Healthcare Financial News

Both chambers of Congress approved a $3.4 trillion federal budget plan for fiscal year 2010 on Wednesday. The nonbinding budget plan passed the House with a vote of 233 to 193 and in the Senate 53 to 43 with no Republican support. The budget paves the way for healthcare reform and President Obama’s other top initiatives related to energy and education provided that they do not contribute to the deficit. The budget protects new healthcare legislation from a filibuster in the Senate with a procedural rule known as reconciliation. "This budget was hugely important to the president, this is the starting point for everything he wants to do,'” said Democratic Senator Kent Conrad, the chairman of the Senate Budget Committee, reports Forbes/Reuters.

Although many not-for-profit hospitals may be at risk of a rating downgrade within the next year or two, the number of affirmations over the last six months have been “substantial,” according to a Standard & Poor’s Ratings Services report. The downgrade-to-upgrade ratio was more than 6:1 from October 2008 through March 2009 versus 4:1 for calendar year 2008, with the key factor in 69% of the downgrades cited as “significant operating losses and pressures.” Smaller hospitals had more downgrades than larger hospital systems, and 77% of the downgrades occurring over the last six months were in the BBB and below category. Yet, 80% of S&P’s rating actions over the last six months have been affirmations. The credit rating updates are emphasizing historical and current operating trends and cash flow in income statements, rather than nonoperating income such as investment performance. “If a health service provider’s fundamental credit factors remain solid in our view, except for the negative effects of the investment market downturn, in most cases we will affirm our rating,” according to the report. “The Impact of Investment Declines on U.S. Not-For-Profit Health Care Provider Ratings” is available at research_request@standardandpoors.com, or at www.ratingsdirect.com for subscribers.

Tuesday evening, the Senate confirmed Kathleen Sebelius as Secretary of the Department of Health and Human Services by a vote of 65 to 31. Later that evening, she was sworn in by President Obama in the Oval Office.

Sebelius has been governor of Kansas since 2003. From 1994 to 2002 she was the Kansas insurance commissioner. During her Senate confirmation hearings, Sebelius said that “health reform would be my mission” as HHS Secretary and stated her support for public and private health insurance coverage options. During the confirmation process, supporters praised Sebelius’s intellect and ability to reach across partisan divides, while opponents cited her support of abortion rights.

A new report by the Institute of Medicine urges all academic medical centers, journals, professional societies, and organizations engaged in health research, education, clinical care, and development of practice guidelines to use voluntary and regulatory measures to prevent financial conflicts of interest. To start, physicians and researchers should disclose their financial links to pharmaceutical, biotechnology, and medical device firms in a standardized format to help institutions judge the risk that a relationship poses. In addition, Congress should require pharmaceutical, biotechnology, and device firms to report through a public Web site the payments they make to doctors, researchers, academic health centers, professional societies, patient advocacy groups, and others to deter undue industry influence.
 
The report urges researchers, medical school faculty, and private-practice doctors to forgo gifts of any amount from medical companies and to decline to publish or present material controlled by industry. Consulting arrangements should be limited to legitimate expert services spelled out in formal contracts and paid for at a fair market rate. Groups that develop guidelines should not accept direct industry funding and should exclude individuals with conflicts of interest from their panels. In addition, the current system for financing accredited continuing medical education relies too heavily on industry support and needs to be overhauled to be free of industry influence. The report emphasizes that voluntary efforts by medical groups, industry, and individual professionals are more likely to reinforce professional values and foster policies that minimize unintended consequences and administrative burdens. 

Senate Finance Chairman Max Baucus (D-Mont) told the National Press Club on Friday that he will temporarily halt debate on the controversial proposal to create a government-run health plan in order to build momentum on other aspects of healthcare reform, reports The Hill. Democrats and organized labor favor a public plan option, but Republicans and health insurers say that private insurers will leave the market because they’ll be unable to compete with a public plan. President Obama supports a public health plan, but he has also stated that he would abandon that idea if the private market could create affordable health insurance that also reduces healthcare costs.

Democrats were handed a victory, however, after Congressional leaders reached an accord with President Obama that healthcare legislation would be protected from a Republican filibuster through the use of the reconciliation procedure, reports The New York Times. The tentative budget agreement reached late last week includes a provision that healthcare legislation can pass by a simple Senate majority instead of the 60 Senate votes normally required for major bills. But the procedure can’t be employed until October 15, allowing ample time for negotiations on the bill, according to Democratic lawmakers. Baucus, however, indicated that he opposed the process for healthcare reform, saying, “If we jam something down somebody’s throat, it’s not sustainable.”

A greater percentage of the U.S. population—21.8%--lost health coverage in a 12-month period from 2001 to 2004 compared to 1983 through 1986, when 19.8% lost their health insurance, according to a new study in the New England Journal of Medicine. But people regained insurance quicker during the 2001 to 2004 period, with 61.7% obtaining new insurance after 1 year and 79.7% receiving health coverage within two years. (Twenty years ago, 59.2% of the uninsured replaced their health insurance within 1 year, and 73.8% obtained insurance within two years.) The shorter period of uninsurance earlier this decade, however, is due to a 12% increase in the uninsured transitioning to public insurance compared to the 1980s, according to the study’s authors.

The Federal Housing Administration announced that it has finalized a deal to insure a $756 million mortgage, the largest single transaction in its 75-year history. The deal will allow Capital Health of Trenton, NJ, to construct a new 223-bed hospital in Hopewell Township to replace the existing Mercer Medical Center. By insuring the mortgage loan, FHA helped enable a lower cost financing, saving the hospital an estimated $538 million in interest expense over the 25-year life of the loan. FHA's Section 242 Mortgage Insurance Program for Hospitals provides HUD-insured mortgages made by private lending institutions to finance construction or renovation of acute care hospitals.

Nine in 10 hospitals are making cutbacks to help weather the economic storm and nearly half have cut staff, reports a new survey of 1,078 hospitals conducted by the American Hospital Association in March. At the same time, more uninsured patients are coming through emergency departments, say six out of 10 hospitals. More than one in five hospitals reported reducing services such as behavioral health programs, post acute care, clinics and patient education. The majority of hospitals reported that fewer patients are seeking inpatient and elective services and that more Medicaid patients are being served. Over half the hospitals say that the need for hospital-subsidized services such as clinics, screenings and outreach is increasing as 40% report that charitable contributions are down.

Despite the measures hospitals are taking to cut costs, 65% report a decline in total margin and 57% say they’ve had a decline in operating margin in 2009 versus the same period in 2008. Forty-three percent expected a negative total margin in the first quarter of 2009. Fifty-nine percent reported a decrease in days cash on hand, and 31% reported a decrease in debt service coverage ratio in 2009 compared to the same period last year. 

HFMA's information about the financial state of hospitals and actions they are taking to combat the financial downturn, along with how-to guidance, is available at www.hfma.org/pulse.

Fears that general hospitals would alter the care they provide to financially vulnerable patients as specialty hospitals capture insured and healthier patients have proved to be unfounded, according to a new study by the Center for Studying Health System Change. The study examines the impact that cardiac, surgical, and orthopedic specialty hospitals have had on general and safety-net hospitals in Indianapolis, Phoenix, and Little Rock, Ark.

A few general and safety-net hospitals noted serving more financially vulnerable patients, a result of losing insured patients to specialty hospitals, they claimed. More often, however, respondents, particularly safety net hospitals, attributed changes in payer mix to an overall increase in the number of uninsured in their respective markets. General hospitals also reported little change in patient acuity as they competed for patients with specialty hospitals. General hospitals that lost specialist physicians to specialty hospitals responded by employing specialists or aggressively aligning with specialists via contractual arrangements to encourage them to concentrate their practices at one hospital. This strategy also helped general hospitals rebound from initial losses in service volume to specialty hospitals.

After endorsement by the Senate Finance Committee earlier this week, Kansas Governor Kathleen Sebelius's nomination to become HHS Secretary is scheduled for Senate floor debate on April 28. Earlier in the week, Senate Minority Leader Mitch McConnell (R-KY) blocked a Senate vote on Sebelius in response to anti-abortion groups who oppose her, as reported by The Boston Globe. Sebelius has come under fire for her support of abortion rights and for not reporting campaign contributions from a doctor who performs abortions. Senate Majority Leader Harry Reid (D-NV), however, was prepared to start procedures to stop a Republican filibuster, according to his spokesperson, who also said that Reid was confident Sebelius would get the 60 Senate votes she needs for confirmation, reports The Washington Post.

Although three out of four Americans believe that electronic medical records are important for health providers to use, most think that they will increase the cost of health care rather than decrease it, according to a recent telephone survey of 1,238 adults responding to questions about the efficiency and value of health care. “The Public and the Health Care Delivery System” survey, sponsored by National Public Radio, the Henry J. Kaiser Family Foundation, and the Harvard School of Public Health, was designed to air the views of the American public to help inform the health care reform debate.

In addition to raising costs, electronic medical records would likely compromise the confidentiality of medical information, said 59% of the respondents. Seventy-two percent of those surveyed agreed that its not always clear when treatments are effective for given patients, suggesting that Americans may welcome comparative effectiveness research. But more than half opposed having the government involved in the making recommendations about medical effectiveness. Undertreatment is a serious problem, said 67% of respondents, with 26% reporting that insurers had denied coverage for medical care recommended by their physicians. And while 65% said their doctors’ charges were reasonable, 27% said family members have had trouble paying medical bills, and 45% said they have skipped dental or medical care or filling prescriptions to cut their medical costs.

A mandate that individuals obtain health insurance or risk a fine is less palatable to Americans than an approach where individuals, employers, government, and insurers share in the responsibility of achieving universal health coverage, according to the study “Will Americans Support the Individual Mandate?” published in Health Affairs. After surveying 1,704 adults, the authors report that 48% of the public supports the stand-alone individual mandate, whereas 59% endorsed a shared responsibility for universal coverage. The individual mandate was favored by 56% of respondents who described themselves as Democrats but by only 36% of Republicans. In addition, two-thirds of those with less than a high school degree supported the individual mandate in contrast to 38% with some college. The reasons respondents gave for opposing the individual mandate included a likelihood of higher taxes, dislike of government-run health care, fear that the premiums would be unaffordable, or the principle that government should not require citizens to buy insurance. The authors advice policymakers to take note that the individual mandate receives majority support only when combined with the requirement that employers provide insurance to all workers or pay a fine, that government health insurance programs be expanded, and that insurers be prohibited from denying individuals coverage.

Kansas governor Kathleen Sebelius is expected to become the next secretary of Health and Human Services after being endorsed by the Senate Finance Committee on Tuesday. In a 15 to 8 vote, all senators opposed to Sebelius’ confirmation were Republicans, including Iowa senator Chuck Grassley and the number-two ranked Republican senator Jon Kyl of Arizona. Two Republicans--Sen. Pat Roberts of Kansas and Sen. Olympia Snowe of Maine--joined the committee’s Democrats in supporting Sebelius. If the two-term governor is confirmed by the full Senate’s vote, expected in the next week or two, Sebelius will play a crucial role in executing President Obama’s vision for health care reform, which is increasingly coming under fire by Republicans in Congress, reports the Los Angeles Times.  Prior to the Senate Finance Committee’s vote, Kyl also voiced his concerns that Sebelius’ support of comparative effectiveness research, which received funding of $1.1 billion from the economic recovery package, would lead to rationing of medical care, according to The Washington Post.

In a new report, Moody’s Investors Services says that downgrades occurred in nearly all rating categories in the not-for-profit healthcare sector in the first quarter of 2009.  Downgrades outpaced upgrades by a ratio of 3.8 to 1, with 19 downgrades and five upgrades, reflecting a significant deterioration in rating activity from the first quarter of 2008 with its eight downgrades and six upgrades for a 1.3 to 1 ratio. Moody's also affirmed 79 ratings in the first quarter of this year, representing 77% of all rating actions.

Primary factors contributing to the 19 rating downgrades in the opening quarter of the year include weakening operating performance from soft to declining volumes as a result of patient-deferred healthcare needs, rising bad debt expense and charity care, and deteriorating liquidity and balance sheet strength from investment losses and large interest rate swap collateral postings.

As of April 1, nine ratings were on Watchlist, all for possible downgrade. The first quarter of 2009 also saw five new ratings added to the not-for-profit healthcare sector portfolio, representing $1.7 billion of newly rated debt. "The high volume of ratings on Watchlist for possible downgrade coupled with the increased level of negative outlook revisions signals credit pressures will remain elevated through calendar 2009," said Moody's Associate Analyst Deepa Patel. The report, "Moody's Not-For-Profit Healthcare 2009 Quarterly Ratings Monitor First Quarter 2009 Activity Continues Trend of Elevated Downgrade Activity Seen in Fourth Quarter 2008," is available at moodys.com.

Moody's also announced it was developing new liquidity ratios for U.S. colleges, hospitals, other not-profits to assist investors in distinguishing among organizations and to boost comparability between organizations in its rating analysis. "Universities and hospitals generally disclose little or no information regarding the true liquidity of their cash and investments reported in their audited financial statements," said Moody's Vice President Roger Goodman. "Reported data on cash and investments lack sufficient and useful analytical content without additional information to supplement financial reporting requirements."

For both the higher education and healthcare sectors, Moody's ratios will address uncertainty of investment liquidity by asset class and manager type. In particular, analysts will likely exclude hedge funds that promise liquidity within a certain time period, but have the ability to implement "gates" to limit withdrawals in some circumstances. "A likely result of our analysis will be the development of multiple measures that both include and exclude certain investments that are subject to gates or other types of uncertainty, including valuation delays or opacity," said Goodman. The report, "Moody's Developing New Liquidity Ratios for U.S. Universities, Hospitals & Other Not-for-Profits," is available at moodys.com.

Hospitals are falling short in implementing safety standards and quality procedures, according to the newly released 2008 Leapfrog Hospital Survey of 1,276 hospitals in 37 major U.S. metropolitan areas. Leapfrog, a nonprofit organization representing major private and public purchasers of health care, finds that only 7% of hospitals fully meet its medication error prevention standards. Efficiency standards--defined as highest quality and lowest resource use--are met by only 24% of hospitals for heart bypass surgery, 21% for heart angioplasty, and 14% for pneumonia care. In addition, 65% of hospitals do not have all recommended policies in place to prevent common hospitals-acquired infections; 75% do not fully meet standards for 13 evidence-based safety practices, ranging from hand washing to nursing staff competence; and only 26% are meeting standards for treating heart attacks.

Hospitals have, however, improved in some areas: 31% now meet the ICU staffing standard, up from just 10% in 2002, and 65% have agreed to implement Leapfrog’s “Never Events” policy when a serious reportable event occurs within their facility. “Progress on patient safety is moving too slowly,” concludes Leapfrog CEO Leah Binder. Consumers can compare local hospital safety information, including all of the measures referenced in the survey.

Download the survey results.

In his weekly address to Americans on April 18, President Obama pledged to reduce waste and improve the efficiency of government operations by examining every program and dollar of spending to ensure that “taxpayers are getting their money’s worth.” To that end, Obama announced that Aneesh Chopra, Virginia’s Secretary of Technology, will serve as the nation’s Chief Technology Officer. Chopra is charged with advancing technological innovations to reduce health care costs as well as to create jobs and for homeland security. Chopra has previously worked as managing director of the Advisory Board Company, leading the firm’s Financial Leadership Council and the Working Council for Health Plan Executives. Chopra, said the president, will work closely with Chief Information Officer Vivek Kundra to set technology policy across government and to use technology to “improve security, ensure transparency, and lower costs. The goal is to give all Americans a voice in their government and ensure that they know exactly how we’re spending their money--and can hold us accountable for the results,” says Obama.

The President also announced that Jeffrey Zients will serve as Chief Performance Officer and Deputy Director for Management of the Office of Management and Budget to “streamline processes, cut costs, and find the best practices throughout the government.” Zients formerly was CEO and chairman of the Advisory Board Company and chairman of the Corporate Executive Board. Currently he is the founder and managing partner of Portfolio Logic, an investment firm focused on business and health care service companies.

Read the announcement.

The Federal Trade Commission has announced a proposed rule that would require vendors of personal health records to notify consumers when the security of their electronic health information is breached.

The American Recovery and Reinvestment Act of 2009 (ARRA) requires the Department of Health and Human Services in consultation with the FTC to conduct a study and report, by February 2010, on potential privacy, security, and breach notification requirements for vendors of personal health records and related entities. In the interim, ARRA requires the Commission to issue a temporary rule requiring these entities to notify consumers if the security of their health information is breached.

The proposed rule requires vendors of personal health records and related entities to provide notice to consumers following a breach. The proposed rule also stipulates that if a service provider to one of these entities experiences a breach, it must notify the entity, which in turn must notify consumers of the breach. The proposed rule contains additional requirements governing the standard for what triggers the notice, as well as the timing, method, and content of notice. It also requires entities covered by the proposed rule to notify the FTC of any breaches.

Public comments on the proposed rule will be accepted through June 1, 2009.

The Federal Communications Commission (FCC) has announced the approval of funding under its Rural Health Care Pilot Program (RHCPP) for the build-out of five broadband telehealth networks that will link hundreds of hospitals regionally in Iowa, Minnesota, Montana, Nebraska, North Dakota, South Carolina, South Dakota, Wisconsin, and Wyoming. In addition, funding has been approved for the design of a telehealth project in Alaska. Collectively, these six projects are eligible to receive $46 million in reimbursement for the engineering and construction of their regional telehealth networks. 

The FCC established the $417 million RHCPP to increase patient access to care via telemedicine and to support the transfer of electronic medical records to improve the quality of patient care.  Nationwide, 67 projects are eligible to receive RHCPP funding for telehealth networks serving 6,000 health care facilities in 42 states and three U.S. territories. At this time, 29 of these projects have developed or posted requests for proposals to select vendors to build out their broadband networks, while the remaining projects are preparing their requests for proposals as part of the competitive bidding process.

Read the press release.

Federal stimulus incentives for hospitals and physicians to implement interoperable electronic health records (EHRs) will not nearly compensate them for the overall costs they will incur, but future penalties from reduced Medicare reimbursement could be a bigger motivator, according to “Rock and a Hard Place: An Analysis of the $36 Billion Impact from Health IT Stimulus Funding,” a paper published by the PricewaterhouseCoopers LLP (PwC) Health Research Institute.

To help drive adoption of electronic health records by 2015, the federal government is investing $33 billion in incentives to providers. An analysis by PwC’s Health Research Institute shows that a 500-bed hospital could receive an average of $6.1 million in incentives to purchase, deploy, and maintain a government-certified, interoperable electronic health record system. By comparison, the average 500-bed hospital that fails to implement a system by 2015 could see a reduction in Medicare funding by $3.2 million or more, depending on their Medicare volume.

The federal initiative comes at a time when capital-constrained healthcare organizations are struggling to find the necessary funding to purchase EHR systems. In a March 2009 survey of 100 hospital chief information officers, one-half of CIOs in hospitals with more than 500 beds said that federal funding is “crucial” to their ability to implement EHRs. “The stick, even more than the carrot, makes a fiscally compelling argument for adopting electronic health records,” said Daniel Garrett, managing director of PwC’s health industries technology (HIT) practice. “If an organization wants to have an enterprise-wide EHR up and running by 2011, they’ve got to start now. The incentives eventually go away and the stick will only get bigger.”

Read the report.

Despite a consensus that the use of health IT should lead to more efficient, safer, and higher-quality care, only 1.5 percent of U.S. hospitals have a comprehensive electronic health record (EHR) system that is present in all clinical units, according to a study in the April 16 issue of the New England Journal of Medicine.

The study found that an additional 7.6 percent have a basic system in place that is present in at least one clinical unit, while 17 percent of hospitals have implemented computerized provider-order entry for medications. Larger hospitals, those located in urban areas, and teaching hospitals were most likely to have EHR systems.

The study identifies capital requirements and high maintenance costs as primary barriers to implementation. The study’s authors conclude that policy strategies focused on financial support, interoperability, and training of technical staff may be necessary to spur adoption of EHR systems in U.S. hospitals.

Read the study.

The Federal Trade Commission’s (FTC) Bureau of Competition has advised TriState Health Partners, Inc., a physician-hospital organization based in Hagerstown, Maryland, that it has no present intention to recommend that the FTC challenge the organization’s proposed clinical integration program. The program would integrate and coordinate the provision of medical care services to patients by TriState’s more than 200 physician members, as well as with the Washington County Hospital, also a participant in the program. It would also include joint contracting by the program’s members with health plans and self-insured employers.

Under the program, physicians will be subject to a variety of requirements regarding their performance, including adherence to clinical practice guidelines being developed by TriState’s participants. Physicians also must make certain financial and personal contributions of time and effort toward the success of the program, such as working on various committees. Physicians generally will be required to use other providers within the network when making needed referrals, and the program will monitor and oversee physicians’ performance in following best practice standards and in meeting both individual and group performance goals and benchmarks. The proposed program will make extensive use of a web-based health IT system, including electronic health records, to help identify patients and providers where various interventions would be most productive in improving care and patient outcomes, and to facilitate those interventions.

TriState’s program will be non-exclusive, so that purchasers and payers who do not wish to buy it will be free to contract directly with TriState’s individual participants. Likewise, access to the services of Washington County Hospital will not be tied to the TriState program, but will be separately available to purchasers and payers. TriState also will implement various information protections in its program’s operation to minimize the possibility of any anticompetitive effects in the market outside the program.

Read the FTC’s press release.

The Financial Accounting Standards Board (FASB) has issued three final Staff Positions (FSPs) intended to provide additional application guidance and enhance disclosures regarding fair value measurements and impairments of securities.

Although the new FSPs may not have a major direct impact on valuation by healthcare organizations, they could have a major indirect impact to the extent they change how financial institutions and other investment professionals and their auditors approach fair valuation in the current marketplace.

“A key change that the FSPs make to FAS 157 is to flip the presumption about transactions in inactive markets being forced or distressed, so that the transactions would be assumed to be forced or distressed rather than presumed not to be,” said Rick Gundling, HFMA’s Vice President, Thought Leadership. “This gives more management judgment to use models to value illiquid assets and more flexibility in recognizing losses on the income statement.”

Read the FASB press release.

About two-thirds of U.S. primary care physicians reported in 2004-05 that they couldn't get outpatient mental health services for their patients--a rate that was at least twice as high as for other services, according to a national study funded by the Commonwealth Fund and published as a web exclusive in the journal Health Affairs.

The study found that more than half of the primary care physicians reporting problems getting mental health services for their patients cited lack of or inadequate insurance coverage, health plan barriers, and shortages of mental health providers as "very important" reasons their patients couldn't get care.

The survey asked physicians about their ability to obtain the following services for their patients: outpatient mental health services, referrals to other specialists, diagnostic imaging services, and nonemergency hospital admissions. Almost 67 percent of the primary care physicians reported they couldn't get mental health services for their patients, compared with 33.8 percent reporting they couldn't get specialist referrals, 29.8 percent reporting they couldn't get diagnostic imaging, and 16.8 percent reporting they couldn't get nonemergency hospital admissions.

Read the study. 

In 2006, over 97,000 individuals were enrolled in 32 state Medicaid Buy-In programs, so named because workers with disabilities “buy into” Medicaid coverage with monthly premiums. An article in the Journal of Disability Policy Studies examines the success of the states in accomplishing the program’s dual objectives of expanding Medicaid coverage to vulnerable populations and promoting employment of working-age adults with disabilities.

The article finds that some states appear to have accomplished both objectives of the program, whereas other states have emphasized one over the other. In addition, certain program features, such as higher earned-income limits, contribute to both larger percentages of Buy-In participants who are employed and higher earnings of employed participants.

While continuing to rely on its core metrics and methodology to evaluate the credit risks being borne by not-for-profit hospitals, Moody’s Investors Service has identified four factors that will be critical in determining the "rating roadmap" for the sector in 2009.

The Moody’s report outlines how its rating analysis will focus on four special risk factors in 2009 to determine when rating action is warranted, including weaker market demand and declining cashflow margins, investment losses, and weaker balance sheets. Other items of concern include debt structure, liquidity stress, and market access problems.

"U.S. not-for-profit healthcare was among the first sectors to experience rapid financial weakening due to the deep recession and credit crisis," said Moody's Senior Vice President Lisa Goldstein, author of the report. "Nearly all rated hospitals are expected to report weaker financial performance in 2009 due to the economic problems that accelerated throughout 2008 and prompted our change in outlook to negative from stable in November."

The report, Not-for-Profit Healthcare Rating Roadmap, is available at www.moodys.com.

The Centers for Medicare & Medicaid Services (CMS) has chosen 14 communities around the nation for the agency’s Care Transitions Project, which seeks to eliminate unnecessary hospital readmissions.

Communities in the following regions have been selected to participate in the project: Providence, R.I.; Upper Capitol Region, N.Y.; Western Pennsylvania; Southwestern New Jersey; Metro Atlanta East, Ga.; Miami, Fla.; Tuscaloosa, Ala.; Evansville, Ind.; Greater Lansing Area, Mich.; Omaha, Neb.; Baton Rouge, La.; North West Denver, Colo.; Harlingen, Texas; and Whatcom County, Washington. 

The Care Transitions Project will continue in all 14 communities through summer 2011.  CMS will monitor the success of this project by watching the rates at which patients in these communities return to the hospital.

Read more about the project.

Reducing capital spending, renegotiating vendor contracts, freezing salaries, reducing staff, and developing contingency budgets are among the tactics hospitals are using to combat declining margins, according to a new survey from HFMA’s Healthcare Financial Pulse project.

The majority of financial executives who responded to the HFMA survey said their organizations experienced negative fallouts from the recession in the second half of 2008, including declines in nonoperating revenue, patient revenue, and days cash on hand. Large hospital respondents had the largest dips in investment portfolios, while rural hospitals took the biggest hit on patient revenue. Read the full survey results.

Sixty-two percent of hospital finance executives who responded to the survey have developed budget contingency plans that spell out temporary or permanent expense reductions that must occur if margins/revenues decline to a certain level or if other financial triggers are hit.

Other tactics identified in the HFMA survey: reducing capital spending, changing debt structure, containing labor costs, reducing nonlabor costs, enhancing productivity and efficiency, engaging staff in financial performance improvement, protecting cash flow, and increasing efforts to protect or expand volumes.

HFMA’s Healthcare Financial Pulse project is sponsored by McKesson and RelayHealth. More information and additional project resources are available at www.hfma.org/pulse.

President Obama has formally established the White Office of Health Reform by an executive order dated April 8, 2009. The principal functions of the office, as defined by the executive order, include coordinating development of the administration’s policy agenda regarding the provision of health care across executive departments and agencies and “to slow the growth of health care costs.”

The executive order also calls upon the Secretary of Health and Human Services to establish an Office of Health Reform that will coordinate efforts with the White House office.

President Obama named Nancy-Ann DeParle as director of the White House office on March 2, 2009.

Read the executive order.

Compensation to physicians for medical directorships in nonhospital-owned group practices is greater than in hospital-owned practices for all specialties except primary care, according to the Medical Group Management Association’s 2009 Medical Directorship/On Call Compensation Survey. The survey, which was based on 2008 data, found the greatest discrepancy among nonsurgical specialists in nonhospital-owned practices, who received $27,400 more annually than their counterparts in hospital-owned practices. Compensation also varied greatly across specialties, with geriatricians receiving the highest annualized compensation ($172,121). 
 
Across all specialty classifications, recruitment and physician education responsibilities yielded the highest compensation. Physician education duties increased primary care compensation by 82 percent; surgical and nonsurgical specialists reported compensation increases above 100 percent. In apparent response to the shortage of primary care physicians, primary care medical directors with recruitment responsibilities exhibit the greatest variation in annualized compensation: a reported $27,430 compared with $13,980 for directors without recruitment responsibilities. Most medical directors spent approximately five hours per week on directorship duties, regardless of practice ownership.
 
View graphics illustrating directorship compensation, compensation by selected duties, and hours spent per week on directorship duties.

The Centers for Medicare & Medicaid Services (CMS) has announced calendar year 2010 Medicare Advantage payment rates and policies. By law, CMS annually updates the Medicare Advantage capitation rates by a growth percentage that reflects growth in all Medicare expenditures, including expenditures under Part A and Part B payment rules. This growth percentage thus reflects the projected reduction in 2010 physician payments provided for under Part B payment rules. CMS announced that this amount for 2010 will be 0.81 percent.

For the first time, CMS will make a “coding pattern differences adjustment” to Medicare Advantage risk scores for plan year 2010, reducing Medicare Advantage payment rates to account for differences in disease coding patterns between Medicare Advantage organizations under Part C and the original Medicare program (Parts A and B). CMS is required by law to adjust Medicare Advantage rates where it finds differences in coding patterns between Medicare Advantage plans and Part A and Part B providers. The adjustment will be applied as a uniform 3.41 percentage reduction to all Medicare Advantage plans’ Part C risk scores in 2010.

In addition, the 2010 rates reflect a provision in recently enacted legislation requiring a multi-year phase-out of the inclusion of costs of indirect medical education in Medicare Advantage rates.  The maximum reduction as part of this phase-out is approximately 0.60 percent per year.   

View a fact sheet on the CMS announcement.

A group of researchers led by patient-safety expert Peter Provonost is working to establish a public-private healthcare alliance to improve patient safety modeled on the aviation industry’s Commercial Aviation Safety Team (CAST). The researchers believe that just as CAST has greatly improved aviation safety, a similar alliance among healthcare stakeholders could reduce medication and device errors and wrong-site surgeries. The group is calling its planned healthcare alliance the Public-Private Partnership to Promote Patient Safety, or P5S.
 
Under a planning grant from the Robert Wood Johnson Foundation, the group is refining plans for the governance, processes, and finances of P5S, for presentation to stakeholders this summer. Thus far, all of the major stakeholders, including the Agency for Healthcare Research and Quality (AHRQ), the Food and Drug Administration, the Joint Commission, the ECRI Institute, and more than 15 large health systems, have agreed to participate.

An article by Provonost and coauthors (including AHRQ director Carolyn Clancy) published on the Health Affairs web site proposes that AHRQ should be the driving force in creating P5S. The agency already oversees the Patient Safety Organizations (PSOs) created to receive medical-error reports under the Patient Safety and Quality Improvement Act passed by Congress in 2005.

Read the article.

The Federal Health Architecture is making software available to help public and private healthcare IT systems communicate to the Nationwide Health Information Network (NHIN), a federal initiative to facilitate the electronic exchange of health information.

The Office of the National Coordinator for Health Information Technology (ONC) has facilitated development of the NHIN, which will tie together health information exchanges, integrated delivery networks, pharmacies, government health facilities and payers, labs, providers, private payers, and other stakeholders into a "network of networks." The NHIN uses interoperability standards recognized by the Secretary of Health and Human Services, as well as public and private sector specifications, participation agreements, and policies. To enable health information exchanges over the NHIN, the ONC is working to develop the necessary governance processes and legal framework for participation in the network.
 
The CONNECT software is the outcome of a 2008 decision by more than 20 federal agencies to connect their healthcare IT systems to the NHIN. The free software and supporting documentation is available at www.connectopensource.org. As with other open source solutions, organizations are encouraged to modify and expand the capabilities of the software.

Get more information about HHS healthcare IT activities.

A public health plan is currently being discussed as part of a number of health reform proposals being considered by President Obama and the Congress. The Cost and Coverage of a Public Plan: Alternative Design Options, a new report by the Lewin Group, examines the potential impacts that a public plan might have in competing for enrollment with the private insurance industry, based on different levels of eligibility and reimbursement rates.

The report estimates that if Medicare payment levels are used in the public plan, premiums would be up to 30 percent less than premiums for comparable private coverage. On average, the monthly premium in the public plan for a typical benefits package would be $761 per family compared with an average of $970 per family in the private market for the same coverage. If eligibility is limited to only small employers, individuals, and the self-employed, as the president proposed, public plan enrollment would reach an estimated 42.9 million people and the number of people with private coverage would fall by 32.0 million people.

The report also predicts that, assuming Medicare reimbursement rates and eligibility for all individuals and employers, provider net income would decline under this public plan proposal, even after accounting for reduced uncompensated care and increased utilization for the newly insured. Net hospital revenues would fall by $36 billion (4.6 percent), and physician net income would fall by $33 billion (6.8 percent). If eligibility is restricted to individuals and small firms, net hospital revenues would actually increase by $11.3 billion due to the increase in newly insured individuals.  But net physician incomes would decline by $3.0 billion.

Read the report.

March employment figures from the U.S. Bureau of Labor Statistics show a continuing sharp decline. While health care as a whole posted modest job gains over the month, hospitals saw a small decline in employment.

The unemployment rate in March rose from 8.1 percent to 8.5 percent as the number of unemployed persons increased by 694,000 to 13.2 million. The number of long-term unemployed (those jobless for 27 weeks or more) rose to 3.2 million over the month and has increased by about 1.9 million since the start of the recession in December 2007.

While healthcare employment continued to trend up in March, adding 14,000 jobs, monthly job growth in the first quarter of 2009 averaged just 17,000, compared with 30,000 jobs per month in 2008. Hospital employment declined by 700 jobs.

Read the BLS press release and employee data by industry sector.

With the Medicare and Medicaid incentives for health IT use announced in the recent economic stimulus package, almost 70 percent of U.S. hospitals are only two or fewer steps away from having the health IT applications necessary to deliver the likely objectives of “meaningful use” for electronic health records, according to HIMSS Analytics.

While only six percent of hospitals report comprehensive adoption of the health IT applications associated with the American Recovery and Reinvestment Act’s (ARRA) EHR criteria--including major ancillary department information systems, clinical documentation, computerized physician order entry, and clinical decision support--67 percent need to add only one or two of these applications to have this threshold of EHR functionality available for their clinicians’ use.     

“Our data show that the majority of U.S. hospitals tracked by the HIMSS Analytics Database are just two stages or less away from having the applications implemented to achieve an electronic medical record tool capable of realizing ‘meaningful use’ objectives,” said David E. Garets, HIMSS Analytics president and CEO.

View comparison data from 2006 to 2008.

 Almost three in 10 working-age Americans with chronic conditions such as diabetes, asthma, or depression lived in families with problems paying medical bills in 2007--a significant increase from two in 10 in 2003, according to a national study released by the Center for Studying Health System Change (HSC) and funded by the Robert Wood Johnson Foundation.

In 2007, 28 percent of working-age adults (ages 18 to 64) with chronic conditions--more than 20 million people--reported that their families had trouble paying medical bills in the past year. This represents an increase from 21 percent in 2003, according to findings from HSC's 2007 Health Tracking Household Survey, a nationally representative survey containing information on 10,000 working-age adults. The survey had a 43 percent response rate.

The study also found that the overall prevalence of chronic conditions increased between 2003 and 2007. In 2007, 39 percent of the working-age population, or 72 million people, had at least one chronic health condition--a significant increase from 35 percent in 2003 and 34 percent in 2001. The rise in chronic conditions, especially for diabetes, hypertension, and heart disease, tracked rising U.S. obesity rates.

Read the report.

An analysis of Medicare claims data from 2003-2004 reveals that almost one-fifth (19.6 percent) of Medicare beneficiaries in the fee-for-service program who had been discharged from a hospital were rehospitalized within 30 days, according to an article in the April 2 issue of the New England Journal of Medicine. Thirty-four percent were rehospitalized within 90 days.

Of the patients who were rehospitalized within 30 days after a medical discharge to the community, just over one-half (50.2 percent) had no bill for a visit to a physician’s office between the time of discharge and rehospitalization. Among patients who were rehospitalized within 30 days after a surgical discharge, 70.5 percent were rehospitalized for a medical condition.

The article’s authors conclude that the cost to Medicare of unplanned rehospitalizations in 2004 was $17.4 billion.

Read the article. 

Sixty-two percent of providers receive additional compensation for on-call coverage, according to the Medical Group Management Association’s (MGMA) inaugural Medical Directorship/On-Call Compensation Survey Report. Less than 30 percent of providers in hospital-owned group practices reported that they do not receive additional compensation for on-call duties, compared with 42 percent of providers in practices not owned by hospitals.

Neurological surgeons reported the highest daily compensation for on-call duties ($2,000). Most physicians in multispecialty groups reported higher compensation for on-call coverage than their peers in single-specialty groups. The survey also found that on-call compensation varies by region. General surgeons in the eastern region received $500 daily for on-call services, for example, while their peers in the Midwest earned $1,000 daily.

Read the press release. 

Hospitals that reported higher scores on measures of safe practices did not have a significantly lower rate of in-hospital deaths compared to hospitals that reported lower scores on these measures, according to a study in the April 1 issue of JAMA.
 
Researchers from the University of California, San Francisco, examined the relationship between scores reported by urban hospitals participating in the Leapfrog Group’s Safe Practices Survey (SPS) and the risk of in-hospital death. Approximately 1,100 urban hospitals have voluntarily completed the SPS in recent years, with results reported to the public on the Internet in quartile rankings.
 
The researchers found that quartiles of SPS were not a significant predictor of mortality. From the lowest to highest quartile of SPS, inpatient death rates adjusted for patient and hospital characteristics were 1.97 percent, 2.04 percent, 1.96 percent, and 2.00 percent. “It is possible that inviting hospitals to self-report on their patient safety practices and then assigning them to quartiles of score is not an effective way to assess hospital quality and safety,” the study’s authors conclude. “Our findings should not be interpreted, however, as indicating that the safe practices are not important or that they cannot be measured in an informative and valid way.”

Read the article.

The Department of Health and Human Services (HHS) has posted a new report on its healthcare reform web site intended to highlight flaws in the nation’s healthcare system and demonstrate the costs of maintaining the status quo.

The Costs of Inaction urges the need for healthcare reform this year, focusing on escalating healthcare costs, diminishing access to care, and gaps in quality. The report claims that an estimated 87 million people--one in every three Americans under the age of 65--were uninsured at some point in 2007 and 2008. It also notes that 8 in 10 Americans are dissatisfied with the total cost of health care.

Read the report.