Healthcare Financial News

In its annual call letter to organizations that intend to offer Medicare Advantage and Prescription Drug plans in 2010, the Centers for Medicare & Medicaid Services (CMS) has provided new guidance that will affect the number of plans offered by Medicare Advantage organizations and the information that prescription drug plan sponsors are required to provide to beneficiaries.

For 2010, CMS is asking Medicare Advantage organizations to make sure the plans they offer significantly differ from one another to ensure that beneficiaries have the information they need to make informed decisions. According to CMS, many plan sponsors offer multiple plans with few distinguishing characteristics and low enrollment.  These low-volume plans crowd the field and make selecting a plan much more difficult for Medicare beneficiaries. CMS also intends to take new steps in its review of Medicare Advantage plan cost-sharing to ensure that sicker beneficiaries will be protected from discriminatory out-of-pocket charges for necessary healthcare services.

Prescription drug plan sponsors will be required to outline all the tools used by the plan to lower costs and improve outcomes on their web sites. Prescription drug plan sponsors will also be required to provide additional information about coverage in the gap on the Medicare Prescription Drug Plan Finder web site later this fall. 

Read the call letter. 

A coalition of more than 25 consumer, labor, and healthcare advocacy groups has unveiled a set of principles that ask healthcare providers, lawmakers, employers, and health plans to consider consumer interests and perspectives as they develop delivery system reforms such as the medical home.  

"These new consumer principles will be invaluable in helping shape new models of delivering primary care that will emphasize high quality, comprehensive and well-coordinated care; enhance patient access to care; and engage patients and their caregivers in managing their health and making good decisions about their care," said Debra L. Ness, president of the National Partnership for Women & Families, one of the coalition members.  "To be truly ‘patient-centered,' these new models of delivering primary care must address the issues that matter most to patients and their families."

Other members of the coalition include AARP, the Alzheimer’s Association, the American Diabetes Association, the AFL-CIO, and the SEIU.

Read the principles.

The Robert Wood Johnson Foundation has released a state-by-state study that chronicles how health insurance coverage has deteriorated since the last large-scale attempt at reform was made in 1994.

At the Brink: Trends in America’s Uninsured 1994-2007 reports that 9 million more Americans were uninsured in that 13-year period, 6 million more working people were uninsured, and the average costs paid by an employee for an individual health insurance premium had risen nearly 8 times faster than average U.S. incomes. More children, however, now have insurance as a result of increased coverage through Medicaid and the Children’s Health Insurance Program. The rate of uninsured children fell by 13 percent to 9.2 million.

The report’s numbers do not reflect the millions of Americans who have lost their jobs and health insurance during the current financial crisis, cautions Risa Lavizzo-Mourey, president and CEO of the RWJ Foundation. 

Read the report.

Comprehensive care plans that are tailored to individual Medicare patients with chronic conditions and monitored by a care coordinator can reduce hospital readmissions by up to 34 percent, according to a report by Mathematica Policy Research, Inc. on behalf of the National Coalition on Care Coordination.

The report examines the three types of care plan interventions that have been tried and the success rate of the Medicare Coordinated Care Demonstration, which began in 2002. It outlines the attributes of the interventions that have been effective, such as in-person contact with patients, coaching patients on proper care and medication use, frequent communication between care coordinators and primary care physicians, and assigning each patient to a nurse care coordinator.

Currently, however, hospitals have no incentive to reduce readmissions under Medicare’s Inpatient Prospective Payment System and, therefore, have no interest in participating in comprehensive care plans. The report, which says that care coordination is vital to keeping Medicare solvent, advocates enticing hospitals to participate in care plan interventions by paying hospitals that have below-average 30-day readmission rates a higher base rate for all Medicare admissions and paying hospitals with high readmission rates a lower base rate. The rates would be “appropriately risk-adjusted and set so that total Medicare payments to hospitals are equivalent to those that would have been achieved with a declining national readmission rate.”

Read the executive summary or full report.

Only 1.5% of U.S. hospitals have an electronic records system in place in all clinical areas and an additional 7.6% have a basic system in at least once clinical unit, according to a New England Journal of Medicine study that examines adoption of electronic records by 2,952 acute-care hospitals. (Adding Veterans Health Administration hospitals to the data bumps the number of hospitals with comprehensive electronic records systems to 2.9%.) The comprehensive survey also found that 12% of hospitals had electronic physicians’ notes in all clinical areas, and 75% had electronic laboratory and radiologic reporting systems. There was no difference in rates of electronic record adoption between public and private hospitals.

Hospitals that hadn’t implemented electronic records systems reported barriers such as lack of capital to purchase the systems (74%); maintenance requirements (47%); physician resistance (36%); lack of clear ROI (32%); and inadequate staff technology expertise (30%). The authors propose that policymakers should stimulate greater use of health information technology by rewarding hospitals that use it, creating incentives for training IT staff, and “harmonizing information-technology standards and creating disincentives for not using such technology.”

Read the study.

The House of Representatives Budget Committee has approved a $3.45 trillion budget for 2010 that hands President Obama the spending he seeks for sweeping healthcare reform in addition to funding his other top priorities in education, energy, and the environment, reports Reuters/Boston Globe. The Senate’s budget blueprint is also expected to preserve the President’s core initiatives.

In addition, the House’s plan includes a procedural maneuver called a reconciliation bill that will allow health care legislation to pass in the House with a simple majority, avoiding a filibuster. Senate Majority leader Harry Reid (D-Nev) is also considering the measure, according to an AP/Boston Globe story. The full House and Senate will vote on their budget plans next week, which are expected to pass both Democratically controlled chambers.

In exchange for a mandate that every American must have health coverage, health insurers said they would no longer charge higher premiums for people in ill health and would abolish coverage exclusions for pre-existing medical conditions, reports The New York Times. The insurance industry’s concession on its rate-setting practice is meant to ward off the possibility that a federal overhaul of the health care system would include a public health plan, which insurers oppose, according to the Times reporting. The offer from insurers, which also included a willingness to accept stringent regulation of benefits and underwriting practices, was made at a Senate HELP committee hearing on Tuesday and in letters signed by the presidents of America’s Health Insurance Plans and the Blue Cross and Blue Shield Association to two Senate health care committees.

Members of Congress welcomed the overture. Senator Max Baucus, chairman of the Senate Finance Committee, said, “It indicates that we may be able to have health care reform this year because the major players are stepping up and saying they are willing to play,” according to the Times article. The insurers said, however, that they would still base premiums on age, place of residence and family size, and that they supported giving discounts to subscribers who had healthy lifestyles.

Read the article.

Stand for Quality, a coalition of 165 organizations that includes the American Hospital Association and the Federation of American Hospitals, announced six recommendations to improve health care quality, access and affordability, which the group says are “inextricably linked.” Stand for Quality is calling for the public and private sectors to partner in measuring quality and to use the results to drive continuous improvements. “Our recommendations build on the successes of work already underway to create an integrated national infrastructure that will put into the hands of providers of care, purchasers of care and consumers of care information to inform their decisions,” says Richard Umbdenstock, president and chief executive officer of the American Hospital Association.

The six recommendations are to set national priorities and provide coordination for quality improvement; endorse and maintain nationally standardized measures; develop measures to fill gaps in priority areas; ensure that providers and other stakeholders have a role in developing policies on use of measures; collect, analyze, and make performance information available and actionable; and support a sustainable infrastructure for quality improvement.

Download the report.

Although California came close to enacting near universal healthcare coverage, the state’s efforts at reform were ultimately voted down in the state’s Senate in early 2008. Three new papers published in a Health Affairs web exclusive examine how California’s health care reform attempt can inform the current federal debate on expanding coverage for the uninsured. Successful reform, say the authors, must come from a federal plan and financing, since individual states’ economies are too volatile and precarious to achieve sustainable universal coverage.

One of the biggest challenges for California was in setting affordable levels of coverage and out-of-pocket expenses for a diverse population. The authors propose that a federal plan could allow low-income workers or dependents to receive subsidized coverage and require employers to pay a defined fee, or offer sliding-scale credits for workers who opt for coverage from their employers. Other lessons from California that could be applied to a federal plan are the use of a publicly financed “backstop reinsurance” to curtail high costs associated with insuring an unknown population and a careful design of choice of plans to avoid adverse selection and extreme cost shifting.

Read the papers.

One of the most contentious issues facing Congress as it crafts legislation to reform health care is whether a government-run healthcare plan will be an option offered to uninsured Americans, reports The Wall Street Journal. The House of Representatives is expected to include a public plan in its bill, which is slated for late spring or early summer, whereas the concept isn’t likely to gain traction in the Senate, with influential Republicans like Charles Grassley opposing it.

Proponents of a public plan envision either a structure that enables the government to establish benefits and prices, like Medicare, or a plan that is managed by a private contractor with the government shouldering the risk. And while a public health plan would provide the necessary competition to private plans to force them to contain costs, its sheer size could also push down payment to providers according to sources consulted for the article.

This week is the seventh annual Cover the Uninsured Week, which is led by the Robert Wood Johnson Foundation, to raise awareness of America’s 46 million uninsured citizens and to advocate for affordable healthcare coverage. HFMA is one of the national supporting organizations. Last year, nearly 1,500 events such as community forums on reform, press conferences, and health and enrollment fairs took place around the country. For ideas on how you can help, visit the Cover the Uninsured Week web site.

The U.S. Department of Health and Human Services (HHS) has announced the members of the Federal Coordinating Council for Comparative Effectiveness Research. Authorized by the American Recovery and Reinvestment Act (ARRA), the new council will help coordinate research and guide investments in comparative effectiveness research funded by ARRA.

The 15-member council, named in accordance with a Congressionally-mandated timeline, will assist the agencies of the federal government, including HHS and the Departments of Veterans Affairs and Defense, as well as others, to coordinate comparative effectiveness and related health services research. ARRA authorized $300 million for the Agency for Healthcare Research and Quality, $400 million for the National Institutes of Health, and $400 million for the Secretary of HHS to support comparative effectiveness research.

The council will hold a public listening session on April 14, 2009.

See the list of council members.

Despite a sobering analysis of President Obama’s FY 2010 proposed budget by the Congressional Budget Office on Friday, President Obama and Democratic budget leaders remain steadfast in pushing forward healthcare reform. Under the President’s $3.6 trillion budget, the country’s cumulative deficit from 2010 to 2019 would skyrocket to $9.3 trillion--$2.3 trillion more than Obama had estimated when he released his budget--and would reach 82% of GDP by 2019, according to the CBO. Judd Gregg (R-NH), ranking member of the Senate Budget Committee, reacted to the CBO report by stating that Obama’s budget would push debt to “unsustainable” levels and “could very well bankrupt future generations.”

But in his weekly address to the American public on Saturday, Obama insisted that, while the dollar amount in his budget would undoubtedly change before the House and Senate vote on the proposal in the next weeks, the final version would include a “serious investment” in health care reform. “So to those who say we have to choose between healthcare reform and fiscal discipline, I say that making investments now that will dramatically lower health care costs for everyone won’t add to our budget deficit in the long-term--it is one of the best ways to reduce it,” said the President. Kent Conrad (D-ND), chairman of the Senate Budget Committee, concurred, saying that his committee was finding ways to adjust the budget “to keep the deficit on a downward trajectory,” but that healthcare reform would remain a top priority.

Each of the chairs of 13 medical departments at Beth Israel Deaconess Medical Center in Boston has agreed to take a $27,000 pay cut in an attempt to prevent 150 staff layoffs, reports The Boston Globe. The hospital expects a $20 million shortfall this fiscal year as inpatient volume has dropped 1%. The department heads are also enjoining 1,100 staff and affiliated physicians to make a financial sacrifice for the institution. Earlier, CEO Paul Levy asked staff for cost-cutting suggestion, which helped the organization to preserve 450 jobs. Levy has cut his own pay by 10% and senior executives will take a 5% pay cut. In addition, no bonuses will be awarded his year, said the hospital.

The Department of Health and Human Services (HHS) announced the selection of David Blumenthal, M.D., M.P.P. as the Obama administration's choice for National Coordinator for Health Information Technology. As the National Coordinator, Dr. Blumenthal will lead the implementation of a nationwide interoperable, privacy-protected health IT infrastructure as called for in the American Recovery and Reinvestment Act, which provides $19.5 billion in health IT funding. 

Dr. Blumenthal most recently served as a physician and director of the Institute for Health Policy at The Massachusetts General Hospital/Partners HealthCare System in Boston, Mass. He was also Samuel O. Thier Professor of Medicine and Professor of Health Care Policy at Harvard Medical School. There, he also served as director of the Harvard University Interfaculty Program for Health Systems Improvement. Prior to that, he was senior vice president at Boston's Brigham and Women's Hospital and served as executive director of the Center for Health Policy and Management and as a lecturer on Public Policy at the John F. Kennedy School of Government.

During the late 1970's, Dr. Blumenthal worked on Senator Edward Kennedy's (D.-Mass.) Senate Subcommittee on Health and Scientific Research. More recently, Dr. Blumenthal served as a senior health adviser to the Obama presidential campaign. 

Read the press release. 

The U.S. Department of Health and Human Services has announced that states can access an additional $268 million authorized by the American Recovery and Reinvestment Act to help pay hospitals to treat their most vulnerable patients.

Disproportionate share hospitals (DSHs)--those that serve a disproportionate share of low-income or uninsured individuals--are eligible. States receive an annual allotment to make payments to DSHs to account for higher costs associated with treating uninsured and low-income patients. The Recovery Act increases the amount of allotments available to states from approximately $11.06 billion to $11.33 billion for 2009.

The Centers for Medicare & Medicaid Services (CMS) will notify states about the availability of the increased portion of allotments for hospitals. Because not all states spend their full DSH allotments, states must demonstrate they have used all of their existing fiscal year 2009 DSH allotments before this new funding can be accessed. States must request the additional funds from CMS as part of their quarterly Medicaid budget request and the funds will be distributed as separate Recovery Act DSH grants.

See a complete list of the revised DSH allotments.  

The Service Employees International Union (SEIU) and the California Nurses Association/National Nurses Organizing Committee (CNA/NNOC) have signed a cooperation agreement to promote passage of the Employee Free Choice Act and unionization in the healthcare sector.

Concurrently, SEIU and CNA/NNOC jointly endorsed measures to create an expanded “Medicare for all” system or to allow states to adopt a single-payer system as an element of healthcare reform.
 
In February, CNA/NNOC, with 85,000 current members, also announced that it will be uniting with the United American Nurses and the Massachusetts Nurses Union to form a 150,000 member union. Steps to complete that unification are continuing.

Read the press release. 

Annual growth in national health spending has exceeded the growth of the economy as a whole by an average 2.4 percentage points from 1970 to 2007, according to an updated primer on healthcare costs from the Kaiser Family Foundation.

The updated primer examines recent trends in healthcare costs in the United States and the factors that contribute to their rapid rise. It notes that since 1970, the share of the economy devoted to health care grew from 7.2 percent to 16.2 percent and is projected to increase to one-fifth by 2018. Reducing that rate of growth poses significant challenges for efforts to reform the nation’s healthcare system.

The primer describes the types and sources of healthcare spending, the demographic factors associated with higher or lower levels of spending, and the impact of higher premiums and out-of-pocket costs on families and employers. It also discusses factors that influence healthcare spending growth--including the use of new medical technology, population changes, and changes in disease prevalence--and highlights some of the challenges policymakers face in trying to slow the rise in healthcare costs.

Read the report or a summary fact sheet. 

On January 15, the U.S. Department of Health and Human Services released two final rules that will facilitate the United States’ ongoing transition to an electronic healthcare environment through adoption of the updated ICD-10 set of diagnosis and procedure codes and updated standards for electronic healthcare and pharmacy transactions.

In accordance with the White House Chief of Staff’s "Regulatory Review" memorandum of January 20, 2009, a determination has been made that the effective date will not be extended and the comment period will not be reopened for either of these rules.

The first rule finalizes new code sets to be used for reporting diagnoses and procedures on health care transactions.  This final rule replaces the ICD-9-CM code sets, developed nearly 30 years ago, with greatly expanded ICD-10 code sets.  The second final rule adopts updated versions of the standards governing electronic transactions under the authority of the Health Insurance Portability and Accountability Act of 1996.  The updated versions replace the current standards and will promote greater use of electronic transactions.  In response to public comments suggesting that more time would be needed for effective industry implementation, the final rules include later compliance dates.  More specifically, the final rules provide compliance dates of Jan. 1, 2012, for the transaction standards and Oct. 1, 2013, for the ICD-10 code set.

Read the fact sheet on the ICD-10 code set and electronic transaction standards. 

Most indicators of payment adequacy for hospital services are positive, said Glenn Hackbarth, Chairman of the Medicare Payment Advisory Commission (MedPAC), in March 17 testimony to the Subcommittee on Health of the U.S. House Committee on Ways and Means.

While most payment adequacy indicators are positive, Hackbarth noted that hospitals’ Medicare margins remain negative. MedPAC projects a negative 6.9 percent margin for 2009. In commenting on these negative margins, Hackbarth observed that “hospitals’ costs are not immutable.” MedPAC research indicates that hospitals under high financial pressure have been able to constrain their costs, especially in comparison with hospitals under low financial pressure. “While Medicare margins for hospitals may be negative in the aggregate,” Hackbarth stated, “Medicare payments are still adequate to cover the costs of efficient hospitals.”

Hackbarth also commented on MedPAC’s recommendation that a hospital’s quality performance should determine whether its payments increase more or less than the market basket. A pay-for-performance payment pool would be funded by setting aside 1 to 2 percent of overall payments. Although the sector as a whole would get a full market basket increase, hospitals with poor quality rankings would get less than a full market basket update.

Read the testimony. 

Fitch Ratings’ “Quarterly Diagnosis” report for fourth-quarter 2008 reports that the for-profit hospital industry remained relatively stable. Although volumes for Fitch's rated hospitals remained weak, they were offset by strong pricing. Bad debt expense and uncompensated care also remained relatively stable, although Fitch believes that this trend will not last into 2009.

The report also reviews the potential impact of President Obama’s proposed budget and the recently enacted American Recovery and Reinvestment Act (ARRA) on for-profit hospitals. Fitch believes that ARRA’s economic stimulus funds are a strong positive for the hospital industry, particularly the increase in federal matching rate (FMAP) funding for state Medicaid programs.

With respect to President Obama’s proposed budget, Fitch believes that the proposal would be positive for the industry if universal or near-universal healthcare coverage is established. It foresees difficulties, however, in enacting the budget as currently written.

Read the report (registration required).

The U.S. Census Bureau has released preliminary data from the 2007 Economic Census. This advance report is the first in a series of industry and geographic area data, including information for more than 1,000 communities not available from previous censuses.

Among the report’s findings is that the healthcare and social assistance sector continued to have the most employees, with nearly 17 million in 2007, an increase of more than 12 percent from 2002.

The economic census is conducted every five years and is the most comprehensive and detailed profile of the U.S. economy, covering millions of businesses representing more than 1,000 industries. Data from the 2007 Economic Census will be released over a two-year period, through June 2011, and will be available in American FactFinder, the Census Bureau’s online data access tool. These data primarily cover the nation’s 7 million businesses with paid employees. Separate data on the 21 million businesses without paid employees will be released in mid-2009.

Visit the 2007 Economic Census home page. 
 

As healthcare reform gains momentum in Washington, nearly 40 percent of consumers have expressed discontent with the status quo, rating the U.S. healthcare system a D or an F. A quarter of consumers have skipped care when they were sick or injured; two in five of those consumers have done so because they simply could not afford it, were not covered by insurance, or thought the costs were too high, according to the results of the 2009 Deloitte Survey of Health Care Consumers.

The survey had some good news for hospitals. Satisfaction with hospital care overall has increased substantially over the last year (74 percent in 2009 as compared with 60 percent in 2008), although ED satisfaction lags at 68 percent. Satisfaction varies according to insurance source, ranging from a low of 57 percent for the uninsured to a high of 81 percent among Medicare enrollees and 82 percent among the military. Insurance coverage is also the most important factor to consumers when selecting a hospital.

The survey also found that consumer differentiation among hospitals based on perceived quality is significant and increasing. Sixty-two percent of consumers believe that hospitals vary with respect to quality. Comparing hospital quality is higher for inpatient use (15 percent) than outpatient use (8 percent). 

Read the survey.

PaperFree Tampa Bay, a new public-private partnership, has launched a plan to convert all physicians in the Tampa Bay area from paper prescriptions to electronic prescribing.

The initiative will deploy more than 100 “electronic healthcare ambassadors” to help physicians quickly and easily transition from paper-based prescriptions, known to be the cause of costly medical errors, to electronic prescribing. PaperFree Tampa Bay plans to seek American Recovery and Reinvestment Act (ARRA) funds to help support the initiative.

A number of key stakeholders, including University of South Florida Health and Allscripts, will fund the initial phase of the project, which will target Hillsborough County’s 3,200 physicians. Funding from ARRA would be used to expand the program to the entire 10-county Tampa Bay region, including the counties of DeSoto, Hardee, Hernando, Highlands, Manatee, Pasco, Pinellas, Polk, and Sarasota.

Read the press release.  

Despite rising healthcare costs and other economic worries, a majority of large U.S. employers remain confident they will continue to offer healthcare benefits to workers 10 years from now. However, the level of confidence has slipped from last year because of economic concerns and uncertainty over the implications of potential health care reform, according to a new survey by Watson Wyatt and the National Business Group on Health.

According to the survey, 62 percent of employers are very confident they will continue to offer healthcare benefits 10 years from now, down from 73 percent last year. The survey also found that roughly four in 10 employers (41 percent) are sticking with their current healthcare strategy, while the remaining respondents have either revamped their strategy or expect to do so this year.

The survey of 489 large U.S. employers, conducted in January 2009, also identified a group of “consistent employers” that have maintained a long track record of lower healthcare cost increases over the past four years. These employers have outperformed other employers in five key areas: appropriate financial incentives, effective information delivery, quality care, metrics and evidence, and maximizing health and productivity.

View the survey report and key findings. 

Medicare spending on home health care--typically following a hospital discharge or for treatment of a chronic condition--totaled $12.9 billion in 2006, up 44 percent from 2002, according to a new report from the Government Accountability Office (GAO).

The GAO found that upcoding--overstating the severity of a beneficiary’s condition--by home health agencies (HHA) and other fraudulent and abusive practices contributed to Medicare home health spending and utilization. Court cases and Department of Health and Human Services Office of Inspector General actions illustrated that kickbacks and billing for services not rendered also contributed to Medicare spending and utilization.

The report concludes that inadequate administration of the Medicare home health benefit leaves the benefit vulnerable to improper payments. The GAO found that the Centers for Medicare & Medicaid Services (CMS) does not require its contractors to verify the criminal history of persons named on applications from prospective HHAs. It also does not generally include physicians, who are in a position to detect certain types of improper billing, in the agency’s efforts to detect improper payments. The GAO found that CMS has not addressed the removal of HHAs or HHA officials from Medicare for certain types of abusive or improper billing.

Read the report. 

Moody’s Investors Service reports that, based on audited financial results for 211 rated organizations, preliminary FY 2008 medians are showing a widespread weakening of credit measures across all rating categories.

Data from the preliminary medians are suggesting several significant developments. First, all major ratios are showing decline, including operating margin and days cash on hand. Second, every rating category shows signs of weakening. Third, most organizations are experiencing a decline in liquidity, the combined effect of weakening investment income and weakening operating cash flow. And finally, the median rate of expense growth continues to outpace the median rate of revenue growth for the third consecutive year.

Moody’s expects to publish full year FY 2008 medians in summer 2009, and predicts that these medians will show further weakening.

The special comment, Not-for-Profit Healthcare Preliminary Medians Show Weakening Across All Major Ratios and All Rating Categories, is available at www.moodys.com.

The costs and performance of the U.S. healthcare system have put America’s companies and workers at a significant competitive disadvantage in the global marketplace, according to a new study by Business Roundtable, an association of chief executive officers of leading U.S. companies.

The first annual Business Roundtable Health Care Value Comparability Study combines internationally reported measures covering both spending on, and the performance of, national healthcare systems to assign a value to the U.S. healthcare system compared with important global competitors. On a weighted scale, the results show that U.S. workers and employers receive 23 percent less value from our healthcare system than the average of five leading economic competitors--Canada, Japan, Germany, the United Kingdom, and France (the “G-5 group”)--and 46 percent less value than the average of emerging competitors Brazil, India, and China (the “BIC group”).

The study also shows that, as a group, the G-5 countries spend approximately 63 cents for every dollar the United States spends on health care, yet the health of the U.S. workforce lags by 10 percent in a composite measure. The gap is even wider in relation to rising economic powers: the three BIC countries spend just 15 percent of what we spend on health care, yet the health of the U.S. workforce trails that of BIC countries by five percent.

Read an executive summary of the report. 

The average total margin for hospitals reporting financial information to DATABANK fell to negative 7.8 percent in the fourth quarter of 2008 from positive 4.6 percent in the fourth quarter of 2007, according to a report released by the American Hospital Association (AHA) and Colorado Hospital Association (CHA).

Hospitals in 28 states report financial data to DATABANK, a CHA database. More than half of these hospitals reported a negative margin in fourth-quarter 2008. Patient discharges fell 0.5 percent from the prior-year quarter, potentially indicating patients are putting off care, while the cost of uncompensated care rose 6.6 percent and the cost of capital rose 12 percent.

Read the report.

Patients with advanced cancer who discuss end-of-life care with their physicians appear to have lower healthcare costs in the final week of life than those who do not, according to a report in the March 9 issue of Archives of Internal Medicine, one of the JAMA/Archives journals.
 
A disproportionate share of medical costs occurs at the end of life, the article notes. Almost one-third of Medicare expenditures are attributable to the 5 percent of beneficiaries who die each year, and about one-third of expenses in the last year of life are spent in the final month. Previous studies suggest that most of these costs result from life-sustaining care, including resuscitation and mechanical ventilation.
 
The study found that in the final week of life, patients who reported having end-of-life discussions with their physicians had average aggregate healthcare costs of $1,876, compared with $2,917 for patients who did not. Formal and informal caregivers who were interviewed after patients’ deaths reported that those with higher costs also had a worse quality of death in their final week.

Read the article. 

Researchers at the RAND Corporation are evaluating a statewide pay-for-performance program launched by the California Integrated Healthcare Association in 2003. Under the program, physician groups receive financial bonuses if they meet certain performance guidelines such as increasing the number of patients with diabetes who receive recommended blood tests. Other performance measures include improving patient experience with getting care and adopting health information technology capabilities. Between 2003 and 2007, health plans participating in the program paid $203 million in incentives to participating physician groups.

Most of the medical groups surveyed by RAND suggested that the program's financial incentives--generally about $1,500 to $2,000 annually per physician--were too small to stimulate significant change among most doctors. They suggested the incentives needed to be two to five times higher in order to achieve quality improvements.

Health plans thought increasing the incentives was a low priority because of the relatively small quality improvements attained thus far and questions about whether other types of investments might produce greater quality gains, according to the study.

Read an abstract of the study. 

Midwestern and southern states received less funding from the federal government than northeastern and western states did in FY 2008 for disease prevention programs, which can amount to millions of dollars in differences, according to a new report from Trust for America’s Health sponsored by the Robert Wood Johnson Foundation.  Shortchanging America’s Health: A State-By-State Look at How Federal Public Health Dollars Are Spent also examines how the economic downturn could lead to serious cuts to disease prevention and emergency preparedness programs at the state level.

The report found that states receive $17.60 per person on average from the U.S. Centers for Disease Control and Prevention (CDC) to spend on public health.  Midwestern states received an average of $17.69 per person and southern states received $18.43 per person, while northeastern states received $22.49 and western states received $23.94 per person from the CDC. Alaska received the most funding from CDC of any state at $52.78 per person in FY 2008, while Indiana received the least at $12.74--a $40 difference.

According to the Center on Budget and Policy Priorities (CBPP), at least 46 states are facing shortfalls to their 2009 and/or 2010 budgets. CBPP estimates that combined budget gaps for states in the remainder of 2009, 2010, and 2011 could total more than $350 billion. Some health programs at risk for cuts include chronic and infectious disease prevention programs, food and water safety, environmental health improvement, and bioterrorism and health emergency preparedness.

Read the report. 

A series of articles offers perspectives on health IT and the recently enacted economic stimulus package (the American Recovery and Reinvestment Act of 2009).

David Brailer, the former National Coordinator for Health Information Technology, shares lessons from health IT efforts in the Bush administration and offers guidance for the current administration. Although Congress’ move to allocate $19 billion for the adoption of electronic health records (EHRs) is a step in the right direction, Brailer highlights problems that could present roadblocks to data exchange, increase costs, and reinforce resistance to patient-centered care.

John Halamka, chief information officer at Harvard Medical School and Beth Israel Deaconess Medical Center, offers five guiding principles for speeding adoption of EHRs that build on previous work and avoid misspending economic stimulus and recovery funds. Mark Frisse of Vanderbilt University writes that an opportunity will be missed if health IT simply automates a broken system. And Ticia Gerber of Manatt Health Solutions highlights the common threads in national and global health IT debates, including the need for strong stakeholder engagement, funding and donor coordination, and challenges for standards and interoperability.

The articles are available on the Health Affairs web site.

A new study from the Kaiser Family Foundation finds that most Medicare Part D prescription drug benefit enrollees did not choose one of the lowest-cost drug plans offered in their area in 2006. Using actual pharmacy claims experiences, and premium and cost-sharing information about Medicare prescription drug plans, the study looked at whether seniors chose the lowest-cost plan for them, based on their drug claims for 2005.

The study found that only 6 percent of seniors chose the lowest-cost plan offered in their area in 2006, and that enrollees who did not choose the lowest-cost plan would have saved $520 on average in 2006 if they had done so. Only 10 percent chose one of the five percent of plans that would have resulted in the lowest costs.

Written by Massachusetts Institute of Technology economist Jonathan Gruber for the Kaiser Family Foundation, the analysis examined retail pharmacy claims from 2005 and 2006 for Part D enrollees ages 65 and older.

Read the report. 

Nonfarm payroll employment continued to fall sharply in February, down 651,000 jobs, and the unemployment rate rose from 7.6 to 8.1 percent, according to the Bureau of Labor Statistics of the U.S. Department of Labor.  Payroll employment has declined by 2.6 million in the past four months. 

The number of unemployed persons increased by 851,000 to 12.5 million in February.  Over the past 12 months, the number of unemployed persons has increased by about 5.0 million, and the unemployment rate has risen by 3.3 percentage points. 
  
Employment declined in most major industry sectors, with the largest losses occurring in professional and business services, manufacturing, and construction.  Health care continued to add jobs over the month of February, with a gain of 27,000. Most of the job growth occurred in ambulatory health care (16,000) and in hospitals (7,000).

Read the summary of February employment data. 

The Department of Health & Human Services (HHS) has launched a new web site that invites Americans to share their thoughts about health reform with the Obama administration and sign a statement supporting enactment of comprehensive health reform this year. Also included on the site are video from the White House Health Forum held Thursday, March 5, and a new report, Americans Speak on Health Reform: Report on Health Care Community Discussions.

In December, then President-elect Obama called on the American people to host health care community discussions to assess the seriousness of the problems facing the healthcare system and identify solutions. Group reports from 3,276 community discussions as well as surveys from 30,603 participants were collected, analyzed, and are summarized in the Americans Speak on Health Reform report.

The cost of healthcare services and health insurance was the top concern about the healthcare system for 55 percent of discussion participants. Participants also cited lack of emphasis on prevention, pre-existing conditions limiting insurance access, and the quality of care as key concerns.

The report is available on the new web site, www.healthreform.gov.

A new data brief from the National Center for Health Statistics, part of the Centers for Disease Control and Prevention, finds that 17.3 percent of persons under 65 years of age with private health insurance were enrolled in a high-deductible health plan in 2007. More than 4 percent were enrolled in a consumer-directed health plan (a high-deductible plan coupled with a health savings account), and almost 15 percent were in a family with a flexible spending account for medical expenses.

The study also finds that persons with directly purchased private health insurance are more likely to be enrolled in a high-deductible plan than those who obtained insurance through an employer or union. Higher incomes and higher educational attainment are also associated with greater uptake and enrollment in high-deductible plans.

Read the data brief.

The outlook regarding fundamental credit conditions facing the medical products and device sector is negative over the next 12 months, based largely on the struggling economy's effects on hospitals and other healthcare providers, as well as the potential for higher event risk primarily associated with acquisitions, according to Moody's Investors Service.

On the whole, the current economic downturn will affect some companies more than others because the medical device industry is so diverse. "Medical device companies that focus on products associated with elective-type procedures are likely to be most at risk as hospitals face challenges in growing volume," says Moody's Senior Credit Officer Diana Lee. Manufacturers of medical equipment--particularly high-cost equipment, such as imaging machines or hospital beds--are most vulnerable to changes in hospitals' capital spending patterns.

Over the longer term, favorable demographics, increased globalization, and product innovation will continue to benefit the medical products and device sector, says Moody's. In addition, regulatory matters and the new administration's focus on a more cost-effective healthcare system could also shape the longer-term outlook for this sector.

The full report, titled "U.S. Medical Products and Devices," is available at www.moodys.com.

A new study of governance in high-performing community health systems identifies six key factors of good governance that contribute to a hospital's high level of operating performance.

The six factors described in the report include:
• Strong values-based CEO leadership, often with emphasis on the importance of strong management teams
• Well-understood, system-wide mission, vision, and values
• A highly committed and engaged board of directors
• Strong clinical leadership and capabilities
• Clearly defined organizational objectives, targets, and metrics
• Healthy organizational culture

The study, sponsored by Grant Thornton LLP and conducted by Dr. Larry Prybil in conjunction with the American Hospital Association, examined 10 high performing healthcare systems across the country by surveying 41 board members to determine key factors that influenced their hospital's operating performance.

Read the report.

A negative outlook for the for-profit hospital sector reflects the assumption that a deteriorating US economy will aggravate challenges such as weak volume trends and increasing exposure to bad debt expenses, according to an announcement by Moody's Investors Service.

The majority of rated issuers still have adequate liquidity in the form of cash and available revolving credit, says Moody’s VP and Senior Credit Officer Dean Diaz. There is likely to be a more concerted reaction to these trends in the form of increased cost-containment discipline by hospital operators, as well as cutbacks in discretionary capital expenditures and expansion projects.

Although the US for-profit hospital sector is less affected by the current economic environment than other corporate sectors, the ratings agency says that hospitals could find it increasingly difficult to achieve volume growth, as patients delay elective procedures or lose insurance coverage.

The full report, titled "U.S. For-Profit Hospitals," is available at www.moodys.com.

The Centers for Medicare & Medicaid Services (CMS) has announced a new policy for Medicare coverage of sleep testing for the diagnosis of obstructive sleep apnea (OSA). The decision provides coverage for specified sleep tests that are used to confirm the diagnosis in patients who have clinical signs and symptoms of OSA.

OSA is a condition that is characterized by periods of apnea during sleep. Apnea is defined as a temporary absence in breathing.  Persons with OSA usually snore; however, not everyone who snores has OSA. Persons with OSA also tend to exhibit daytime drowsiness that can cause accidents with motor vehicles and machinery. Long term OSA can lead to cardiovascular problems.

“Medicare beneficiaries who have obstructive sleep apnea face significant risks for cardiovascular disease and other ailments,” said CMS Acting Administrator Charlene Frizzera. “This coverage decision establishes nationally consistent coverage and assures that beneficiaries who have sleep apnea can be appropriately diagnosed and referred for treatment.”

Read the decision memorandum.

The median profit margin of U.S. hospitals has fallen to zero percent, according to a Thomson Reuters analysis of hospital finances.  Driven largely by a decline in non-operating revenues, financial strains are apparent in all types of hospitals.

The study tracks two dozen key financial indicators, using proprietary and public data to dissect the balance sheets of more than 400 hospitals nationwide. It evaluates trends in revenue and profit, employment levels, closures, inpatient volume, reimbursement rates, and frequency of elective medical treatments to gauge the fiscal health of the nation’s hospitals.

The analysis found that approximately 50 percent of hospitals were unprofitable in the third quarter of 2008, when median days cash on hand also fell to an historic low. Payments received from Medicare, Medicaid, and private insurers were growing at a declining rate through the end of 2008. “The key metrics we’re watching most closely right now are operating margins and frequency of elective procedures,” said Gary Pickens, chief research officer for the Healthcare business of Thomas Reuters and lead author of the study.  “If they start to slip, it may usher in a host of contagion effects.”

Read the analysis.

President Obama has nominated Kansas Gov. Kathleen Sebelius to serve as Secretary of the U.S. Department of Health & Human Services. Nancy-Ann DeParle, who served as Administrator of the Health Care Financing Administration (HCFA, now the Centers for Medicare & Medicaid Services) during the Clinton administration, will head the White House Office for Health Reform.

Governor Sebelius is currently serving her second term as governor of Kansas, having been reelected to the office in 2006. She has also served as the Kansas Insurance Commissioner (1994-2002) and as a member of the Kansas House of Representatives (1986-1994).

In addition to her work as Administrator of HCFA, Nancy-Ann DeParle has served as a Commissioner on the Medicare Payment Advisory Commission (MedPAC), Associate Director for Health and Personnel at the White House Office of Management and Budget (also during the Clinton administration), and as Commissioner of the Tennessee Department of Human Services.

Read the announcement on the White House blog. 

The Medicare Payment Advisory Commission (MedPAC) has released its March 2009 Report to the Congress: Medicare Payment Policy. The report offers payment policy recommendations for nine payment systems, including hospital inpatient and outpatient payment systems. It also provides recommendations on public reporting of physicians’ financial relationships with healthcare providers.

With respect to hospital payment systems, MedPAC recommends that Congress increase payment rates for the acute inpatient and outpatient prospective payment systems in 2010 by the projected rate of increase in the hospital market basket index, concurrent with implementation of a quality incentive payment program. It also recommends that Congress reduce the indirect medical education adjustment (IME) in 2010 by 1 percentage point to 4.5 percent per 10 percent increment in the resident-to-bed ratio. The funds obtained by reducing the IME adjustment should be used to fund a quality incentive payment program.

With respect to public reporting of physicians’ financial relationships, the report recommends that Congress should require all hospitals and other entities that bill Medicare for services to annually report the ownership share of each physician who directly or indirectly owns an interest in the entity (excluding publicly traded corporations) for posting on a searchable public web site.

Read the MedPAC fact sheet or full report.

Businesses in the United States spent $264.2 billion on information and communication technology (ICT) equipment and computer software in 2007, a 4.4 percent increase over 2006, according to the U.S. Census Bureau.

The healthcare and social assistance sector spent $21.4 billion, representing 8.1 percent of total ICT spending. Capitalized expenditures reached $14.5 billion, a 10.9 percent increase from 2006.

Each year, the Census Bureau publishes sector-level data from its Information and Communication Technology Survey for noncapitalized and capitalized spending as a supplement to the Annual Capital Expenditures Survey. Noncapitalized expenditures are written off in the same year in which they are made, while capitalized expenditures are usually depreciated over time.

Read the report.