Healthcare Financial News

January 1, 2009, marks the beginning of the New Year and of the effective date of a revised voluntary code by the Pharmaceutical Research and Manufacturers of America (PhRMA) on interactions between pharmaceutical companies and healthcare professionals.

Changes in the revised code include:
• A prohibition on the distribution of non-educational items--including pens, mugs, and similar items--to healthcare providers and their staff.
• A prohibition on company sales representatives providing restaurant meals to healthcare professionals. Occasional meals provided in healthcare professionals’ offices in conjunction with informational presentations are still allowed.
• New provisions requiring pharmaceutical companies to ensure that their representatives receive sufficient training in applicable laws, regulations, and codes of practice governing interactions with healthcare professionals.
• Yearly certifications by pharmaceutical companies that they have processes in place to abide by the code.

Read the revised code.

Policymakers, the media, and the public should focus on 20 specific health indicators as "yardsticks" to measure the overall health and well-being of Americans, says a new report from the Institute of Medicine.  By providing information that can be compared over time, these 20 indicators will also help track the nation's progress on improving people's health and the effectiveness of public health and care systems, the report says. 

The 20 proposed indicators together provide a broad picture of Americans' health and the nation's health systems.  They reflect a range of factors that determine well-being, including how many individuals engage in certain risky or healthy behaviors, how well patients fare from the care they receive, and to what extent health professionals and facilities are meeting specific goals.

Six of the 20 proposed indicators address health systems, including
• Per capita health care spending
• Percentage of adults without health coverage via insurance or entitlement
• Percentage of non-institutionalized people who did not receive or delayed receiving needed medical services, dental services, or prescription drugs during the previous year
• Percentage of adults who are up-to-date with age-appropriate screening services and flu vaccination
• Hospitalization rate for ambulatory care-sensitive conditions
• Percentage of children between 19 and 35 months old who are up to date with recommended immunizations

Read the report brief. 

The Centers for Medicare & Medicaid Services (CMS) has announced it is requiring certain durable medical equipment suppliers to post a surety bond. In addition, CMS has revoked the billing privileges of more than 1,100 medical equipment suppliers in south Florida and southern California and is suspending payments to home health agencies in the Miami-Dade, Fla. area. 

The final surety bond regulation requires that certain suppliers of durable medical equipment, prosthetics, orthotics and supplies (DMEPOS) post a $50,000 surety bond. This requirement is in part a response to the large number of improper and potentially fraudulent payments to medical equipment suppliers for furnishing medical equipment and devices to people with Medicare. The 2007 Medicare error rate report found approximately $1 billion in improper payments for medical equipment and supplies. 

To prevent fraud, CMS has revoked billing privileges of 1,139 DMEPOS suppliers as part of the DMEPOS High-Risk Suppliers Demonstration. This project began in October 2007 and focuses on DMEPOS suppliers in South Florida and the Los Angeles metropolitan area. These suppliers, who were paid a combined total of $265 million between calendar years 2005 and 2007, lost their billing privileges for not reenrolling in the Medicare program and not meeting Medicare’s supplier standards. CMS is also suspending payments and taking other payment and review actions for home health suppliers in the Dade County, Fla., area. On Oct. 6, 2008, CMS initiated efforts to address potential waste, fraud and abuse by suspending payments to 10 home health agencies and is continuing to review claims and payments to other agencies as resources allow. 

Read the release. 

A survey suggests that nearly half of older adults in the U.S. use prescription and over-the-counter medications together, and that about four percent of older adults are potentially at risk of an adverse drug reaction because of an interaction between medications, according to a study in the December 24/31 issue of JAMA. The researchers also found that nearly 30 percent use at least five prescription medications.

Rates of prescription medication use have increased considerably over the last several decades, as have the rates of use of over-the-counter medications and dietary supplements. Older adults are the largest per capita consumers of prescription medications and the most at risk for medication-related adverse events, according to background information in the article.

"One recent report estimated that U.S. adults older than 65 years make more than 175,000 emergency department visits annually for adverse drug events; commonly prescribed medications accounted for one-third of these events," note the researchers. "Our findings suggest that concurrent use of prescription and nonprescription medications in older adults remains a public health problem and could be an important focal point for further improvements in drug safety for seniors."

Read the abstract.

ECRI Institute, an independent nonprofit that researches the best approaches to improving patient care, has revealed its 2008 list of the 10 most dangerous health technology hazards facing hospitals. The list--updated annually based on problems reported to and investigated by ECRI Institute--includes detailed descriptions of these hazards, as well as concrete information on how to avoid them.

The top five health technology hazards identified in the 2008 list are:
• Alarm hazards
• Needlesticks and other sharps injuries
• Air embolism from contrast media injectors
• Retained devices and unretrieved fragments left in patients
• Surgical fires

“Our list is based on serious technology safety concerns that can be prevented with appropriate attention and planning.  We hope that the list can help raise awareness about these problems, which should be on every hospital’s quality improvement agenda,” says James P. Keller, Jr., vice president, health technology evaluation and safety, ECRI Institute.

Read the list (free registration required). 

In a study of adverse events affecting Medicare beneficiaries in two selected counties, the Department of Health & Human Services Office of Inspector General (OIG) found that 15 percent of hospitalized beneficiaries experienced an adverse event during their hospital stays. In the report, OIG defines the term “adverse event” as harm to a patient as a result of medical care, such as infection associated with use of a catheter.

The OIG report also notes that a difficulty in determining adverse events incidence rates involves differences in the definitions used by various entities. The National Quality Forum (NQF) list of Serious Reportable Events and the Centers for Medicare and Medicaid Services (CMS) list of hospital-acquired conditions often address the same adverse event but define the event differently. For example, the OIG sample included two adverse events involving poor glycemic control, both of which resulted in serious harm. However, because of differences in the way specific adverse events are defined, one case met the criteria of NQF’s list and the other met the CMS criteria.

The OIG report concludes that although its results are not nationally representative, the extent of adverse events and temporary harm found in the case study substantiates concerns about the incidence of adverse events in hospitals and the importance of safety initiatives to reduce occurrences.

Read the report.  

Technology is often touted as the cure for health care, but a new Joint Commission Sentinel Event Alert warns that implementation of technology and related devices is not a guarantee for success, and may actually jeopardize the quality and safety of patient care.

The Joint Commission’s Alert urges greater attention to understanding when a technology may (or may not) be applicable, choosing the right technology, understanding the impact technology can have on the quality and safety of patient care, and attempting to quickly fix technology when it becomes counterproductive. The Alert makes clear that the overall safety and effectiveness of technology in health care ultimately depend on its human users, and that any form of technology can have a negative impact on the quality and safety of care if it is designed or implemented improperly or is misinterpreted.

To reduce the risk of errors related to health information and technology, The Joint Commission’s Alert recommends that healthcare organizations take a series of 13 specific steps, including the adequate training of all staff who will be using the technology.

Read the Alert.

Changes to the Medicare inpatient prospective payment system (IPPS) by the Centers for Medicare and Medicaid Services (CMS) have significantly changed the way in which hospitals are reimbursed for fiscal year 2008. Major changes to IPPS include the continued phase-in of relative weights based on hospital-specific costs and new Medicare severity-adjusted DRGs (MS-DRGs). Other changes include the way in which outliers and certain transfers are reimbursed.

American Hospital Directory has now published a summary analysis of the first actual claims data released under the new rules. This first look at the MS-DRG data is based on an early release of the FY2008 Medicare Provider Analysis and Review (MedPAR) for discharges during the first three quarters. Hospitals may find these preliminary statistics useful for comparing their individual experiences under the new MS-DRGs with the national experience.
 
Read the analysis.

The right of federally funded healthcare providers to decline to participate in services to which they object has been affirmed in a final rule issued by the U.S. Department of Health and Human Services (HHS) and published in the Federal Register.

The final rule clarifies that non-discrimination protections apply to institutional healthcare providers as well as to individual employees working for recipients of certain funds from HHS; requires recipients of certain HHS funds to certify their compliance with laws protecting provider conscience rights; and designates the HHS Office for Civil Rights as the entity to receive complaints of discrimination addressed by the existing statutes and the regulation.

In the preamble to the final rule, HHS encourages providers to engage their patients early on in “full, open, and honest conversations” to disclose what services they do and do not provide.  While it would strengthen provider conscience rights, the rule does not restrict healthcare providers from performing any legal service or procedure. If a procedure is legal, a patient will still have the ability to access that service from a medical professional or institution that offers it.

The rule takes effect 30 days after its publication date of Dec. 19, 2008. Read the final rule.

The Commonwealth Fund has launched a new web site, WhyNotTheBest.org, which allows healthcare providers to conduct side-by-side comparisons of 4,500 hospitals nationwide, track performance over time against numerous benchmarks, and download tools to improve healthcare quality. The web site is a free resource which provides data on hospital performance across two dozen measures of recommended care, and links users to improvement resources directly related to those measures, connecting them to hands-on tools they can put into practice.

The web site also lets users search for and compare hospitals with similar characteristics, such as region, ownership, size, and type (such as safety net, teaching hospital). Benchmark comparisons show how a hospital measures up against others in the same state, the top 10 percent, or the national average.

Populated with publicly-reported data from the Centers for Medicare & Medicaid Services (CMS), the Commonwealth Fund site shows how hospitals fared on 24 nationally recognized measures of care, including those evaluated in The Commonwealth Fund's National Scorecard report. Rankings across 10 measures of patient satisfaction are also reported, pulled from data in the Hospital Consumer Assessment of Healthcare Providers and Systems, a survey of patients' experience in U.S. hospitals.

View the web site.

The Congressional Budget Office (CBO) has issued a report intended to assist Congress in upcoming deliberations about proposals that could substantially modify the U.S. health insurance system. The report includes estimates of the effects of various proposals on the federal budget, the number of people with insurance coverage, and healthcare spending.

The report notes that rising healthcare and health insurance costs pose a serious threat to the nation’s future fiscal condition, projecting that federal spending on Medicare and Medicaid will increase from around 4 percent of GDP in 2009 to nearly 6 percent in 2019 and 12 percent by 2050. Most of that increase will come from growth in per capita costs rather than from an aging population.

The report also notes that serious concerns exist about the efficiency of the healthcare system, but cautions that no simple solutions are available to reduce the level or control the growth of healthcare costs. Possible steps include restructuring the insurance market to discourage treatments that provide minimal benefits or changing incentives to encourage hospitals, physicians, and other providers to control costs. The report states that other approaches--including the wider adoption of health IT or greater use of preventive medical care--could improve people’s health but would probably generate either modest reductions in the overall costs of health care or increases in such spending within a 10-year budgetary time frame.

Read the report. 

The Centers for Medicare & Medicaid Services (CMS) has launched its fourth annual health care provider satisfaction survey of Medicare fee-for-service contractors who process and pay more than $280 billion in Medicare claims each year. The Medicare Contractor Provider Satisfaction Survey (MCPSS) offers health care providers the opportunity to contribute directly to CMS' understanding of contractor performance, as well as aid future process improvement efforts at the contractor level.

CMS is sending the 2009 survey, designed to be completed in about 20 minutes, to approximately 30,000 randomly selected providers, including physicians and other healthcare practitioners, suppliers, and institutional facilities that serve Medicare beneficiaries across the country. Those healthcare providers selected to participate in the survey will be notified this month. Providers can submit their responses via a secure website, mail, fax or over the telephone.

All Medicare Administrative Contractors (MACs) will be measured against performance targets on the 2009 MCPSS as part of their contract requirements. MACs are Medicare contractors that provide a number of services, including processing Medicare fee-for-service claims and fielding healthcare provider questions.

Read the CMS fact sheet. 

The U.S. Department of Health & Human Services Office of Inspector General (OIG) has released a report on key issues related to adverse events in hospitals. These adverse events include the “never events,” such as surgery on the wrong patient, which the National Quality Forum has said should never occur in a healthcare setting. 

The report identifies seven issues as most critical to understanding the landscape of adverse events in hospitals, including:
• Wide variation in estimates, and difficulties in measurement, of the incidence of adverse events in hospitals.
• The growing prominence, and potential drawbacks, of nonpayment policies for adverse events.
• Barriers that may inhibit internal reporting of adverse events.
• Concerns over potential underreporting of adverse events to oversight entities.
• Legal concerns for patients and providers arising from public disclosure of adverse events.
• Slow adoption of recommended practices to prevent adverse events.
• Strategies that may accelerate progress in reducing the incidence of adverse events.
 
In a separate report, the OIG also looks at state reporting systems for adverse events in hospitals. A primary conclusion of this report is that, in the absence of a national system and federal guidelines regarding state reporting systems, states have developed disparate reporting systems that make data unsuitable for use in the aggregate to identify national incidence of adverse events and trends.

Read the OIG’s reports on key issues and state reporting systems.

A new policy brief issued by the University of California Berkeley School of Law’s Center on Health, Economic & Family Security and the Institute for America’s Future argues in favor of a public insurance option for Americans who lack employment-based coverage. This public plan would be similar to conventional Medicare and would be offered through a national insurance exchange, where it would compete with private insurance plans.

The policy brief’s recommendation is based on three assertions. First, the brief asserts that public insurance has a better track record than private insurance when it comes to reining in costs while preserving access. Second, it claims that over the last generation, public insurance has pioneered new payment and quality-improvement methods that have frequently set the standard for private plans. Third, the brief asserts that public plan choice is essential to set a standard for reining in costs and driving value against which private plans must compete.

The policy brief was introduced in a conference call on Wednesday, Dec. 17, in which the report’s author, U.C. Berkeley political science professor Jacob Hacker, was joined by Institute for America’s Future co-director Roger Hickey and U.S. Rep. Pete Stark (D-Cal.), who chairs the House Ways and Means Health Subcommittee.
 
Read the policy brief.

Interruptions in Medicaid coverage are associated with a higher rate of hospitalization for conditions that can often be treated in an ambulatory care setting, including asthma, diabetes, and hypertension, according to a new study in the Annals of Internal Medicine. The analysis, which examines interrupted Medicaid coverage and hospitalization rates, finds that increased risk for hospitalization is highest in the first three months after an interruption in Medicaid coverage.

The study suggests that when states require enrollees to demonstrate eligibility on a more frequent basis, they may see an increase in hospitalizations for common health conditions: lacking insurance to cover the costs of primary care, many former Medicaid enrollees end up in hospitals and are then re-enrolled in Medicaid. The study of California adults, conducted by researchers at San Francisco General Hospital Medical Center and University of California San Francisco, was supported by the Commonwealth Fund.

Federal rules require states to re-determine Medicaid beneficiary eligibility at least once every 12 months but some states do so more often. During most of the time of this study, 1998 to 2002, California--which has the largest Medicaid program in the U.S.--required beneficiaries to report on their eligibility every three months. California has since reduced the frequency of eligibility determination.

Read a summary of the report.

The U.S. Census Bureau has released the new Statistical Abstract of the United States: 2009. First published in 1878, “Uncle Sam’s Almanac” is a summary of statistics on a wide range of important topics, from A (aquaculture) to Z (zinc production).

Statistics on health care, for example, note that the average length of stay for patients at community hospitals declined from 7.2 days in 1990 to 5.5 days in 2006. Yet over the same period, the average cost per patient stay climbed 81 percent, from $4,947 to $8,970.

Also, Americans are spending more on retail prescription drugs. Drug sales climbed from $72.2 billion in 1995 to $259.4 billion in 2007, with the majority of spending shifting from brand name to generic (60 percent brand name in 1995, less than 42 percent in 2007).

The Statistical Abstract is available on the Census Bureau’s web site. 

A new issue brief from the Commonwealth Fund titled Checking Up on Retail-Based Health Clinics: Is the Boom Ending? reports that, despite the rapid growth of retail clinics, only a tiny fraction of American families in 2007 had ever used the in-store clinics, typically located in pharmacies, supermarkets and big-box retailers. The issue brief is based on a national study conducted by the Center for Studying Health System Change (HSC).

The number of retail clinics has grown rapidly in recent years, from about 60 retail clinics in 18 states at the beginning of 2006 to more than 900 in 30 states by the end of 2007. As of 2007, 2.3 percent of American families (about 3.4 million families) had ever used a retail clinic, according to HSC’s findings. Of the families reporting they had ever used a retail clinic, about half reported visiting a retail clinic in the prior 12 months before the survey interview, while the other half reported they had visited a retail clinic during an earlier period.

The study found that families that reported not getting or delaying needed medical care at some point in the previous 12 months were almost 2.5 times as likely to have used a retail clinic as families without such access problems. Also, younger families (those with a family respondent aged 18-34) were more than twice as likely as older families (those with a family respondent aged 50-64) to have used a retail clinic.

Read the issue brief.

A new report by the McKinsey Global Institute finds that $650 billion of a total $2.1 trillion in U.S. healthcare spending is above what would be expected in comparison with 13 peer Organization of Economic Cooperation and Development (OECD) countries, even when adjusted for wealth. 

The report--titled Accounting for the Cost of U.S. Health Care: A New Look at Why Americans Spend More--finds that outpatient care, which includes same-day hospital visits, accounts for two-thirds of the spending above expected ($436 billion). Fueling this spending are a number of supply- and demand-related factors, including provider capacity growth in response to high outpatient margins; the judgment-based nature of physician care; technological innovation that drives prices higher rather than lower; demand growth that appears to be due to greater availability of supply; and relatively price-insensitive patients with limited out-of-pocket costs.

Elsewhere in the U.S. health system, drugs and health care administration represent additional areas where spending is above expected. Drug costs represent $98 billion, or 15 percent, of spending above expected, driven by higher prices and the use in the United States of a more expensive mix of drugs. Health administration costs represent $91 billion, or 14 percent, of total spending above expected, due in part to the system structure, but also to inefficiencies and redundancies that exist within the system.

Read the report. 

At the request of the U.S. House of Representatives Committee on Oversight and Government Reform, the Institute of Medicine of the National Academies (IOM) has prepared a report titled HHS in the 21st Century assessing whether the U.S. Department of Health & Human Services (HHS) is “ideally organized” to meet the health challenges facing our nation.

The report recommends that the HHS Secretary work with Congress to ensure that the department’s programs and reimbursement policies are outcomes-based, reflecting the best available evidence of value and creating incentives for the adoption of best practices, including integration of care, in order to improve quality and efficiency.

Another recommendation is that the HHS Secretary work with Congress to establish a capability for assessing the comparative value--including clinical and cost effectiveness--of medical interventions and procedures, preventive and treatment technologies, and methods of organizing and delivering care. This recommendation, while approved by a majority of the committee issuing the report, failed to gain unanimous consensus.

Read the report brief and summary of recommendations to Congress.

In response to a request from the health subcommittee of the U.S. House of Representatives Committee on Ways and Means, the Government Accountability Office (GAO) has issued a report on the accuracy of profit and expenditure projections by Medicare Advantage (MA) organizations.

The federal government’s spending on the MA program has grown substantially in recent years, from approximately $60 billion in 2006 and $77 billion in 2007 to an estimated $91 billion in 2008. MA organizations provide healthcare coverage to Medicare beneficiaries through private health plans, thus offering an alternative to the original Medicare fee-for-service program. Payments to MA organizations are, in part, based on the projected expenditures organizations submit in their bids for providing Medicare-covered services, as well as actual enrollment and beneficiary health status.

On average, MA organizations reported earning profits of 6.6 percent of total revenue in 2006, which was higher than their projected profits of 4.1 percent. More than half of beneficiaries were enrolled in health benefits plans offered by MA organizations for which profits as a percentage of revenue were greater than projected and the combined medical and non-medical expenses as a percentage of revenue were lower than projected. Among the three types of MA health plans with the largest enrollments--HMOs, PPOs, and private fee-for-service plans--there was a consistent pattern of actual profits being higher than projected and medical expenses being lower than projected.

Read the report. 

As expected, President-elect Barack Obama made official his nomination of former Sen. Tom Daschle (D-S.D.) as Secretary of Health & Human Services on Thursday, Dec. 11. He also named Daschle as director of a new White House Office on Health Care Reform. Dr. Jeanne Lambrew, who authored a book about healthcare reform with Daschle, will serve as deputy director of the new office.

The White House Office on Health Care Reform will coordinate efforts within the administration, the Congress, and across the country to pass healthcare reform. Referring to Daschle’s two roles, President-elect Obama noted that Daschle “will be responsible not just for implementing our healthcare plan--he will also be the lead architect of that plan.”

Dr. Lambrew, the newly nominated deputy director of the White House office, is currently an associate professor of public affairs at the Lyndon B. Johnson School of Public Affairs at the University of Texas and a Senior Fellow at the Center for American Progress.

Read the transition team's press release.

States are moving at an unprecedented rate to get their healthcare systems wired and connected. According to a new report from the National Conference of State Legislatures, lawmakers around the country introduced more than 370 bills relating to health IT during an 18-month period between 2007 and 2008.

Specifically, 132 bills containing health IT provisions were enacted in 44 states and the District of Columbia. That is three times as many bills enacted compared with the same period from 2005 to 2006. The majority of bills relate to financing and planning efforts. Six states enacted comprehensive measures aimed at protecting patient privacy while facilitating the exchange of health data.

"This is a healthcare IT revolution in that state governments and their federal partners are moving toward a seamless, integrated system of information sharing ranging from patient medical records to insurance claims to filling a patient's drug prescription," said state Sen. Richard Moore of Massachusetts.

Read the report.

Fitch's 2009 outlook for the U.S. healthcare sector is negative. Fitch believes that the healthcare sector will face a very difficult operating environment in 2009 resulting from weaker demand associated with the global economic recession and a U.S. governmental focus on reducing the consumer burden of healthcare spending. The outlook covers for-profit hospital operators as well as pharmaceutical manufacturers and the medical device sector. 

Even though U.S. healthcare demand remains strong due to an aging demographic, Fitch expects that growing economic weakness will cause some consumers to delay or forego spending on prescriptions and procedures due to rising unemployment levels and declining wealth. As a result, volume weakness will likely increase, in part putting pressure on top line growth. It is also likely that a growing uninsured or underinsured population will result in increased bad debt and uncompensated care. Regulatory and legislative pressure on the healthcare industry also will grow as the government increases its focus on controlling healthcare costs.

Within the for-profit hospital sector, Fitch notes some offsetting trends that may limit performance declines. First, providers have adopted new methods to address the uninsured, including increased point-of-service collections, patient screening, and efforts to qualify patients for Medicaid or other assistance programs. Second, operators are experiencing stability in managed care pricing, which should allow some revenue growth in spite of weak volumes. Third, it is likely that the newly elected executive and legislative representation will address state Medicaid shortages and enhance healthcare coverage. Finally, with few exceptions, Fitch notes that the sector does not face any significant debt maturities in the next two years that would necessitate refinancing in the current credit environment.

Read the outlook (registration required).

Nearly nine in ten hospital executives believe the current economic crisis will affect their facilities more heavily than the downturn of 2001 - 2002, according to a survey released by CSC titled "Treatment Plan: Hospitals Respond to the Economic Crisis."  The impact is already being felt. Fifty-five percent of hospitals surveyed have seen cuts in revenue from Medicaid payments and many are beginning to prepare for increases in uncompensated care.

With the economy weighing heavily, 74 percent of hospitals surveyed have begun implementing changes to respond to the crisis, while 20 percent are in the planning stages of responding. Some of these changes have been made to capital investments: 60 percent report delaying or deferring future construction, 55 percent report delaying or deferring future IT projects, and 38 percent have postponed IT expansions already underway.

"The economic environment, exacerbated by the credit crisis, has put the healthcare industry in uncharted waters," said Deward Watts, president of CSC's Global Healthcare Sector. "The industry's quick response to this challenge is encouraging, but tough times lie ahead. Hospitals that address changing patient demands and shifting reimbursement cycles will be better positioned to mitigate the downturn."

Read the report.

In his weekly address on Saturday, Dec. 6, President-elect Barack Obama described details of an economic stimulus plan that his administration plans to pursue in the early days of his presidency. A highlighted feature of the plan was investment in electronic health records (EHRs) at hospitals and physician’s offices to modernize the nation’s healthcare system, provide jobs, and improve patient safety. The address came just days before release of a report by the National Alliance for Health Information Technology (NAHIT) showing that more than half of CFOs and finance VPs responding to the NAHIT survey plan to defer health IT equipment purchases or delay or lengthen timeframes for health IT initiative implementation because of current budgetary constraints.  View President-elect Obama’s address.

President-elect Obama’s nominee for Secretary of the Department of Health & Human Services, Tom Daschle, has also announced that the transition team will host health care community discussions across the country over the holidays to help Daschle’s policy team put together their final recommendations for the new administration.

The health care community discussions, which will be organized via the transition’s web page, are modeled on the platform committee meetings that the Obama campaign held across the country earlier this summer.

Read the Daschle announcement. 

Clinicians using an electronic prescribing system appear more likely to prescribe lower-cost medications, reducing drug spending, according to a report in the December 8/22 issue of Archives of Internal Medicine, one of the JAMA/Archives journals.
 
In April 2004, two large Massachusetts insurers began using an electronic prescribing (e-prescribing) system, which provided community-based practices with free wireless devices and access to a secure web portal that color-coded drugs within a three-tier copayment structure. Using 18 months of data, the researchers compared the change in proportion of prescriptions for the three tiers before and after e-prescribing began, and also compared the prescription habits of clinicians using the e-prescribing system to those of control clinicians.
 
After implementation of e-prescribing, prescriptions for tier 1 pharmaceuticals (preferred drugs with lower copayments, such as generics) increased by 3.3 percent. Second- and third-tier prescriptions for brand-name drugs with higher copayments decreased accordingly among clinicians using the system. Based on average medication costs for private insurers, the researchers estimate that using such an e-prescribing system at this rate could result in savings of $0.70 per patient per month, or $845,000 annually per 100,000 insured patients filling prescriptions.

Read abstract.  

An escalation in rating downgrades of not-for-profit hospitals in the fourth quarter points to the negative effects on the sector of a rapidly weakening economy, restricted access to capital, investment losses, and the growing risks associated with variable rate debt, says Moody's Investors Service in a new report.

Moody's downgraded 18 hospital bond ratings in October and November while upgrading only one. This represents a sharp increase in downgrades for the first nine weeks of a quarter and a notable departure from the nearly equal ratios of upgrades to downgrades in recent quarters. The primary factors for the downgrades cited by Moody's include the softening of revenue caused by patients deferring elective procedures, intensifying competition for insured patients with other hospitals and physician groups, and weaker financial performance as rising unemployment is causing increased charity care and bad debt expense.

Moody’s Senior Vice President Lisa Goldstein notes that many hospital management teams have responded quickly to the economic challenges that are impairing financial performance, taking such steps as making greater use of board members' financial and investment expertise, delays of non-essential capital spending, and reevaluation of the financial benefits of new large-scale capital projects. "Other steps include better upfront payments collection, staff reductions, review of all vendor contracts, and outsourcing of some services," said Goldstein. "However, some hospitals with union contracts set to expire in the next 12 months are finding staff reductions to be a more delicate matter."

For more information on the report, read the Moody’s announcement (registration required).

The Securities and Exchange Commission (SEC) has unanimously approved new measures to increase the transparency of the municipal securities market by making information about the market available online.

Unlike investors in corporate securities who have direct access to free company information through the SEC’s EDGAR system, average investors in municipal securities currently have no free and convenient way to get important information about the municipal bonds in which they invest. The rule amendments approved by the SEC designate the Municipal Securities Rulemaking Board (MSRB) as the central repository for ongoing disclosures by municipal issuers. Under a separate MSRB rule change, its Electronic Municipal Market Access (EMMA) system would make these disclosures available to investors in the same manner that the SEC’s EDGAR system does for corporate disclosures. Offering documents, real-time trade prices, and education resources already are available on EMMA at www.emma.msrb.org.

"With liquidity problems of municipal auction-rate securities and rating downgrades of municipal bond insurers contributing to the current credit crisis, the disclosure and transparency of the municipal markets have never been more critical. Municipal securities investors need to know what they own. Now they will no longer have to go to such extensive and expensive lengths to find out," said SEC Chairman Christopher Cox.

Read the SEC final rule.

JPMorgan Chase has announced plans to lend an additional $5 billion to non-profit and healthcare companies, higher-education institutions, and government units over the next year. That will bring total commitments to more than $65 billion.

"These capital-intensive industries have faced tremendous challenges this year when the auction-rate securities market shut down and then the fixed-rate loan market froze up," said Todd Maclin, chief executive officer of Commercial Banking at JPMorgan Chase & Co. "We have expanded and will continue to expand our lending to existing clients while beginning new relationships with others. Lending to these organizations helps both them and our communities."
 
The news release offers several examples of the firm’s recent financing projects, including a new 288-bed children’s hospital facility in Chicago.

Read the release.

Despite numerous initiatives to encourage people to use healthcare price and quality information, most Americans still rely on word-of-mouth and physician recommendations to choose health providers, according to a national study by the Center for Studying Health System Change (HSC), funded by the California HealthCare Foundation.

While sponsors of healthcare price and quality transparency initiatives often identify all consumers as their target audiences, the true audiences for these programs are much more limited, the study found. In 2007, only 11 percent of American adults looked for a new primary care physician, 28 percent needed a new specialist physician, and 16 percent underwent a medical procedure at a new facility, according to findings from HSC's 2007 Health Tracking Household Survey, a nationally representative survey containing information on 13,500 adults. The survey had a 43 percent response rate.

When selecting new primary care physicians, half of all consumers relied on word-of-mouth recommendations from friends and relatives, but many also used doctor recommendations (38%) and health plan information (35%). Nearly two in five used multiple information sources when choosing a primary care physician, but when choosing specialists and facilities for medical procedures, most consumers relied exclusively on physician referrals, according to the study.

Read the research brief.

America’s Health Insurance Plans (AHIP) has introduced a healthcare reform proposal intended to achieve universal coverage, reduce the growth of healthcare costs, and improve the quality of medical care.

The new proposal is the result of three years of policy development by AHIP’s Board of Directors to develop workable solutions to the healthcare challenges facing the nation.  It outlines strategies to achieve four main objectives: controlling costs; helping consumers and purchasers obtain affordable and portable coverage; achieving universal coverage; and adding value through a system that rewards quality, efficiency, and an emphasis on primary care and wellness.

“Today our board is making a strong statement that now is the time for health care reform,” said Karen Ignagni, President and CEO of AHIP.  “Reducing health care costs, improving quality of care, and bringing everyone into the system must be done in tandem to maximize the opportunity for success on all fronts.”

Read more about the proposal.

The American Association of Colleges of Nursing (AACN) has released preliminary survey data showing that enrollment in entry-level baccalaureate nursing programs increased by only 2.0 percent from 2007 to 2008. Though this marks the eighth consecutive year of enrollment growth, the annual increase in student capacity in four-year nursing programs has declined sharply since 2003 when enrollment was up by 16.6 percent. Enrollment growth in master’s nursing programs has also decreased, and the number of students entering research-focused doctorates appears to be flat based on early reporting.

AACN’s latest data confirms that interest in nursing careers remains high with schools of nursing receiving many more qualified applications than can be accommodated. Preliminary data for 2008 show that 27,771 qualified applicants were turned away from entry-level baccalaureate nursing programs based on responses from 406 institutions. Most schools point to a shortage of faculty as the primary reason for turning away students. AACN expects this number to increase when final data is available in March 2009.

“If our nation’s nursing schools are to effectively address the current and future nursing shortage, we must find ways to expand student capacity and accommodate all qualified applicants in our programs,” said AACN President Fay Raines.

View a graphic depicting enrollment changes from 1994-2008.

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.

Leaders of the National Governors Association (NGA) and the National Conference of State Legislatures (NCSL) have called on congressional leaders and the Administration to take early action to stabilize the nation's economy.

Twenty states already have cut $7.6 billion from their fiscal year (FY) 2009 budgets, and 30 states have identified additional shortfalls totaling more than $30 billion. Twenty-five states also have identified shortfalls of $60 billion for FY 2010. However, these numbers tell only a portion of the story, with previous budget actions and the continuing downturn producing cumulative budget gaps of more than $140 billion for FY 2009 and FY 2010. Additionally, states feel the greatest impact on their budgets in the year after a recession ends, primarily because Medicaid growth occurs late in the recession and employment growth lags the recovery. Thus, the repercussions of this downturn will last for several years--and will be much worse without swift action.

The governors and state legislators are calling on the federal government to look to existing federal-state programs because these programs are on-going and therefore the funds can be obligated quickly and expedited efficiently. They specifically request that an economic recovery strategy include a temporary enhancement for at least two years of the Federal Medical Assistance Percentage, which determines the federal government’s share of state Medicaid expenditures.

Read the full release.

Children of farm workers are three times as likely as all other children and almost twice as likely as other poor children to be uninsured, according to a report in the December issue of Archives of Pediatrics & Adolescent Medicine, one of the JAMA/Archives journals.
 
Children of farm workers face a variety of health challenges, according to background information in the article. Most are Latino, a group that already has less than optimal access to pediatric health services. In addition, Mexican American migrant children who move around the United States with their farm-worker parents are two to three times more likely to be rated in poor or fair health than non-migrant Mexican American children. Farm workers’ children are often exposed to pesticides and are more likely to engage in dangerous agricultural work themselves.
 
Roberto L. Rodriguez, M.D., M.P.H., of the University of Texas Medical Branch–Austin and Dell Children’s Medical Center of Central Texas and colleagues analyzed results of a national survey of 3,136 farm workers with children younger than 18 years. Among the farm-worker parents, 32 percent reported that their children were uninsured, including 45 percent of migrant-worker parents. Parents who were older, had less education, had spent less time in the United States and who lived in the Southeast or Southwest were more likely to have uninsured children.
 
Read abstract.

Medicare patients who receive ventricular assist devices (a type of heart pump) have high rates of death, illness, and prolonged hospital stays, with resulting high costs of care, according to a study in the November 26 issue of JAMA.
 
A ventricular assist device consists of a mechanical pump that takes over the function of a damaged ventricle of the heart and helps restore normal blood flow. In 2003, Medicare expanded coverage of ventricular assist devices as permanent therapy for end-stage heart failure. Little is known about the long-term outcomes and costs associated with these devices.
 
Researchers analyzed trends in use, outcomes and costs of ventricular assist devices for all Medicare fee-for-service beneficiaries from February 2000 through June 2006. This study included beneficiaries who received a ventricular assist device as primary therapy (primary device group) or after heart surgery (postcardiotomy group). The researchers found that overall 1-year survival, regardless of subsequent heart transplantation or device removal, was 51.6 percent in the primary device group and 30.8 percent in the postcardiotomy group. For patients in the 2000 through 2005 groups, the average Medicare payment to hospitals for inpatient care in the first year after implantation of a ventricular assist device was $144,298 per patient. One-year Medicare payments for inpatient care of primary device patients totaled approximately $228 million, and was about $151 million for inpatient care of postcardiotomy patients.
 
Read abstract.
 

The median deductible required by employers for individual coverage in PPO health plans jumped to $1,000 in 2008, up from $500 last year, according to the National Survey of Employer-Sponsored Health Plans. This survey is conducted annually by Mercer, a global consulting firm.

In 2000, only about half of employers imposed a deductible for PPO coverage (compared to about four-fifths today) and when they did the median amount was just $250.  PPOs are the most popular type of health plan, enrolling 69 percent of all covered employees. What makes this finding more dramatic is that it refers to traditional PPOs--not the high-deductible health plans where a deductible of at least $1,100 is required in order to deposit tax-free money in a Health Savings Account, or HSA. These plans are spreading rapidly as well.

The Mercer survey includes private and public employer health plan sponsors with 10 or more employees. Nearly 2,900 employers participated in 2008.

Read a summary of the survey results.