20 a month for individual coverage. Deductibles, however, would be as high as $5,000 for families, with Target paying 80% of expenses after the deductible has been met and 100% after the family maximum out-of-pocket of $8,800. The HRA option has higher premiums but lower deductibles. Critics, however, say Target employees who are less than in perfect health or who are pregnant will unlikely be able to pay the high deductibles and will either drop insurance or leave Target. 

The association health plan bill, sponsored by Sen. Michael Enzi (R-WY), stands little chance of being passed after a vote in the Senate failed to reach the approval of 60 senators needed to move it forward, reports the Los Angeles Times. The legislation, which would have allowed small businesses to collectively purchase health insurance for their employees at lower premiums, was opposed by groups such as the AARP, the American Cancer Society, state attorneys general, and medical societies for bypassing state laws requiring specific coverage for certain diseases and for prevention. The Times attributes the impasse to “election-year mistrust between the political parties.” Robert J. Blendon, a public opinion expert at the Harvard School of Public Health, told the Times, "The partisan nature of Washington politics has just gotten so extreme that you have a sense people don't want to move on a problem unless it's done completely on the terms of their own party." Although Enzi said he would reintroduce his bill later this year with concessions to Democrats, observers are not hopeful the bill will be revived. (Access the Los Angeles Times story.)

Forty percent of medical malpractice cases filed in the U.S. are baseless, according to a study published in the New England Journal of Medicine. But contrary to public opinion that frivolous suits result in large payouts or verdicts, the study found that most of the groundless suits are dismissed. Still, 15% of malpractice settlements or jury awards go to plaintiffs who have filed groundless suits, and the overhead costs of litigation are very high, reports the AP. The AMA responded to the study by saying that access to care is decreased as physicians spend significant time and money defending meritless lawsuits. The Association of Trial Lawyers for Americas, however, called the study biased and objected to the researchers using claims data from insurers who are defendants in malpractice suits.

Although per capita healthcare spending in the U.S. is 2 ½ times more than the median spending of other industrialized countries, health systems abroad are four to 13 years ahead of the U.S. in using health information technology to control costs, according to a study published in Health Affairs. (View abstract.) Germany launched its national health IT network in 1993 and expects to complete it by 2006, Canada says it will have electronic health records for half its population by 2009, the UK has the most comprehensive system, and Norway and Australia have a six-year jump on the U.S. in developing health IT systems. Few question that health IT will lead to cost savings; estimates are that an electronic health record would save $371 billion in U.S. hospitals alone over the next 15 years. The study examines how various countries have overcome some of the health IT obstacles plaguing the U.S. and urges policy makers to look at lessons learned abroad to shorten health IT implementation time here. For example, health IT initiatives abroad are usually subsidized by public funds so government has a say in how systems interconnect. Germany has built its health IT network on smart-card technology, which allows healthcare workers access a centralized patient database storing complete medical histories. And other countries have spent considerable time and effort educating physicians on how to transition to an electronic system.

The Veterans Health Administration, says Fortune magazine, is the “most wired and cost-effective health system in the land.” The article credits the VA’s embrace of health information technology with its consistently higher quality and patient satisfaction scores than many private-sector hospitals. By 1999, all of the VA’s 1,300 hospitals, clinics, and other facilities had an electronic medical record and by 2000, every VA hospital was using bar-code scanners to ensure that the right patients were receiving the correct drugs. In the mid-90s, when poor quality rather than high tech was a more apt description of the VA, only 29% of VA patients received pneumonia vaccinations. In 2005, 94% did, which reduced hospital admissions by 4,000 patients per year. Screening for cervical cancer jumped from 64% in 1995 to 91% in 2005. The VA’s EMR system also allowed VA patients displaced by Hurricane Katrina to receive seamless medical care at any VA facility. The VA is also applauded for delivering high quality at lower cost. The average cost of healthcare spending for a VA patient is $5,000 compared to $6,300 for other Americans. The VA’s adoption of health information technology is made even more remarkable, according to the article, because the U.S. government is spending only $111 million this year to fund EMR projects—small sums compared to health IT budgets of $10 billion for England and $2 billion for Canada.

Although Sen. Chuck Grassley (R-IA), chairman of the Senate Committee on Finance, and Rep. Bill Thomas (R-CA), chairman of the House Committee on Ways and Means, support legislative reforms on charitable giving, the final agreement they reached on the tax reconciliation bill does not contain the charitable giving incentives and reforms urged by the Independent Sector, a nonprofit coalition of more than 500 charitable and philanthropic groups. The provisions to strengthen government oversight and accountability and transparency of charitable organizations, said IS, will likely be added to the pension reform bill, which has passed both chambers of Congress. IS predicts that Thomas may add new proposals, while Grassley has expressed interested in enhanced electronic filing requirements and funding for community education. “These recent developments may provide a window of opportunity to see a more complete package enacted,” says IS’ website.

The nonprofit Emergency Care Research Institute, which publishes pricing information on medical devices, filed suit against cardiac device-maker Guidant Corporation for attempting to keep its prices to hospitals confidential, reports Red Herring. Approximately 400 hospitals voluntarily provide ECRI with prices they pay for medical devices--data ECRI sells to hospitals so they can make informed purchasing decisions. In its complaint, ECRI said that Guidant is using the confidentiality clauses in its contracts with hospitals to prohibit hospitals from disclosing prices to ECRI and that Guidant has demanded that ECRI “cease and desist” from publishing the information. Withholding the data, alleges ECRI, is a “disadvantage to consumers and the detriment of public health,” and ECRI is asking the court to affirm its First Amendment right to publish the information. Guidant maintains that confidential pricing is “a fairness issue. We simply don't want the price negotiated privately with one hospital based on one set of circumstances used against us in negotiations with another hospital with an entirely different set of circumstances,” said Guidant in a prepared statement.

As the U.S. Senate moved to consider the Republican-backed association health plan bill that allows small employers to band together to purchase affordable health insurance, Democrats threatened to filibuster the bill if they are not allowed to add amendments to it, reports the Los Angeles Times. The bill, sponsored by Sen. Michael Enzi, R-Wyo., is expected to provide health insurance for 600,000 uninsured workers, but Democrats argue that the bare-bones insurance would be exempt from prevention and disease coverage requirements mandated by individual states. Enzi counters that large companies are also exempt from state insurance requirements, and that his legislation would require insurers to provide coverage comparable to what public employees receive in the five largest states. The Democrats will offer their own bill, sponsored by Sen. Richard Durbin of Illinois, which they say will cover three times more individuals than Enzi’s bill while adhering to state coverage rules. Durbin’s bill would provide tax credits to help small businesses offer insurance and would be administered by the Office of Personnel Management. (View the Los Angeles Times article.)

Consumer information about healthcare costs, quality, and treatment alternatives could help stem health costs, but some are overselling the potential of consumer empowerment to reshape the healthcare system, testified Paul Ginsburg, PhD, president of the Center for Studying Health System Change, at Congress’ Joint Economic Committee hearing on “The Next Generation of Health Information Tools for Consumers.” Policy discussion “about price and quality transparency downplays the complexity of decisions about medical care and the dependence of consumers on physicians for guidance about what services are appropriate,” said Ginsburg. Markets for self-pay health services, such as LASIK, are often cited as a model for consumer engagement, but HSC research indicates that consumers’ experiences with self-pay markets have been romanticized and do not offer much encouragement as a roadmap for effective healthcare shopping without either regulation or a large role for insurers.

Engaging consumers to be more aware of cost and quality issues, however, can increase the value of health care for the U.S. population as a whole, said Ginsburg. Insurers will be a powerful consumer ally as they develop more sophisticated benefit structures and information tools to support consumers in choosing effective treatments from higher-quality, lower-cost providers. By investing in research on medical effectiveness, government can also empower consumers, said Ginsburg, adding that an untapped information resource to assess physician efficiency and quality is the Medicare Part B claims files.

The changes that specialty hospitals are exacting on the healthcare landscape have been largely anecdotal, prompting the Government Accountability Office to survey general hospitals to determine how competition from specialty hospitals has affected them. In a new report, the GAO found that all general hospitals made an average of 22 operational changes and eight clinical service changes from 2000 to 2005 to remain competitive in a marketplace with many rivals. But contrary to claims from specialty-hospital advocates that competition from specialty hospitals will force general hospitals to improve their quality and efficiency, the GAO found that the presence of a specialty hospital in a market had no influence on the number of changes general hospitals made. “There were no substantial differences in the average number of operational and clinical service changes made by general hospitals in markets with and without specialty hospitals,” said the report. (Click here to download the report.)

Under a U.S. House bill passed May 9, critical-access rural hospitals will receive a five-year continuation of an exemption that allows them to apply for Federal Housing Administration mortgage insurance, reports CQ Today. In 2003, critical access hospitals--institutions with a maximum of 25 beds and located 35 or more miles from other hospitals--were granted an exemption to qualify for low-interest-rate FHA mortgage insurance, which would have expired July 31. The exemption will now extend until July 31, 2011. “Recent healthcare statistics show a huge backlog of capital improvement needs for hospitals across the country, and nowhere is this situation growing more critical than in rural America, where they are often treated differently from those in urban areas,” the bill’s sponsor, Bob Ney, R-Ohio, told CQ Today.

The period to comment on an exposure draft of revisions to HFMA’s guidance on reporting charity care and bad debt will expire on May 26. HFMA’s Principles and Practices Board Statement No. 15, Valuation and Financial Statement Presentation of Charity Service and Bad Debts by Institutional Healthcare Providers, discusses key issues surrounding the valuation and reporting of charity care and bad debt, including the criteria for charity care; the valuation, recording, and disclosure of these two types of uncompensated care; and the classification of receipts relating to charity care. The updates in this exposure draft address current questions raised in relation to charity care reporting practices and also incorporate principles of HFMA’s PATIENT FRIENDLY BILLING® project. To download the draft and comment instructions, click here.

West Virginia is free to require Medicaid recipients to fulfill terms of their “personal responsibility contracts” to be eligible for some medical services now that the Bush administration has approved the state’s plan, reports The Charleston Gazette. After choosing a physician or clinic as a “medical home,” beneficiaries enter contracts that may include provisions such as agreeing to take medications, keeping medical appointments, exercising, and eating well. If the recipient breaks the contract, he or she will lose certain services, such as dental care, substance abuse treatment, or prescription drug coverage. Those who honor the contracts will earn points toward optional health services. Disabled Medicaid recipients are excluded from the responsibility contracts and no benefits will be cut for children. What officials have yet to figure out, however, is whether an individual who desperately needs a medical service will be denied if a contract is breached. The Bush administration approved West Virginia’s new Medicaid program within a week under the streamlined process established under the Deficit Reduction Act passed in February.

Despite numerous reports that medical malpractice premiums rising in excess of 20% per year are driving doctors out of business, a study published in Health Affairs found that premiums have always been a small percentage of total practice expenses. The double-digit premium increases stem from reports based on advertised malpractice insurance rates, not the actual rates doctors pay, write the study’s authors. In actuality, for all doctors nationally, premiums increased from 1970 to 2000 an average of $416 per year. From 1986 to 1996, premiums decreased $122 per year, and they increased $731 per year from 1996 until 2000, but they were still lower in 2000 than they were in 1986. In 2000, premiums made up 7% of total practice expense. Practice revenue, however, did decline from 1996 to 2000 due in part to increases in nonpremium expenses. Frustration with the practice of medicine and falling incomes have likely caused physicians to seize on the emotional issue of malpractice as the cause of their dissatisfaction. “Claims that the level of malpractice premiums justify a tax credit to prevent physicians from leaving the practice of medicine are hyperbole, especially when a physician’s income is viewed compared with that of others,” write the authors. View the abstract.

The Office of Inspector General has told Alvarado Hospital Medical Center in San Diego, and parent company Tenet HealthSystem Hospitals, Inc., that it intends to exclude Alvarado from participating in federal healthcare programs based on the OIG’s allegations that the hospital paid kickbacks to physicians for patient referrals. According to the OIG, Alvarado paid excessive relocation packages to ostensibly help physicians relocate to San Diego, but the relocation agreements primarily benefited the established practices where the new doctors were placed and were used to buy referrals. Although Alvarado was indicted on felony kickback charges, two jury trials deadlocked on whether Alvarado intended to violate the law.

Tenet claims that the OIG’s decision could cause Alvarado to close. “We believe that nothing in the hospital’s practice of recruiting physicians to eastern San Diego County warrants a forced sale or closure of the hospital--especially given the lack of any evidence that any physician compromised his or her medical judgment when referring a patient to Alvarado,” said a statement by Tenet. Alvarado has 30 days to submit documentary and other evidence concerning the proposed exclusion and whether it is warranted.

As San Diego County attempts to create a heart attack treatment network that will route patients only to designated hospitals with rapid-response cardiac catheterization labs and high-volume cardiologists, critics maintain that the county is setting standards too low for participating hospitals, reports The San Diego Union-Tribune. Ideally, only 90 minutes should elapse between the time the patient arrives at the emergency department with a STEMI (ST segment elevation myocardial infarction) and undergoes catheterization. But only two of the county’s 13 nonmilitary hospitals meet Medicare’s looser standard of 120 minutes between arrival and catheterization for at least 62% of patients. And only five hospitals qualify as heart centers under national benchmarks that specify that hospitals perform at least 400 percutaneous coronary interventions annually. After years of heated debates, the committee developing the county’s guidelines said it will have to accept hospitals that perform far fewer procedures and hope that constant monitoring will force cardiologists to improve their quality. Hospitals, meanwhile, are worried that if they are not included in the network, they’ll lose prestige as well as significant revenue. Dr. Timothy Henry, director of research at the Minneapolis Heart Institute Foundation, told the Union-Tribune that it is patients who should worry, however. “It sounds like San Diego is creating a system that is not a system because it’s not eliminating anybody,” he said. Other heart attack networks are being planned in Boston; Des Moines, Iowa; Austin, Texas; Springfield, Ill.; and the whole state of North Carolina.

Approximately 3 million fewer workers who were eligible for employer-sponsored health insurance enrolled in 2003 compared with 1998--from 85.4% of workers to 80.3%--according to Shifting Ground: Changes in Employer-Sponsored Health Insurance, a new report by the Robert Wood Johnson Foundation. Although employers continued to pay 82% of the cost of health insurance during that five-year period, the portion of the premiums employees paid skyrocketed 42% after being adjusted for inflation. Twenty-five states experienced a significant decrease in the percent of private-sector employees who accepted their employers’ offer of health insurance during this period, such as New Jersey (-12 percentage points), Nebraska (-11 percentage points), Wisconsin (-9 percentage points), Colorado (-9 percentage points), and Iowa (-9 percentage points). “With premiums rising each year for companies and their employees, millions of workers are no longer accepting the health insurance offered through their jobs,” said Risa Lavizzo-Mourey, president and CEO of the Robert Wood Johnson Foundation. “If trends continue, this could dramatically increase the number of working but uninsured people in this nation.” Read the report.

A Wisconsin circuit court judge ruled that an uninsured couple cannot bring a class-action lawsuit against a hospital on the basis that the hospital charges higher rates to those without insurance, reports the Milwaukee Journal Sentinel. A full-time day trader and his wife filed suit in May 2005 alleging that a $25,000 medical bill for inpatient and outpatient procedures at Oconomowoc Memorial Hospital in Waukesha, Wis., was unreasonable and improper. Waukesha County Circuit Judge Patrick Haughney ruled that Wisconsin hospitals are allowed to have variable pricing, and that the couple, who dropped their $3,000-a-year health insurance while amassing a $280,000 portfolio, were uninsured by choice rather than economic circumstances. The judge, however, did let stand the allegation that the hospital’s charges were unreasonable. “If a jury trial is held in this matter, it will be for the jury to determine whether the amount is reasonable,” said Haughney.

Hospitals and health systems that say they are less than 85% compliant with Health Insurance Portability and Accountability Act privacy and security regulations increased to 15% in 2006 from 9% in 2005, according to a survey by the American Health Information Management Association. (Click here to download the report.) The slight increase raises concerns because without institutions’ commitment to ongoing HIPAA training and monitoring, “all the work that has been put into the HIPAA compliance efforts of the last few years may be undone over time,” said the survey report. Lack of resources to ensure compliance with HIPAA regulations was a major barrier for 55% of respondents, who said they fear losing budgeting support from senior management. Another disturbing trend is that 22% of respondents said patients had refused to sign release-of-information forms. Hospitals will have to do a better job explaining to patients how information will be protected in order for electronic health records and health information networks to move forward, said AHIMA. “Consumers will be watching the healthcare industry to see how well it complies with the HIPAA rules before they put their trust in a national health information exchange.” HIPAA security regulations have been easier to implement than privacy rules, however. Twenty-five percent of respondents said they were fully compliant with security regulations and 75% said they are nearly completely compliant.

Tenet Healthcare Corporation entered a multiyear agreement with HealthGrades, Inc., to offer detailed reports about physicians affiliated with Tenet hospitals on the HealthGrades web site at no cost to consumers, beginning June 1. Besides listing basic information about physicians’ board certification and any disciplinary actions, Tenet physicians will be able to add details to their profiles, such as education, office hours, areas of practice specialization, and insurance plans accepted. The HealthGrades web site will also include detailed profiles of Tenet hospitals with which the physicians are affiliated. The hospital profiles will include an overview of the hospital’s services, areas of expertise, and role in the community, as well as HealthGrades’ quality ratings and designations. HealthGrades, which normally charges consumers for its physician reports, says 2.9 million unique visitors use its web site each month to make healthcare decisions. HealthGrades provides ratings and profiles of hospitals, nursing homes, and physicians to consumers, corporations, health plans, and hospitals.

In other news, Tenet is focusing on developing a robust outpatient strategy to increase its outpatient services, which were responsible for 29% of its revenue in 2005, reports the Dallas Business Journal. Tenet currently operates 20 ambulatory surgery centers and more than 40 imaging and diagnostic centers.

After remaining stable since the mid-1990s, the proportion of U.S. physicians without any managed care contracts rose from 9.2% in 2000-01 to 11.5% in 2004-05, according to a study by the Center for Studying Health System Change. Compared with physicians with one or more managed care contracts, physicians without managed care contracts are more likely to have practiced for more than 20 years, work part time, lack board certification, practice solo or in two-physician groups, and live in the western United States, the study found. “While physicians have not dropped out of managed care networks in large numbers, this small but statistically significant increase could signal a trend toward greater out-of-pocket costs for patients and a decline in patient access to physicians,” since patients may not be able to afford out-of-network costs, said Paul B. Ginsburg, president of HSC. Obstetricians-gynecologists had the highest rate of rejecting managed care contracts. In 1996-97, only 3.5% of obstetricians-gynecologists had no managed care contracts compared with 11.8% in 2004-05. Read the study.

The Massachusetts Hospital Association reports that the discussion convened two weeks ago by House leaders to resolve the differences over how to regulate patient care made significant progress in bringing MHA, the Massachusetts Organization of Nurse Executives, and Massachusetts Nurses Association--the union behind government-mandated ratios--into agreement on some common themes. For example, responsibility for setting standards and overseeing compliance would be done by the Massachusetts Department of Public Health rather than the legislature.

However, there remain substantial issues to resolve. The hospitals and nurse leaders are asking that any potential compromise must provide some flexibility for hospitals to staff their units in response to actual, real-time conditions presented by patients.

House leaders say a debate on nursing legislation will take place on May 23.

A previous version of this story incorrectly suggested the disagreements of nurse staffing ratios had been resolved. HFMA regrets this error.

Hospitals with the greatest commitment to improving patient service averaged a 2.7 mean score increase over the past year despite the national decline in healthcare satisfaction, according to a report by Press Ganey Associates, which assessed data from more than 2 million inpatients at nearly 1,600 U.S. hospitals, and more than 1.8 million outpatients. Finding that patients are more satisfied with service at ambulatory surgery centers (overall satisfaction score of 91.1) than they are with hospital outpatient services (score of 90.3), the 2006 Health Care Satisfaction Report says that more hospitals need to achieve a higher level of excellence to remain competitive. Other findings: Satisfaction with emergency department waiting times increases when patients receive information about delays at regular intervals; the more satisfied a physician is with a hospital, the higher his or her patients’ satisfaction with care received; and physicians are most loyal to facilities that are customer focused, not those that appeal to physician desires at the expense of patients. The report also suggests that healthcare management may be losing touch with front-line employees such as nurses, since there is a wide gap between the high job satisfaction reported by executives and administrators and the dissatisfaction nurses and technical workers feel about their work.

 Large numbers of uninsured adults are not receiving recommended services for cancer prevention, cardiovascular risk reduction, and diabetes management, and higher income did not improve the rates at which the uninsured received these services, reports an article in the May 3 issue of JAMA. In fact, higher income was associated with much lower rates of cervical and breast cancer screening, serum cholesterol screening, and eye exam and influenza and pneumococcal vaccination for diabetics among the uninsured compared with those with health insurance. For example, 67% of uninsured individuals earning more than $75,000 received breast cancer screening versus 86% of insured individuals with the same income; 18% of uninsured high-income earners who are diabetic received pneumococcal vaccines compared with 42% of insured high earners; and 54% of high-income uninsured individuals received cholesterol screening compared with 79% of insured people. In contrast, higher-earning individuals with insurance tend to have the highest rates of cancer prevention screenings and use more services for chronic care. The authors suggest that policymakers should broaden their recommendations about prevention services beyond low-income insured adults, and that preventive and chronic care be excluded from the high deductibles associated with health savings accounts or plans with significant cost sharing. Read the abstract.

On-call specialist coverage in emergency departments continues to “deteriorate,” further straining “an already frayed system,” according to the American College of Emergency Physicians’ 2005 survey of emergency department medical directors. Of the survey respondents, 73% reported inadequate on-call specialist coverage compared with two-thirds of respondents in 2004. Twenty percent of directors at level I trauma centers said they’ve had to transfer patients to another center due to a lack of specialists willing to take call. On-call shortages were particularly acute for orthopedists; neurosurgeons; and plastic, ENT, and hand surgeons. And although 36% of ED directors say they pay stipends to entice specialists to take call, 38% said emergency physicians are spending more time than ever getting specialists to come to EDs.

Another growing problem is slow access to ED care, with 45% of respondents reporting that patients leave without receiving treatment compared with 30% in 2004. And three-fourths of EDs are now “boarding” patients for four hours or more due to a lack of available inpatient beds. “The factors driving this complex problem--reduced health insurance coverage, reduced federal and private funding, and ongoing medical liability concerns--must be addressed at the federal level,” concludes the report.

Independent Sector and more than 20 charitable organizations sent a letter Wednesday to House-Senate conferees on the tax reconciliation bill, urging them to include charitable-giving incentives and reforms in the final version of the bill. Tax incentives like those in the Senate’s version of the Tax Relief Act of 2005, said the letter, will increase charitable giving, and the reforms will deter those who try to exploit charitable organizations. The “proposed reforms strike the right balance between legitimate government oversight and protecting the independence that charitable organizations need to remain innovative and effective,” said the letter.

The Financial Accounting Standards Board has posted examples on its web site that illustrate the application by not-for-profit organizations of the FASB exposure draft Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans. The proposal would require employers to recognize the overfunded or underfunded positions of defined benefit post-retirement plans in their balance sheets and to increase the transparency and completeness of financial statements. The examples show how a not-for-profit organization would apply the retrospective application provisions of the exposure draft at initial implementation and how such an entity would report actuarial gains or losses and prior service costs or credits in a statement of activities. FASB is seeking written comments on the proposed statement by May 31.

The much-heralded legislation recently passed by Massachusetts to provide near-universal healthcare coverage to the state’s residents will have a “positive credit impact” on Massachusetts hospitals, according to Moody’s Investors Service. Under the new law, individuals face penalties if they don’t have health insurance and businesses with more than 10 employees pay a surcharge if they don’t provide insurance. The legislation also grants Massachusetts an increase in Medicaid funding of $90 million per year for 2007 to 2009. Although Moody’s predicts hospitals will benefit from less bad debt and charity care overall, some individuals won’t be able to pay if the state-provided insurance plans have high deductibles or copays, adding to hospitals’ bad debt. Nor is it certain how many individuals will actually acquire insurance. Moody’s also says that the impact of the legislation will affect hospitals differently, depending on how many uninsured patients they currently treat.

Tax credits and subsidies that reduce health insurance premiums by 20% have little effect on enticing the uninsured to acquire health insurance, reports a study of the California health insurance market published in Health Affairs. At most, premium subsidies would reduce the number of the uninsured by 12%. Nor do lower premiums cause those with group insurance to switch to individual healthcare products. Premium subsidies, however, would likely cause people to continue coverage and insure their families. Contrary to popular opinion, the researchers found that people use individual health policies for long-term coverage, with 60% of policies continuing for more than a year and 30% continuing for more than three years.

As expected, the study also found that high-deductible plans attract healthy people and that large premium reductions would be necessary to get people with chronic problems to enroll. The survey of nearly 4,000 subscribers of individual and family health plans and 409 uninsured people also revealed that a major barrier to obtaining insurance was the perceived difficulty in obtaining information about the plans and the application process. “Public policies that would reduce the costs of information search and the burden of the application process might go as far as modest subsidies in helping expand coverage,” write the study’s authors.

Inpatient psychiatric facilities will receive an average 4% increase in Medicare payments for rate year July 1, 2006, to June 30, 2007, CMS announced. The payment increase will go to approximately 1,800 inpatient psychiatric facilities. The final rule incorporates changes in coding and DRG classifications that were adopted in the inpatient PPS final rule for FY06. Other changes include an increase in the per-diem rate for rate year 2007 to $595.09 from $575.95 in rate year 2006, an increase in the fixed-dollar loss threshold amount for outlier payments from $5,700 to $6,200, and implementing the Office of Management and Budget’s "geographic areas" definitions based on the new core-based statistical areas to determine the wage index adjustment. Download the rule.

Noting that long-term care hospitals have healthy margins, CMS says it will hold payments for rate year 2007 at the 2006 level--$38,086.04--for approximately 400 long-term care hospitals. LTCH Medicare margins rose to 7.8% for FY03 and jumped to 12.7% for FY04, according to CMS. Admissions to LTCHs have also risen rapidly in certain areas of the country, and a significant number of those admissions are “short stay” transfers from acute care hospitals. Consequently, total estimated payments to LTCHs in rate year 2007 are expected to be approximately 70% higher than payments in rate year 2003.

In addition, CMS is replacing the current market basket--“excluded hospital with capital”--with the “rehabilitation, psychiatric, and long-term care” market basket. This change will result in an increase in the labor share, which is used in the adjustment for area wages, from 72.885% to 75.665%. The final rule would also make the LTCH payment system more efficient by revising the payment adjustment formula for short-stay outlier patients. It reduces the part of the current payment formula that is based on costs and adds a fourth component, a blend of an amount comparable to the hospital inpatient PPS payment and the LTC-DRG per-diem payment. Download the rule.

The IRS reminded large tax-exempt organizations of the May 15 deadline to electronically file federal information returns, including Form 990. For the first time, exempt organizations are required to file these returns electronically if they have $100 million in total assets and file at least 250 returns per year--including income, excise, and employment tax and information returns such as forms W-2 and 1099. Exempt organizations that cannot meet the May 15 deadline may request an automatic extension using Form 8868 and file by Aug. 15. Exempt organizations are encouraged to file their extension forms electronically as well.

The Medicare Trustees Report issued on Monday reveals that Medicare’s Hospital Insurance Trust Fund is projected to be exhausted in 2018, two years earlier than estimated in last year's report. This change results from higher costs in 2005 than previously estimated and some upward revisions in the short-range assumptions about utilization of hospital insurance services. Currently, hospital insurance tax income covers 98% of costs, but without changes in the law, “taxes would cover 80% of estimated costs in 2018, and only 29% at the end of the long-range period,” write the trustees. “Closing deficits of this magnitude will require very substantial increases in tax revenues and/or reductions in expenditures.” The report also said that Social Security will become insolvent in 2040, a year earlier than projected.

Treasury Secretary John Snow said the current state of Medicare and Social Security represents a “looming fiscal crisis for our nation as the baby boom generation moves into retirement,” reports a San Francisco Chronicle article. And in an address to the American Hospital Association on Monday, President Bush said, “The systems are going broke.” But Rep. Pete Stark (D-Calif.), a member of the House health subcommittee, claims that the Bush administration is hyping the trustees’ report to “rationalize dismantling Medicare.” The trustees’ report calls for Medicare reforms to be enacted quickly. “The sooner the solutions are enacted, the more flexible and gradual they can be,” they write. Read the report.

President Bush urged executives in attendance at the American Hospital Association’s annual meeting to make their hospital prices and quality data public. “If everyone here cooperates in this endeavor, we can increase transparency without the need for legislation from the United States Congress,” Bush said in a speech to the AHA on Monday. Although it is incumbent on the government to provide a medical safety net for the poor, Bush said, private medicine must control current “unacceptable” runaway healthcare costs in order to “fight off the calls of those in Washington, D.C., who want the federal government making all the decisions for health care.”

Outlining his strategies to make care more affordable, Bush discussed his plan to expand health savings accounts and make pricing in the healthcare system more transparent so consumers can make informed choices. Medicare’s price and quality information will be made public starting June 1, said Bush, and all insurance plans providing benefits to federal employees will be required to post negotiated prices. He called on all insurance companies, hospitals, physicians, and other providers to do the same. Bush also said he wants to see legislation that will provide association health plans for small companies and for the Senate to pass medical liability reform. And he urged hospitals to do their part in creating electronic health records by working “with the AHA to come up with a plan to help develop a nationwide information system that is modern and helps you do your job better.”

The American Hospital Association’s board of trustees approved a policy to share pricing information with consumers and called for a federal requirement for states to make hospital charge information available to consumers as well as for insurers to provide information on expected out-of-pocket costs in advance of medical visits. Hospitals, said the policy, will be at the forefront in defining common terms and explaining complex pricing information in a consumer-friendly way. Federal-led research, however, is needed to determine what type of pricing information consumers with different insurance plans--traditional insurance, HMOs, and HSAs--want and will use.

Meanwhile, HCA Inc. issued a statement that it is working on a “top priority” plan to provide patients with hospital pricing information “so they can better understand their responsibilities and make more informed decisions about their health care."

By paying its two neurosurgeons $1 million each and covering their malpractice insurance, the not-for-profit Martin Memorial Medical Center in Stuart, Fla., says it has solved the problems many hospitals face getting neurosurgeons to treat emergency patients, reports The Palm Beach Post. The two surgeons work exclusively at Martin Memorial and take call. Although their salaries are considerably higher than the median compensation of $704,957 for neurosurgeons reported by the Medical Group Management Association, the hospital’s CEO says the pay is justified. “They totally deserve it,” Richmond Harman told the Post. “These guys are extremely busy.” The two neurosurgeons billed $20 million for 368 surgeries they performed from July 2004 to July 2005. Neurosurgeons at two other hospitals share call with the Martin Memorial surgeons so there are only two or three days a month when a neurosurgeon is not available in an emergency.

Workforce shortages and emergency department overcrowding were two of the biggest concerns expressed by community hospital CEOs in the American Hospital Association’s recent survey. According to the AHA report The State of America’s Hospitals, community hospitals reported a nurse vacancy rate of 8.5%, which translates to 118,000 nurse openings as of December 2005. Other worrisome vacancies were for laboratory technicians (6.3% vacancy rate), imaging techs (5.9%), and pharmacists (4.4%). As a result of workforce shortages, 52% of hospital CEOs said staff morale was suffering, 40% reported ED overcrowding, and 38% said the lack of staff was causing decreased patient satisfaction. The survey also found that half of all EDs in community hospitals are at or over capacity, primarily due to lack of staffed critical care beds. Also, 42% of hospitals didn’t have adequate specialty coverage in their EDs, forcing a third of hospitals to pay for the specialty care they lacked. Other findings of the survey: The cost of pharmaceuticals and other medical supplies increased 9% from 2004 to 2005, 33% of hospitals reported losing money on operations in 2004, and 46% of hospitals in medical liability crisis states said physicians had left the market and 32% had to limit services such as obstetrics and neurosurgery. Download the report.

Medicare Part D plans offered by UnitedHealth Group, Humana, and WellPoint have the largest market share among the more than 80 companies administering over 1,400 drug plans to seniors, according to most recent CMS Part D enrollment data. UnitedHealth, which markets its drug program in partnership with AARP, has captured 27% of Medicare Part D enrollment and 20% of those enrolled in Medicare Advantage. Humana, with its low premiums, has 18% of seniors enrolled in the drug plan and 13% of Medicare Advantage beneficiaries. Together with WellPoint, which has 7% of the Medicare Part D market, the three insurers command 52% of enrollment. Next year, CMS predicts there will be fewer insurers offering the drug benefit. Download the data.

CMS has issued a new rule that it says will help ensure that Medicare pays healthcare providers and suppliers accurately and appropriately and will also help protect against Medicare fraud and abuse. The rule standardizes existing Medicare enrollment requirements used by Medicare contractors and is a step closer to the development of an electronic health record. The regulation requires that providers and suppliers complete and submit a Medicare enrollment application to participate in the Medicare program, report changes in enrollment data within 90 days of the change, and requires providers and suppliers to recertify the accuracy of their enrollment information every five years. Existing providers and suppliers will be notified by CMS when it is time to recertify their Medicare enrollment information. CMS also anticipates revising Medicare enrollment applications to simplify the process for providers and suppliers.

Sens. Chuck Grassley (R-Iowa) and Max Baucus (D-Mont.) have written to President Bush requesting that he ask John Palmer and Thomas Saving to resign their positions as public trustees for the Social Security and Medicare trust funds. Palmer and Saving served one four-year term as trustees, which expired in March 2005, and were recommended for another term in November 2005. No other trustee has served more than one term. Grassley, chairman of the Senate Committee on Finance, and Baucus, the committee’s ranking member, have announced they will introduce legislation to continue the one-term precedent. The reappointment of Palmer and Saving “precluded any meaningful consideration of new nominees or the active participation of new nominees in the development of the 2006 trustees’ report,” wrote Grassley and Baucus. The senators also say that Palmer’s and Saving’s paid consulting work for the Department of Treasury during the gap between their two terms undermines the independence and credibility required of trustees to produce the annual report.

Providing health insurance coverage for nearly all Californians would cost significantly more than a similar plan recently signed into law in Massachusetts, according to a study released by the California HealthCare Foundation. A Massachusetts-style program that mandates that all individuals have healthcare coverage would require as much as $9.4 billion in additional funding--or $1,450 per uninsured Californian. Spending on premiums and out-of-pocket expenses for Californians under age 65 would rise by $10.6 billion, or 9.9% per year. Contributions from employers would increase by $5.1 billion, or 8.8% annually, assuming no changes in employers’ contribution policies.

Socioeconomic and insurance coverage differences between the two states account for the higher cost of implementing near-universal coverage in California. The percentage of Californians without insurance is 20.7% compared with 13.1% of Massachusetts residents without insurance, and 42.8% of Californians have low or modest incomes in contrast to 28.7% of the population in Massachusetts. In addition, Massachusetts spends up to six times more per uninsured person subsidizing uncompensated care than does California--funds that Massachusetts will redirect to pay for most of the coverage subsidies under the new legislation. Click here to download the report.

Health Information Exchange Projects, an AHA-sponsored report, documents the heady expense involved in establishing regional health information organizations--a key component of a national health information system--as well as challenges in financing that expense. For the RHIOs studied, costs for planning are $300,000 to $1 million, costs for development and implementation are $3 million to $10 million, and costs for operations are $2 million to $5 million per year. Financing of the planning phase typically comes from grants. For later phases, hospitals and health systems confront a “significant disconnect between costs and benefits,” with providers bearing costs and payers potentially reaping benefits in the form of reduced costs. The report suggests that certain financing models can compensate for this “misalignment.” Click here to download the report.

Paul Schyve, senior vice president of the Joint Commission on Accreditation of Healthcare Organizations, is encouraging providers to make collecting and analyzing information about patient safety the cornerstone of a patient safety culture. While the knowledge and tools to improve patient safety have advanced rapidly, developing and maintaining a culture within healthcare organizations that emphasizes safety first has been extraordinary difficult, writes Schyve in the April issue of the Commonwealth Fund Digest. The primary reason is that the culture of medicine, steeped in die-hard traditions and subsumed into the identities of healthcare professionals, is very resistant to change. But to gain any traction on improving patient safety, organizations and individuals will have to alter their beliefs that patient harm results from professional incompetence, limits of medicine, or a fluke beyond anyone’s control, says Schyve. In the new model, safety must be a goal that requires constant attention, measurement, and study. Instead of focusing on a physician’s competence and decision-making in preventing harm to his or her own patients, professionals should work as a team to redesign systems that improve safety for all patients. Organizations must commit to reporting and studying errors to learn from them and to establishing new communication protocols and safety processes to be followed without exception.

While operating expenses at Pennsylvania hospitals grew by 5.7% in FY05, reimbursements from third-party payers grew by 7.4%, leading to a 90% gain in operating income over the previous year, according to new figures released by the Pennsylvania Health Care Cost Containment Council. This is the third year of positive financial growth for many Pennsylvania hospitals as a result of significant reimbursement increases. Yet 59 hospitals--27% of Pennsylvania’s hospitals--lost money overall (total margin) during the past three years. Most were small or medium-size community hospitals that cannot rely on a larger health system for financial support.

For the sixth straight year, growth in Medicare revenue lagged behind both commercial health plans and the state's Medicaid program. Medicare revenue increased by only 5.38%, while revenue from commercial health plans and Medicaid increased by 8.32% and 12.86%, respectively. “Lagging reimbursements from the federal Medicare program remain a critical issue for Pennsylvania hospitals,” said Marc Volavka, executive director of PHC4. “A statewide comparison of revenue to a case mix index, which reflects hospital costs, suggests Medicare is under-reimbursing by about 16%, compared to the average for all payers.” Commercial health insurers accounted for 42.4% of reimbursements paid to Pennsylvania hospitals in FY05, compared with 38.5% from Medicare and 10.6% from Medicaid. Click here to download the report.