Healthcare Financial News

The White House has released its proposed budget for FY10, which includes a proposal to establish a $630 billion healthcare reserve fund to finance healthcare reforms over the next 10 years.

The budget describes the reserve fund as a “first step,” acknowledging that $630 billion will “not be sufficient to fully fund comprehensive reform.” Half of the reserve would be funded by more affluent taxpayers (e.g., couples filing jointly with a combined income of $250,000 or more), including a 28 percent cap on itemized deductions. The other half would be funded by savings generated from proposed accountability, efficiency, and quality initiatives.

Two of the efficiency and quality proposals directly affect hospitals. The first would move Medicare payments to hospitals from fee-for-service to a bundled payment system that would fund hospitalization plus 30 days of post-hospitalization care. Hospitals with high rates of readmission would receive reduced payments if patients were readmitted during the 30 days following the initial hospitalization. The budget summary projects that this bundled payment system would save $26 billion over 10 years. The second proposal would link payments to hospitals for acute inpatient services to performance on specified quality initiatives. Projected savings for the quality initiative are $12 billion over 10 years.

“The reforms broadly proposed by President Obama, though lacking great detail at this time, do contain components supported within HFMA’s principles of payment reform.  However, we need to see HHS’s detailed budget and CMS’s proposed rule to fully appreciate their impact,” said Richard L. Clarke, president and CEO of HFMA. “Both bundled payments and pay-for-performance are monumental shifts and should be implemented in a phased and thoughtful manner. To work, bundled payments require tightly integrated networks of hospitals, physicians, and other care providers.  Integration at this level does not exist today in most healthcare delivery systems, and will take time to evolve. Pay-for-performance approaches are consistent with HFMA’s principles of reform, but the sequencing of implementation must allow time for providers to adapt. We must not deprive some hospitals of the resources they need to improve.  A better approach is rewarding relative improvements, allowing underperforming facilities time and resources to change.”

Read the Office of Management and Budget’s summary of major budget provisions (see pp. 25-30 for healthcare reform) and the Department of Health & Human Services budget fact sheet.

The cost of providing health care to seniors is rising more than twice as fast in Dallas as in San Diego, and Medicare now spends nearly three times more to care for its enrollees in Miami than it does in Honolulu. This illustrates how huge inefficiencies in the U.S. healthcare system are hamstringing the nation’s ability to expand access to care, according to a new analysis of Medicare spending by researchers of the Dartmouth Atlas Project published in the New England Journal of Medicine.

The researchers argue that differences in spending growth are largely due to discretionary decisions by physicians that are influenced by the local availability of hospital beds, imaging centers, and other resources--and a payment system that rewards growth and higher utilization. A slight difference in growth rates can make a large difference over time. San Francisco and East Long Island had nearly identical spending per enrollee in 1992. But where San Francisco grew at 2.4 percent for the next 14 years, spending in East Long Island exploded at 4 percent. So, by 2006 spending in East Long Island was $2,300 more per enrollee than in San Francisco--about $1 billion in additional annual Medicare spending in a single region.

“This work demonstrates why health reformers should work to realign private and public payment schemes to benefit quality performance over the volume of services,” said Dr. Risa Lavizzo-Mourey, president and CEO of the Robert Wood Johnson Foundation, which provides funding to the Dartmouth Atlas Project. “Clinicians who successfully provide high quality care and slow spending growth should be rewarded, not penalized.”

Read the report and related materials.

As economic conditions continue to worsen, the public is increasingly worried about the affordability and availability of care, with many postponing or skipping treatments due to cost in the past year, according to the Kaiser Family Foundation’s first healthcare tracking poll of 2009.

Slightly more than half (53 percent) of Americans say their household cut back on health care due to cost concerns in the past 12 months. The most common actions reported are relying on home remedies and over-the-counter drugs rather than visiting a doctor (35 percent) or skipping dental care (34 percent).  Roughly one in four report putting off health care they needed (27 percent), one in five say they have not filled a prescription (21 percent), and one in six (15 percent) say they cut pills in half or skipped doses to make their prescription last longer.

The 27 percent of the public that reported they had put off or postponed getting needed health care were asked about the specific types of care they had forgone. The most common responses were delaying going to the doctor for a temporary illness (19 percent) or for preventive care (19 percent). But nearly as many--16 percent--report putting off care for a more serious problem, either postponing a doctor’s visit related to a chronic illness such as diabetes or delaying major or minor surgery.

Read the summary of key findings. 

An examination of clinical practice guidelines for treating cardiovascular disease finds that current recommendations are largely based on lower levels of evidence or expert opinion, according to a study in the February 25 issue of JAMA.
 
Clinical practice guidelines are often assumed to be the standard of evidence-based medicine, the article reports. For more than 20 years, the American College of Cardiology (ACC) and the American Heart Association (AHA) have released clinical practice guidelines to provide recommendations on care of patients with cardiovascular disease. The ACC/AHA guidelines currently use a grading scheme based on level of evidence and class of recommendation. The level of evidence classification includes A (higher level of evidence), B, and C (lower level of evidence). The class of recommendation designation includes I (evidence that a treatment or procedure is effective), II, IIa, IIb and III (evidence that a treatment or procedure is not effective).
 
The study’s authors evaluated the adequacy of evidence behind current guideline recommendations. They found that among all 1,305 class I recommendations of guidelines reporting level of evidence, only 245 have level of evidence A, with 481 having a level of evidence C. “Our finding that a large proportion of recommendations in ACC/AHA guidelines are based on lower levels of evidence or expert opinion highlights deficiencies in the sources of definitive data available for the generation of cardiovascular guidelines. To remedy this problem, the medical research community needs to streamline clinical trials, focus on areas of deficient evidence, and expand funding for clinical research,” the authors conclude.

Read the article.

In his first address to Congress, President Obama identified health care as an area “that will grow our economy,” while pledging to pursue healthcare reform to “address the crushing cost of health care.”

The president’s address cited numerous statistics illustrating the impact of healthcare costs, identifying escalating costs as “one of the major reasons why small businesses close their doors and corporations ship jobs overseas.” He indicated that the budget he plans to submit to Congress later this week includes “a down-payment on the principle that we must have quality, affordable health care for every American,” and that this commitment will be “paid for in part by efficiencies in our system that are long overdue.”

The president also stated that he will be bringing together businesses, workers, physicians, and healthcare providers next week to begin work on the issue of healthcare reform.

Read the president’s remarks. 

Growth in national health expenditures (NHE) in the United States is expected to significantly outpace economic growth in 2008 and 2009 due to the recession, according to a report issued today by the Centers for Medicare & Medicaid Services (CMS).  

In 2008, NHE growth is expected to be 6.1 percent, as health spending increases from $2.2 trillion in 2007 to $2.4 trillion in 2008. In comparison, economic growth, as measured by the gross domestic product (GDP), is anticipated to be 3.5 percent. For 2009, health spending is projected to increase 5.5 percent while GDP is expected to decrease 0.2 percent. The health share of GDP is expected to increase from 16.2 percent in 2007 to 16.6 percent in 2008 and to 17.6 percent in 2009. By 2018, national health spending is expected to reach $4.4 trillion and comprise just over one-fifth (20.3 percent) of GDP.

Hospital spending growth is expected to edge downward from 7.3 percent in 2007 to 7.2 percent in 2008, and then decelerate further in 2009 to 5.7 percent. Driving the expected deceleration in hospital spending growth is projected slowing growth in use associated with the recession and projected slower income growth. In addition, hospital price growth is expected to decelerate to the slowest rates since 2000 (2.9 percent in 2008 and 2.6 percent in 2009), also associated with the effects of the recession.

Read the online report, prepared by CMS’s Office of the Actuary and published by Health Affairs.

The evidence shows more clearly than ever that having health insurance is essential for people's health and well-being, and safety-net services are not enough to prevent avoidable illness, worse health outcomes, and premature death, according to a new report from the Institute of Medicine. Moreover, new research suggests that when local rates of uninsurance are relatively high, even people with insurance are more likely to have difficulty obtaining needed care and to be less satisfied with the care they receive.

The number of people who have health insurance continues to drop, and employment-based coverage--the principal source of insurance for the majority of Americans--is eroding, a situation that is getting worse with the current economic crisis, the report notes.  In 2007, nearly one in 10 American children and one in five non-elderly adults had no health insurance. The average amount employees paid per year for family coverage in an employer-sponsored plan rose from $1,543 in 1999 to $3,354 in 2008.  If there is no intervention, the decline in health insurance coverage will continue, the report concludes. 

The committee that prepared the report called on the president and Congress to begin efforts immediately to achieve health coverage for all Americans. It also urged steps to reduce the costs of care and the rate at which healthcare spending is rising to make that coverage sustainable for everyone.

Read the report.

A study published on the Health Affairs web site provides annual estimates of national personal health spending by medical condition. Combining data from several sources, the study's authors looked at 32 selected conditions within 13 all-inclusive diagnostic categories for 1996-2005.

Circulatory system spending was highest among the diagnostic categories, accounting for 17 percent of personal health spending in 2005 and reaching $253.9 billion. Nearly half of circulatory system spending is attributable to heart conditions, which consist primarily of coronary heart disease, congestive heart failure, and dysrhythmias, the researchers say.

The most costly conditions were mental disorders--such as anxiety, depression, and dementia--and heart conditions. Spending for mental health disorders reached $142.2 billion in 2005 and accounted for 9 percent of personal health spending. Spending for heart-related conditions accounted for 8 percent of personal health spending ($123 billion in 2005). Spending growth rates were lowest for lung cancer, chronic obstructive pulmonary disease, pneumonia, coronary heart disease, and stroke.

Read the article. 

The Center to Champion Nursing in America has announced the formation of the Champion Nursing Coalition, a diverse group of organizations representing consumers, insurers, businesses, healthcare providers, and other stakeholders. The coalition will emphasize the importance of finding solutions to the nation’s nursing shortage as an essential component of meaningful healthcare reform.

The Center to Champion Nursing in America is a joint initiative of AARP, the AARP Foundation, and the Robert Wood Johnson Foundation. It was created to address the shortage of nurses in the U.S., which is projected to reach 500,000 by 2025.

For a list of the coalition’s founding members, read the press release.

U.S. employers expect healthcare cost increases to hold steady at 6 percent and more plan to adopt consumer-directed health plans (CDHPs) in 2010 in an effort to control cost increases, according to a forthcoming survey by Watson Wyatt and the National Business Group on Health.

The survey of 489 large U.S. employers found that the median rate of health cost increases is expected to remain at 6 percent in 2009, although this is still nearly twice the rate of inflation. The increase is the same rate that employers experienced in both 2007 and 2008.

Just more than half (51 percent) of companies now offer workers a CDHP, up from 47 percent in 2008. Another 8 percent are expected to adopt a CDHP by 2010. Companies with at least half of their workers enrolled in a CDHP have a two-year cost trend (4.6 percent) that is 25 percent lower than non-CDHP sponsors (6.1 percent).

The 14th Annual National Business Group on Health/Watson Wyatt report will be published in mid-March.

Read the press release.

Young adults in the United States aged 18-29 face a number of health challenges, including increases in obesity, high injury rates, and lack of insurance coverage compared to older adults, according to Health, United States: 2008, the 32nd edition of an annual report prepared by the Centers for Disease Control and Prevention’s (CDC) National Center for Health Statistics.

This year′s report features a special section on adults aged 18 to 29, a group making many life choices that will affect their future economic and health status. Among the report’s findings are a tripling in obesity rates among young adults in the past three decades, from 8 percent in 1971-1974 to 24 percent in 2005-2006; a high percentage of uninsured young adults, especially in the 20-24 age group (34 percent); and a significant number of young adults (17 percent) who reported needing but not receiving medical care, prescription medicines, mental health care, or eyeglasses because they could not afford them.

The full report is available at www.cdc.gov/nchs.

A comprehensive set of insurance, payment, and system reforms could guarantee affordable health insurance coverage, improve health outcomes, and slow the growth of health spending by $3 trillion by the end of the next decade, according to a new report by the Commonwealth Fund Commission on a High Performance Health System.

The report, The Path to a High Performance U.S. Health System: A 2020 Vision and the Policies to Pave the Way, lays out strategic reforms that simultaneously aim to improve access, enhance quality, and control costs. A central recommendation is to create a national insurance exchange that would offer a choice of private plans and a new public plan, coupled with insurance reforms that would make coverage affordable, ensure access, and lower administrative costs. The report’s analysis indicates that insurance reforms would extend coverage to everyone within two years, with only 1 percent uninsured throughout the next decade.

If combined with payment and system reforms initiated in 2010, the integrated approach to reform could slow the growth of national health spending by a cumulative $3 trillion by 2020. Spending would still go up, but at a slower rate.

Read the report.

After Missouri's sweeping Medicaid cutbacks in 2005, more than 100,000 people lost coverage, and many more faced cuts in benefits and increased cost sharing. The number of uninsured people in the state increased; hospitals faced greater demand for uncompensated care; and community health centers faced revenue shortfalls that forced them to cut staffing, increase patient charges, and seek larger state grants. Moreover, Missouri's cuts slowed the growth in Medicaid spending but did not reduce Medicaid costs.

These findings are contained in a study published on the Health Affairs web site written by Urban Institute researchers working with the Kaiser Family Foundation's Commission on Medicaid and the Uninsured. The study examines the consequences of the cuts Missouri adopted in response to the yawning budget shortfalls that Missouri and other states faced in the beginning years of the decade.

Read the study.

In contrast to the perception that methicillin-resistant Staphylococcus aureus (MRSA) bloodstream infections associated with use of a catheter are an increasing problem in intensive care unit (ICU) patients, the incidence of this type of infection decreased by nearly 50 percent from 1997-2007, according to a study in the February 18 issue of JAMA.
 
Staphylococcus aureus, a bacteria that is a cause of staph infections, is a common cause of potentially serious and costly health care-associated infections, appearing frequently in hospitals as central line-associated bloodstream infections. The emergence of MRSA in healthcare settings has drawn the attention of clinicians, public health agencies, and the public, and has prompted calls for mandatory screening or reporting in efforts to reduce infections.
 
The study’s authors analyzed national health care-associated infection surveillance data reported by hospitals to the Centers for Disease Control and Prevention (CDC) for seven types of adult and pediatric ICUs. They found that the overall incidence rate of MRSA central line-associated bloodstream infections declined 49.6 percent from 1997 through 2007. The authors suggest that these decreases in incidence may be attributable to efforts by healthcare facilities to improve adherence to CDC’s evidence-based prevention guidelines, the implementation of strategies designed to improve central line insertion and care practices, and increasing success in preventing MRSA transmission between patients by health care facilities.
 
Read the article. 

The United American Nurses, California Nurses Association/National Nurses Organizing Committee, and the Massachusetts Nurses Association have announced they are joining together to form a new, 150,000-member association. The new organization will be called the United American Nurses-National Nurses Organizing Committee, UAN-NNOC (AFL-CIO).

A press release announcing the formation of the new union described the representation of all registered nurses (RNs) by a RN union as a “guiding principle.” The release noted that a substantial majority of the new union’s budget will be dedicated to organizing all non-union direct care RNs. Nurse-to-patient staffing ratios and the creation of a national Taft-Hartley pension for union RNs were also cited as priorities.

Read the press release.

While the $787 billion federal fiscal stimulus package signed into law on Tuesday, Feb. 17, provides a broad array of near-term benefits to municipal issuers, the relief it provides is not likely to create longer-term benefits, according to a new report from Moody's Investors Service.

Despite the fact that the American Recovery and Reinvestment Act of 2009 comprises substantially expanded funding and various tax benefits, most municipal issuers face credit challenges that may endure beyond the two-year scope of most of the bill's stimulus actions. The portion of the bill affecting the municipal market is approximately $222 billion.

With respect to the not-for-profit hospital sector, the report notes that urban hospitals serving large low-income populations and others funded by Medicaid will see some short-term relief of revenue pressures as a result of a temporary increase in the Federal Medical Assistance Percentage (FMAP). The not-for-profit hospital sector will remain under pressure, however, from rising numbers of the uninsured and cutbacks in employer-provided health insurance. Increased federal scrutiny of community benefit expenditures also remains a concern.

The report, "U.S. Federal Stimulus Likely to Relieve Short-term Credit Pressures Facing a Number of Municipal Issuers," is available at www.moodys.com.

The Centers for Medicare & Medicaid Services (CMS) has announced the delay of the effective date for the interim final rule entitled "Medicare Program; Changes to the Competitive Acquisition of Certain Durable Medical Equipment, Prosthetics, Orthotics and Supplies by Certain Provisions of the Medicare Improvements for Patients and Providers Act of 2008."

The interim rule was to take effect on Feb. 17, 2009. CMS has delayed the effective date to April 18, 2009, to allow department officials the opportunity for further review of the issues of law and policy raised by the rule.

The original comment period on the rule remains unchanged. The public has until March 17, 2009 to submit comments on the substantive policy issues discussed in the rule.

View the interim final rule.

The House of Representatives’ Committee on Financial Services has included the municipal securities market on its oversight plan for the 111th Congress.

The oversight plan states that “the Committee will review the state of the $2.5 trillion municipal securities market. . .including efforts to. . .improve issuers’ access to capital.”

Read the oversight plan.

The Centers for Medicare & Medicaid Services (CMS) has issued a proposed coverage decision memorandum on the use of computed tomographic (CT) colonography, also known as virtual colonoscopy, as a colorectal cancer screening test.

The memorandum concludes that there is insufficient evidence to establish that CT colonography improves net health benefits for asymptomatic, average risk Medicare beneficiaries. It proposes that CT colonography remain uncovered for colorectal cancer screening.

Read the proposed decision memorandum. 

An economic stimulus package of just over $787 billion passed in both the House of Representatives and Senate on Friday, Feb. 13.

A significant portion of the stimulus plan is dedicated to health care-related spending. The states will receive $87 billion in additional Medicaid funding, while another $24.7 billion will subsidize 65 percent of COBRA premiums for laid-off workers for up to nine months. Healthcare IT investment will be supported by $19 billion in federal funds, with an additional $1.1 billion slated for comparative effectiveness research.

President Obama is expected to sign the legislation on Tuesday, Feb. 17.

Read the Kaiser Family Foundation’s summary of health care-related provisions.
 

A new statistical brief from the Agency for Healthcare Research and Quality (AHRQ) finds that expenditures for outpatient prescription pain relievers more than tripled from 1996 to 2006, rising from $4.2 billion to $13.2 billion.

The total number of prescription pain reliever purchases during the period also increased, from 163.6 million purchases in 1996 to 230.7 million purchases in 2006. Average expenditures for a person with a least one prescription pain reliever purchase nearly tripled, from $83 in 1996 to $232 in 2006.

Read the AHRQ brief.

The Internal Revenue Service (IRS) has issued a report on community benefit and executive compensation practices and reporting for not-for-profit hospitals. The report results from a study that began in 2006 and is based on responses to questionnaires sent to 500 not-for-profit hospitals.

The IRS found that the average and median percentages of total revenue reported as spent on community benefit were 9 percent and 6 percent, respectively. These percentages were lowest for rural hospitals and highest for hospitals located in the 26 largest urban areas. Uncompensated care was the largest reported community benefit expenditure, accounting for 56 percent the of aggregate community benefit expenditures reported. Uncompensated care and community benefit expenditures were concentrated in certain hospitals and unevenly distributed. Fourteen percent of the hospitals, for example, reported 63 percent of the aggregate uncompensated care expenditures, while one group of 15 hospitals represented 93 percent of all medical research expenditures reported.

The report’s findings on executive compensation showed average and median compensation for the top management official as $490,000 and $377,000, respectively. Both the average and median total compensation paid increased with revenue size. Twenty hospitals were selected for examination based on high compensation amounts paid: in this group, the average and median total compensation were $1.4 million and $1.3 million, respectively. The report concluded, however, that nearly all examined compensation amounts were upheld as established pursuant to the rebuttable presumption process allowed by the IRS and within the range of reasonable compensation.

Read the report’s executive summary.

The Centers for Medicare & Medicaid Services (CMS) has announced a clarification in its policy for Medicare coverage of bariatric surgery as a treatment for certain beneficiaries with type 2 diabetes.

The decision specifies type 2 diabetes as one of the co-morbidities CMS would consider in determining whether bariatric surgery would be covered for a Medicare beneficiary who is morbidly obese, as long as the surgery is furnished at a CMS-approved facility. An individual with a body-mass index (BMI) of at least 35 is considered morbidly obese.  Normal BMI is considered to be between 18.5 and 25. 

CMS also announced that bariatric surgery will not be covered by Medicare when it is used to treat type 2 diabetes in a beneficiary with a BMI below 35.  While recent medical reports claimed that bariatric surgery may be helpful for these patients, CMS did not find convincing medical evidence that bariatric surgery improved health outcomes for these non-morbidly obese individuals. 

Read the decision memorandum. 

In testimony before the Senate Committee on the Budget on Feb. 10, 2009, Douglas Elmendorf, director of the Congressional Budget Office (CBO), stated that without changes in policy, the number of uninsured adults under age 65 will likely grow from 45 million in 2009 to 54 million in 2019.

Elmendorf identified several proposals that, used in combination, may help the nation achieve near-universal health insurance coverage. These include mechanisms for pooling risk (e.g., strengthening the existing employer-based system, modifying the market for individually purchased insurance, or establishing a national insurance exchange), subsidies to make insurance less expensive, and the use of either an enforceable mandate for individual coverage or an effective process to facilitate enrollment.

Elmendorf’s testimony also addressed the challenges and opportunities for reducing costs and improving efficiencies within the healthcare system.

Read the testimony.

A report on program offerings of health plans by the National Business Coalition on Health finds that health plans are embracing the need for health promotion services, with 77 percent of fully insured plans offering health promotion and wellness programs and 81 percent offering a health risk assessment.

Many plans are focusing specifically on diabetes management programs. The report notes that diabetes now affects almost 8 percent of the total population and 11 percent of people ages 40-59, at an annual estimated cost in 2007 of $174 billion in direct medical care and lost productivity. Fifty-seven percent of the health plans surveyed offer a reward for participation in a disease management program.

The report also found that 83 percent of the plans have the capacity to reward high-performing physicians with such incentives as periodic bonuses or higher fee schedule or capitation rates.

Read the report. 

Wages for registered nurses (RNs) increased faster in California than elsewhere after California began implementing landmark legislation mandating minimum nurse-to-patient staffing ratios in acute care hospitals, according to a study published by Health Affairs.

The study suggests that implementing nurse staffing standards in California could cost more than some anticipated. The findings by Barbara Mark, a professor in the School of Nursing at the University of North Carolina, and coauthors could also mean higher costs for other localities that implement nurse staffing regulations.

The study’s authors stress that the effect of nurse staffing regulations on wages might vary from place to place, depending on local variables such as the demographic makeup of the nurse workforce and the availability of alternative job opportunities for RNs.

Read the article.

A study of 15 programs in the Medicare Coordinated Care Demonstration, funded by the Centers for Medicare & Medicaid Services, showed that care coordination for chronically ill Medicare beneficiaries had no effect on the number of hospitalizations per patient in 13 of the 15 programs. None of the 15 programs generated net savings. The study results are reported in the Feb. 11 issue of JAMA.

The 15 demonstration programs varied significantly, but all of the programs assigned patients to a care coordinator, typically a registered nurse. The care coordinator assessed patient needs and developed patient care programs, which provided patient education and monitoring to improve adherence to treatment regimens and patient communication with physicians.

Although the study showed “underwhelming” results for care coordination, the article notes that results from two of the hospitals in the study suggest the potential for care coordination interventions to be cost-neutral and improve patients’ well-being.

Read the article. 

A new report from Moody’s Investors Service warns that unfavorable interest rate swaps may expose some not-for-profit hospitals to a ratings downgrade.

The report, Interest Rate Swaps Cause New Liquidity Stress for Some Healthcare, Higher Education and Other Not-for-Profit Borrowers, notes that the current low interest rate environment is posing two primary risks for borrowers with floating-to-fixed interest rate swaps. First, collateral calls or termination payments might significantly reduce a borrower’s liquidity. Second, material swap liabilities could result in violations of bond covenants, especially when these liabilities are combined with investment losses.

A particular concern for not-for-profit hospitals are covenants that require a minimum number of days cash on hand. A collateral posting requirement might substantially reduce the unrestricted cash available to meet this covenant.

The report is available at www.moodys.com (subscription required).

Cancer patients can face severe challenges in paying for life-saving care, even when they have private health insurance, according to a new report by the Kaiser Family Foundation and the American Cancer Society.

The report, Spending to Survive: Cancer Patients Confront Holes in the Health Insurance System, highlights five key gaps in the health care system that can leave people with cancer and other life-threatening diseases in financial jeopardy as a result of their diagnosis:
• High cost-sharing and caps on benefits
• Lack of protection from catastrophically high healthcare costs if a patient becomes too sick to work
• The unavailability of adequate and affordable coverage in the individual market
• Limited availability and high premiums for high-risk insurance pools
• Waiting periods, eligibility restrictions, or delayed application for public programs 

Read the report.

The Centers for Medicare & Medicaid Services (CMS) has announced resolution of a dispute among the parties involved in the protest of the award of the Recovery Audit Contractor (RAC) contracts. A stop work order has now been lifted and CMS will move forward with implementation of the RAC program.

Under the program, the four RACs will contract with subcontractors to supplement their efforts.  PRG-Schultz, Inc. will serve as a subcontractor to HDI, DCS and CGI in regions A, B and D.  Viant Payment Systems, Inc. will serve as a subcontractor to Connolly Consulting in region C.  Each subcontractor has negotiated different responsibilities in each region, including some claim review.

Read the CMS announcement. 

In a letter to President Obama dated Feb. 5, 2009, Sen. Max Baucus (D-Mont.), Chair of the Senate Finance Committee, and Sen. Edward Kennedy (D-Mass.), Chair of the Senate Committee on Health, Education, Labor & Pensions, reiterated their commitment to moving health reform legislation in the Senate this year.

The letter also expresses the senators’ confidence that President Obama will soon find a strong candidate to replace former Sen. Tom Daschle (D-S.D.) as nominee for Secretary of the Department of Health & Human Services.

Read the letter.

In a Feb. 4, 2009, memorandum to the Department of Health & Human Services (HHS), President Obama has ordered HHS to withdraw two letters to state health officials that had limited the flexibility of the states in determining eligibility for the State Children’s Health Insurance Program (SCHIP).

The first letter, dated Aug. 17, 2007, had limited the states’ flexibility in expanding SCHIP eligibility to children in families with effective family income levels above 250 percent of the federal poverty level. A May 7, 2008, letter reiterated the requirements of the 2007 letter. Both letters were issued by HHS’s Centers for Medicare & Medicaid Services (CMS).

The president’s memorandum alleges that “tens of thousands of children have been denied health care coverage” as a result of the two CMS letters.

Read the memorandum. 

At the requests of Senate Finance Committee Chairman Max Baucus (D-Mont.) and Ranking Member Charles Grassley (R-Iowa), the Government Accountability Office (GAO) has provided estimates of the state allocations from increased Medicaid funding that would likely occur under two alternate funding arrangements for the economic stimulus plan.

The first estimate, requested by Sen. Baucus, provides likely state allocations resulting from the economic stimulus legislation currently being considered by the Senate. The legislation would provide an increase in each state’s Federal Medical Assistance Program (FMAP) funding of 7.6 percentage points from the first quarter of FY09 through the first quarter of FY11, and additional FMAP assistance based on increases in a state’s unemployment rate.

The second estimate, requested by Sen. Grassley, provides likely state allocations if an across-the-board percentage point increase would replace the legislation under consideration, assuming the same level of funding.

Read the estimates requested by Sen. Baucus and Sen. Grassley.

President Obama has signed new legislation reauthorizing the State Children’s Health Insurance Program (SCHIP) for the next 4 1/2 years at a cost of $32.8 billion. The legislation was passed in the House of Representatives on Wednesday, Feb. 4, by a vote of 290-135, following last week’s 66-32 vote in the Senate.

The new legislation will expand SCHIP coverage to an estimated 4.1 million children, while maintaining coverage for the more than 7 million children already in the program. The cost of the program will be funded by an increase in the federal tax on tobacco products.

Included in the legislation was a provision expanding SCHIP to newly arrived legal immigrants, who had faced a five-year waiting period for eligibility. Dropped from the legislation was a provision that would have banned physicians’ self-referrals to hospitals in which they have an ownership interest.

Read the White House statement.

A new report from the Institute of Medicine of the National Academies (IOM) concludes that the Privacy Rule of the Health Insurance Portability and Accountability Act (HIPAA) does not protect privacy as well as it should and impedes health research.

The report recommends either the adoption of a new framework to ensure health record privacy or revision of the Privacy Rule. A new framework would improve the privacy of personal health data in research by reducing variability in the ethical oversight of research and by placing a high priority on strong security protections. If the existing rule is retained, IOM urges measures that would reduce variability in interpretations of the rule.

IOM also stresses the need for three additional changes:
• All health research institutions should take strong measures to safeguard the security of personally identifiable health information.
• HHS should support the development of new security technologies and self-evaluation standards.
• HHS or Congress should provide reasonable protection against civil suits for volunteer members of Institutional Review Boards and Privacy Boards.

Read the report.   

A federal court of appeals has reversed a lower court ruling that granted a Freedom of Information Act (FOIA) request to Consumers’ Checkbook, Center for the Study of Services (CSS). CSS had submitted the FOIA request to the Department of Health & Human Services seeking access to all Medicare claims submitted by physicians in several localities during 2004.

The appeals court ruled that physicians have a substantial privacy interest in data regarding the total payments they receive from Medicare. This privacy interest was not outweighed by a public interest in the data. An exemption to FOIA, which provides that FOIA does not apply to “personnel and medical files. . .the disclosure of which would constitute a clearly unwarranted invasion of personal privacy,” thus applied.

The court specifically rejected as unproven CSS’s assumption that the frequency with which a physician performs a procedure indicates the quality of the procedure.

Read the decision of the U.S. Court of Appeals for the District of Columbia Circuit.

Patients who have a clear understanding of their after-hospital care instructions are 30 percent less likely to be readmitted or visit the emergency department than patients who lack this information, according to a new study funded by the Agency for Healthcare Research and Quality.

Fewer hospital readmissions and ED visits also translate to lower total costs. The study found that total costs (a combination of actual hospitalization costs and estimated outpatient costs) were an average of $412 lower for the patients who received complete information than for those who did not.

The study is published in the February 3, 2009, issue of the Annals of Internal Medicine.

Read the abstract. 

Former Senator Tom Daschle (D-S.D.) has withdrawn his name from consideration for Secretary of the Department of Health & Human Services.

In a statement released by the White House, Daschle states, “. . . [healthcare reform] will require a leader who can operate with the full faith of Congress and the American people, and without distraction. Right now, I am not that leader, and will not be a distraction.”

In a separate statement, President Obama commended Daschle’s dedication to public service and to healthcare reform. Noting that reform is “essential to the progress of our economy and the well-being of businesses and families across our nation,” the President accepted Daschle’s decision “with sadness and regret.”

Read the statements of President Obama and former Senator Daschle. 

Moody’s Investors Service has announced that ratings downgrades exceeded upgrades by a 2-to-1 margin in the fourth quarter of 2008, a ratio not seen since 2003 and an increase from a 1.3 to 1 ratio in 2007. The 53 downgrades in the fourth quarter represented the highest number since 2001, when 55 downgrades occurred.

There were 27 upgrades in the fourth quarter. The dollar amount of upgraded debt in 2008 ($13.1 billion) continued an upward trend, significantly exceeding the amount of downgraded debt ($9.2 billion).

Moody’s attributes the escalating rate of downgrades to continuing volatility in the financial markets and the economic downturn. Most of the downgraded institutions experienced some combination of softer volumes for elective procedures, increasing bad debt expense, and eroded liquidity resulting from investment losses.

The special comment, “Moody’s Not-For-Profit Healthcare 2008 Year-End Ratings Monitor,” is available at www.moodys.com (subscription required).

The American College of Physicians has issued its “State of the Nation’s Health Care” report and recommendations for 2009. The report concludes that the state of the nation’s health care is poor and calls upon President Obama and the 111th Congress “to take immediate, sustained and dramatic” steps for reform.

The report describes two “essential and interrelated goals” for reform: expansion of health insurance coverage and expansion of the primary care physician workforce. Noting that there are not enough primary care physicians to meet the present and future needs of currently insured Americans, the report states that even more primary care physicians will be needed if the new administration and Congress are successful in their goal of expanding coverage to all Americans.

Read the report. 

The Senate has passed a bill reauthorizing the State Children’s Health Insurance Program (SCHIP). The bill passed in the Senate is similar to the version passed in the House of Representatives earlier this month.

The bill extends SCHIP coverage to more than four million uninsured children, in addition to the more than seven million children already covered by the program. Both the Senate and House versions include a provision extending coverage to children and pregnant women who are legal immigrants, who previously had to wait five years before becoming eligible for SCHIP.

President Obama expressed his endorsement of the bill. “As the worsening economy causes families to lose their jobs and health insurance, it is vital that we redouble our efforts to ensure that every child in America has access to affordable health care," he said in a statement posted on the White House blog on Friday, Jan. 30. "Providing health care to more than ten million children through the Children's Health Insurance Program will serve as a down payment on my commitment to ensure that every American has access to quality, affordable health care.”

Read the White House blog post.

In the United States, nearly 13 percent of adults age 20 and older have diabetes, but 40 percent of them have not been diagnosed, according to epidemiologists from the National Institutes of Health (NIH) and the Centers for Disease Control and Prevention (CDC). Diabetes is especially common in the elderly: nearly one-third of those age 65 and older have the disease. An additional 30 percent of adults have pre-diabetes, a condition marked by elevated blood sugar that is not yet in the diabetic range.

“These findings have grave implications for our healthcare system, which is already struggling to provide care for millions of diabetes patients, many of whom belong to vulnerable groups, such as the elderly or minorities,” said Griffin P. Rodgers, M.D., director of the National Institute of Diabetes and Digestive and Kidney Diseases. “Of paramount importance is the need to curb the obesity epidemic, which is the main factor driving the rise in type 2 diabetes.”

The findings are reported in the February 2009 issue of Diabetes Care.

Read the abstract.