Healthcare Financial News

HFMA has issued new PATIENT FRIENDLY BILLING® guidelines to assist hospitals in their financial communications with patients. The recommended practices stress that, except in emergency situations, patients want to know what they will be expected to pay for healthcare services before they incur the costs, especially as patients become responsible for a larger portion of their hospital bills. Early, transparent financial communication allows patients the opportunity to comparison shop for services, learn about payment alternatives (including financial assistance), and explore other alternatives with their own physicians.

When hospital and patient engage in transparent financial communications, “the billing and collection process becomes a verification of what the patient already expects,” say the guidelines. “Each patient’s personal payments will be related to what they can afford to pay, and providers are more likely to receive sufficient payment from all appropriate payment sources so that they can continue to provide quality healthcare services.”

Massachusetts’ experience shows that although major expansions in coverage can be achieved without addressing healthcare costs, cost pressures have the potential to undermine the gains under reform, according to a study published on the Health Affairs web site. The study finds that Massachusetts has sustained gains in insurance coverage and access to care stemming from its landmark 2006 health reform, despite hard economic times. Some of the early gains in reducing barriers to care and improving the affordability of care had eroded by the fall of 2008, however, roughly two years after the Bay State began implementing the legislation signed into law in April 2006.

Massachusetts is addressing the challenges of cost control and delivery-system constraints through new legislation signed by Gov. Deval Patrick in August 2008. Under this legislation, Massachusetts is preparing to undertake fundamental reform of its delivery system, moving away from fee-for-service to a global payment system that emphasizes care coordination and collaboration.

HFMA's Principles and Practices Board has created a sample charity care policy "to assist hospitals to manage their resources responsibly and to provide the appropriate level of assistance to the greatest number of persons in need." The document offers hospitals a template to help establish their own policies and procedures for offering charity care to their patients.
 
The guidelines provide definitions of how a patient's family income can be calculated to determine eligibility for charity care and illustrates healthcare services that can be covered under the policy--emergency, medically necessary as determined on a case-by-case basis, non-elective procedures and treatment to prevent an adverse health effect. To assess a patient's need for charity care, hospitals are advised to require patients to submit an application with relevant financial information, check public data sources such as credit scores, make “reasonable efforts” to determine if the patient is covered by public or private payers, and examine the patient’s outstanding accounts receivable for previous medical services and payment history. The policy recommends that financial evaluations for needy patients be done once a year or when new information becomes known, and that patients be notified if they qualify for charity care within 30 days of applying. 

The guidance also outlines how hospitals should determine presumptive financial assistance eligibility, using outside agencies or life circumstances, when there is no documentation of the patient’s income. It also offers suggestions on how to disseminate information about the charity program to patients and the public, and describes how collection practices will take into account the patient’s efforts and cooperation in applying for public assistance or charity care and in complying with payment agreements.

Hospitals should consider the P& P Board’s charity policy a sample, not a standard. "As your organization considers adopting this policy, you should keep in mind the communities you serve, any applicable state and local laws and regulations, and the individual mission of your organization," it says.

Eight-five percent of New Hampshire hospitals continue to experience declining financial health as a result of the economic recession even though 95 percent have taken such cost-saving measures as cutting administrative expenses and staff, according to a new survey conducted by the New Hampshire Hospital Association in April. Sixty percent of community hospitals reported increases in the numbers of uninsured patient visits to their emergency departments and 70 percent said more patients were unable to pay for their care the first three months of this year compared to the same period last year. Also, 43 percent reported that their ability to access capital to make facility upgrades and clinical and information technology improvements has not improved, while 48 percent said it is getting worse. In addition, the survey found that the need for services subsidized by the hospitals, such as clinics, screenings and outreach, is increasing even as charitable contributions are down. New Hampshire’s health system has lost more than $400 million in investments since January 2008.

If federal healthcare reform is not legislated, within 10 years the cost of health care for businesses could double and the number of uninsured Americans could reach 65.7 million, with middle-income families hardest hit, according to a Robert Wood Johnson Foundation report. 

The research from the Urban Institute simulates how coverage and cost trends would change between now and 2019 under three different scenarios based on growth in incomes and growth rates for health care costs. Without reform, totals for uncompensated care could more than double, from $62.1 billion in 2009 to $141.4 billion in 2019 in the worst case, and even $106.6 billion in the best case. The study estimates that only 56.1 percent of Americans would be covered by employer-sponsored insurance as health insurance premiums increased 72 percent under the best-case scenario to as few as 49.2 percent by 2019. For individuals and families, health care costs would likely increase at least 46 percent. The report makes clear that the biggest effects of not having health reform would be felt by families with moderate incomes, who have less access to public coverage. Under the model, the number of middle-income earners without insurance would increase sharply from 12.5 million in 2009 to as many as 18.2 million in 2019.

In addition, spending on Medicaid and the Children’s Health Insurance Program could increase from $251.2 billion this year to $519.7 billion in 2019 as more people are priced out of private insurance and become eligible for government programs. Enrollment in these programs could increase to 20.3 percent in 2019—an increase of 13.3 million people from current figures.

As small businesses are trying to cope with declining revenues as a result of the recession, about 10 percent are contemplating eliminating health coverage for their employees, according to The Wall Street Journal. Reporting on several surveys that examine how employers are managing escalating healthcare costs, the Journal quotes the national insurer Assurant Health commenting on a recent increase in small businesses that have cancelled their insurance policies. Small businesses have seen their health insurance premiums for individual coverage increase by 74 percent from 2001 to 2008. The Journal also cites a Hewitt survey that found that 19% of all companies are considering not offering health benefits in the next three to five years.

Major teaching hospitals will have to spend an additional $99 to $183 per admission to comply with the Institute of Medicine’s 2008 recommendations to reduce the workload of residents, according to a study published in The New England Journal of Medicine on May 21. The IOM advises that residents be given a five-hour nap after every 16-hour shift, that they have greater supervision and better managed patient hand-offs, and less total work. Assigning midlevel health practitioners to assume some of the residents’ workload or hiring additional residents will cost each teaching hospital $3.2 to $3.5 million per year, according to the study. At best, the IOM’s proposed changes in residents’ hours could reduce errors by 11.3 percent, but more breaks for residents could also increase errors by 10 percent, reports MedPage Today. The Accreditation Council for Graduate Medical Education will determine whether to implement the IOM’s recommendations.

Despite reports indicating that placement of retail clinics are determined by physician shortages and higher uninsured populations, these clinics appear to be located in more advantaged neighborhoods, according to a report in the May 25 issue of Archives of Internal Medicine.

Eighteen states (37 percent) had no retail clinics, and 17 states (35 percent) had 25 or more clinics, the authors found. Nearly all the counties with retail clinics (96 percent) are in metropolitan areas, and they have less poverty and lower numbers of uninsured individuals (12.1 percent) compared to counties with no retail clinics (13.3 percent). 

“If retail clinics are determined to be a valuable and effective source of care, rethinking the distribution of these clinics may be an important avenue for improving their potential societal benefit,” the authors conclude. “With nearly a third of chain stores located in medically underserved areas, the future expansion of retail clinics into existing stores could potentially improve access for underserved populations.”

To control costs and improve quality, physicians should advocate and participate in integrated accountable care organizations, according to leading industry analysts writing in The New England Journal of Medicine.
 
Elliott Fisher, associate director of the Dartmouth Institute for Health Policy and Clinical Practice; Donald Berwick, president and CEO of the Institute for Healthcare Improvement; and Karen Davis, president of the Commonwealth Fund, write that healthcare cost savings must come from placing accountability for care coordination with integrated organizations comprising virtually linked networks of independent practicioners or more traditional multispecialty groups or staff-model HMOs. They acknowledge that such organizations will require change in current gainsharing and antikickback laws and regulations.

Fisher, Berwick, and Davis further suggest that physicians reassess and scale back practices that research shows are overused and "agree to slow fee increases for private payers, allowing Medicare to catch up." The analysts also suggest that a legislative target may be necessary in order to bring costs under control, including federal government "authority to reduce updates in Medicare fees if the target [rate of spending growth] is exceeded."

Karen Davis is leading a panel of provider executives to discuss creating a high-performing health system at HFMA's ANI: The Healthcare Finance Conference next month in Seattle.

Attorney General Eric Holder and HHS Secretary Kathleen Sebelius announced that a new interagency effort, the Health Care Fraud Prevention and Enforcement Action Team (HEAT), will be created to combat Medicare fraud.  HEAT will expand the joint DOJ-HHS Medicare Fraud Strike Force teams that have been fighting Medicare fraud in South Florida and Los Angeles since 2007. The strike force teams use a “data-driven” approach to identify unexplainable billing patterns and investigate providers for possible fraudulent activity.

The HEAT team will also try to prevent fraud by building on demonstration projects by the HHS Inspector General and CMS that focus on suppliers of durable medical equipment (DME).  These projects increase site visits to potential suppliers to prevent imposters from posing as legitimate DME providers.  Other HEAT initiatives will include increasing training for providers so they can identify and prevent fraud; improving data sharing between CMS and law enforcement to identify patterns that lead to fraud; and strengthening Medicare Parts C and D compliance and enforcement.

Republican senators Richard Burr, Lamar Alexander, and Tom Coburn, along with House Republicans Devin Nunes and Paul Ryan, introduced healthcare reform legislation based on “choice and competition rather than rationing and restrictions to contain costs,” say the lawmakers.

The Patients’ Choice Act would create State Health Insurance Exchanges from which individuals would select health plans providing, at a minimum, the same benefits that members of Congress receive. Insurers would be mandated to cover every individual without regard to health status, but individuals can choose not to be insured. The bill would eliminate the tax break that employers receive for offering health insurance to their workers—a measure that Democrats oppose. Instead, every individual would get a tax rebate of about $2,300, or $5,700 for families, to purchase health insurance from a variety of plans. In addition to the tax credit, low-income families would receive a subsidy to buy a private plan instead of being enrolled in Medicaid in an effort to stop the “open-ended entitlement programs that offer little or no accountability to taxpayers and patients.” Medicare beneficiaries would also choose a private plan, allowing the market to set reimbursement rates.

The legislation would have physicians and hospitals and other healthcare providers forming Accountable Care Organizations, which would receive bonuses for offering better quality care at less cost and for keeping patients healthy. Publishing standards for reporting price, quality, and effectiveness of care would fall to a new organization that would be managed by five commissioners who were appointed by the President. The bill would also dramatically change how medical malpractice cases are adjudicated, with either panels of physicians and lawyers deciding whether negligence occurred and awarding compensation or “health courts” swiftly resolving disputes.

“The Patients’ Choice Act proves that America can have universal health care coverage without the government running our health care system,” stated Ryan. But according to The Wall Street Journal, the Republican bill “has little chance of passage” with the Democrats in control of Congress. “But it reflects some Republican lawmakers' growing dissatisfaction with a bipartisan effort to fix the health-care system.”

Representing HFMA, Michael M. Allen, chief financial officer of Winona Health in Winona, Minn., provided testimony before the Financial Services Committee of the U.S. House of Representatives on the impact of recent municipal bond financing issues on not-for-profit hospitals. Explaining hospitals’ need for inexpensive capital to implement electronic health records, invest in new medical technology, and modernize aging facilities, Allen stressed the importance of being able to access an efficient tax-exempt bond market. He urged the committee not to impair the start of a market recovery. “Liquidity facility solutions that are brought to the market should first and foremost be optional and the preservation of a private market for these facilities should be maintained,” said Allen. Initial pricing “should be set carefully to avoid crowding relatively strong, long term providers of liquidity facilities out of the market.” Allen also suggested that liquidity facility solutions be limited to existing issues to avoid a negative impact on the tax-exempt bond market.

HFMA members, Allen testified, support a federally backed municipal bond reinsurance program. He outlined the necessary criteria for the program: a three- to five-year window to give private bond insurers time to recapitalize; market equivalent rates so hospitals don’t receive an unsustainable artificial subsidy, and for outstanding debt issues only. “Limiting it to existing issues allows hospitals that have experienced a spike in capital costs due to insurer downgrades or expired bank letters of credit ‘breathing room’ to cost effectively adjust their debt structure while the private sector recovers,” said Allen.

The underwriting processes, collateral requirements, covenants and usage constraints of the existing FHA 242 program should be optimized to meet the current needs of the market, said Allen. He also recommended eliminating the requirement that at least 20 percent of debt be dedicated to new construction, and asked that the collateral requirements be amended to allow “credit-worthy” hospitals to access the FHA 242 program despite recent adverse financial results. “Sound underwriting practices should be able to separate a financial event that has been dealt with by a seasoned management team from a long term trend of poor performance,” he said. Allen added that HFMA members do not recommend that financial advisors or rating agencies be subject to additional federal regulation..

“We cannot overstate the impact that the suggested simplifications will have on hospitals, particularly small to mid-sized facilities that are not integrated with a larger health system and therefore have difficulty accessing capital at market-rates,” Allen told the committee.

The Certification Commission for Healthcare Information Technology (CCHIT) announced that it has approved final 2009-2010 criteria for certification of ambulatory, inpatient, and emergency department electronic health records and for its newly developed stand-alone electronic prescribing certification. CCHIT also approved updated criteria for the ambulatory add-on options in child health and cardiovascular medicine. Besides the detailed criteria and test scripts, the Commission will publish a companion guide mapping the criteria to the characteristics of a qualified EHR as described in the American Recovery and Reinvestment Act (ARRA). The materials will be published on May 29 on the CCHIT web site.

The Certification Handbook, containing the policies of CCHIT's certification programs, is undergoing a significant revision to take into account the expanded applicability of EHR certification under ARRA. Changes will include a more extensive verification of successful implementation and use of commercial products, as well as the pilot of a new program to inspect and certify EHR technologies in use. CCHIT will release the updated handbook and announce further application details for 2009-2010 certifications during June or July.

Nearly 90 percent of family physicians say that their patients are worried about being able to pay for their health care, according to a new survey of 505 physicians by the American Academy of Family Physicians. Fifty-eight percent of respondents said appointment cancellations have increased  and 54 percent reported seeing fewer total patients. But 73 percent said they had seen an increase in uninsured patients visiting their offices and 64 percent reported a decrease in the number of insured patients. In addition, 60 percent said that their patients are forgoing preventive care, which has led to health problems. And nearly 90 percent of respondents have noted a significant increase in patients with major stress symptoms since the beginning of the recession. Two-thirds of the family physicians who responded said they were taking specific actions, such as discounting their fees, increasing charity care, providing free screenings, and moving patients to generic prescriptions, to help their patients manage health care.

“Evidence-based hospital design” is changing the shape and configuration of hospital patient rooms in order to reduce hospital-acquired infections and adverse events and promote patient healing, reports The New York Times. The article profiles hospitals that have redesigned patient rooms to let in more natural light and shut out noise, adding handrails next to bed headboards to prevent falls, and installing locked cabinets in each room that contain only the patient’s medications to eliminate drug errors. The rooms are also situated so nurses can more easily see the patients and are private and large enough so that visitors linger.

Insurers, however, want evidence that the changes will positively affect “quality and safety and efficiency,” America’s Health Insurance Plans told the Times. Currently over 1,500 studies have been done to prove the point that design can affect patient outcomes. One study at Bronson Methodist Hospital in Kalamazoo, Mich., reduced hospital-acquired infections by 11 percent through private rooms, better air-flow design, and strategically located sinks. Sacred Heart Medical Center at RiverBend in Springfield, Ore., cut staff injuries from moving patients from 10 a year to one by putting ceiling lifts into patient rooms. “It’s possible that old hospitals where the nurses and the staff are great can succeed in the worst environment. But they have great obstacles to overcome,” Anjali Joseph, director of research at the nonprofit Center for Health Design, told the Times.

A new study finds that urgent care centers, as a more cost-effective option than emergency departments for some medical problems, may proliferate, especially as the shortage of primary-care physicians increases. The survey of 436 urgent care centers, published in BMC Health Services Research, found that the average reimbursement of $103 per patient visit is on par with primary care visits but is much less than the mean payment for ED visits at $560. Family physicians typically staff urgent care centers, with common services including fracture care, suturing lacerations, x-rays, pain management, and administration of IV fluids. The study also found that 22 percent of urgent care centers have a basic electronic health record, exceeding the 11 percent of four- to five-physician practices that have electronic records. Urgent care physician salaries at $158,845 are comparable to those of family practitioners.

In related news, The New York Times reports that hospitals are creating their own walk-in clinics to compete with those at stores such as Wal-Mart and CVS. The clinics help reduce the overcrowding in emergency departments and allow hospitals to reach more patients with insurance or cash. And patients that are introduced to a hospital through a walk-in clinic may return for inpatient care, such as to deliver a baby. Of the 1,000 retail clinics, one in 10 has a relationship to a hospital. A Harris Interactive poll found that 11 percent of the population has used a retail clinic in the last 10 months compared to 7 percent last year. Mayo Clinic has two retail clinics—one in a supermarket and one in a mall--and six primary-care practices that have hours in the evening and on weekends. “We think of ourselves as a new model of care; we meet our patients at least halfway,” Dr. David Herman, who oversees the clinics, told the Times.

Senate Finance Committee Chairman Max Baucus and ranking member Chuck Grassley have released policy options for financing healthcare reform, recommendations that the rest of the committee will discuss on Wednesday before the Senate marks up legislation in June.

One potential funding source explored in the paper are savings achieved from within the healthcare system. The policy options look at three ways to adjust the annual inflationary increase to account for productivity in Medicare payment rate updates—reducing the inflationary update by an amount equal to all, one-half, or one-quarter of the expected productivity gains. The paper also recommends reducing geographic spending variations by cutting Medicare payments in areas where spending is above the national average. In addition, the paper suggests updating payment rates for home health services, which have the highest profit margin in Medicare, to be more reflective of actual costs of providing care; ensuring appropriate payments for durable medical equipment; adjusting payments for high-growth services such as imaging and minor procedures; and reducing market-basket updates for providers whose payments are higher than actual costs.

Another category of financing reform focuses on modifying the current tax treatment of health-related expenses to eliminate inconsistencies and discourage wasteful health spending. One of the policy options requires nonprofit hospitals to maintain a minimal level of charitable activity, limit charges to the uninsured and indigent patients, and curtail aggressive collection actions. Hospitals that do not meet these requirements would be subject to an excise tax. The paper also explores ways to make the tax exclusion for employer-provided health insurance more equitable and efficient, such as capping the exclusion based on the value of the health insurance policy or the income level of the employee. And a final source of funding are tax provisions to promote wellness, such as a tax increase on alcoholic beverages and an excise tax on sugar-sweetened beverages.

Public comments should be directed to Health_Reform@finance-dem.senate.gov by May 26.

Senators Max Baucus and Chuck Grassley emerged from an eight-hour Senate Finance Committee meeting on Thursday and said that the Senate’s healthcare reform legislation will very likely require every American to have health insurance, reports Politico. The committee, which debated how to finance health reform, agreed that lowering healthcare costs must start with universal coverage. The senators also agreed on the need for an insurance exchange organized by the government to help individuals and small businesses find the best rates of health insurance. The committee’s Democrats and Republicans, however, could not agree on whether to include an option for a public insurance plan in their bill. Another sticking point: whether to mandate employers to either provide insurance to their workers or pay a fee to an insurance fund.

On those two issues, said Grassley, the ranking member of the committee, there is a “philosophical difference” between the two parties, reports The Wall Street Journal. He added, however, “We might be able to find a consensus” on the public plan. Baucus, chairman of the committee, downplayed any disagreement on the employer mandate, saying that senators were unclear how it would work.

Medicare beneficiaries are more satisfied with their health care and experience fewer problems accessing and paying for care than Americans with employer-sponsored insurance (ESI), according to a study by Commonwealth Fund researchers published on the Health Affairs web site. The results of the survey of 3,500 adults lead the researchers to speculate that, “If given the opportunity many adults under age 65 would likely select a public health insurance option.”

Thirty-seven percent of Medicare beneficiaries rated their coverage as excellent versus 20 percent of the employer group. Only eight percent of Medicare beneficiaries rated their insurance as "fair" or "poor" compared with 18 percent of those with ESI. Sixty-one percent of Medicare beneficiaries said that they had received excellent or very good care, compared to just half of those with ESI. And 57 percent of elderly Medicare beneficiaries were confident that they could get high-quality, safe care in the future versus 46 percent of those in the employer group. Despite their lower incomes, elderly Medicare beneficiaries reported fewer problems with medical bills, such as inability to pay or being contacted by collection agencies. Fifteen percent of them reported at least one of these problems compared to 26 percent of those in the employer-coverage group.

“The first place that we should look for savings is within health care itself," said Sen. Max Baucus (D-Mont.) during a Senate Finance Committee roundtable discussion with tax and healthcare policy experts and economists. "We should reform the healthcare delivery system to bring higher quality and greater efficiency to all Americans.” The purpose of the discussion was to explore the revenue and savings options that the committee will consider as it crafts a health reform bill.

Some of the experts discussed the controversial issue of funding reform by limiting the current tax treatment of healthcare benefits. One option is to cap the tax exclusion on the basis of an individual’s income or the value of the benefit. Currently, those with the most expensive insurance get the biggest tax break. They also discussed modifying the tax treatment of other health tax benefits like HSAs and FSAs. Although Baucus said he did not want to eliminate the tax exclusion for employer-provided health care, he added that the current exclusion is regressive and “it often leads people to buy more health coverage than they need.” Baucus said he wanted to find a way to make the tax exclusion fairer and more equitable. 

Senate Finance Committee chairman Max Baucus (D-Mont.) and Ranking Member Chuck Grassley (R-Iowa) have released a 61-page report of policy options for covering the uninsured. The proposed policies will be discussed by the committee before it marks up its health reform legislation slated for June. The policy options aim to reform the individual and small group health insurance markets by creating a competitive environment in which health plans compete on price and quality. Insurers would no longer be allowed to bar individuals with pre-existing conditions from qualifying for a policy. All insurers would have to offer coverage in four benefit categories, and all plans would be required to provide primary care and first-dollar coverage for preventive services, emergency services, medical and surgical care, physician services, hospitalization, outpatient services, day surgery, diagnostic imaging and screenings including x-rays, maternity and newborn care, prescription drugs, radiation and chemotherapy, and mental health and substance-abuse services. Plans would not be allowed to set lifetime limits on coverage or annual limits on any benefits.

Individuals with incomes under 400 percent of the poverty level would receive a tax credit to make coverage more affordable. Small businesses with 10 or fewer full-time employees with average employee earnings below $20,000 would get a credit equal to 50 percent of the average total premium cost paid by the employer.

The proposal also includes three alternatives for a public health insurance plan. One is a Medicare-like option that would be administered by HHS. The second would be administered through multiple, regional third-party administrators and a third alternative would be state-run. The policy report also discusses expanding coverage through a reformed and better regulated private market instead of creating a public health insurance option. The policy options also would standardize Medicaid eligibility for all parents, children, and pregnant women below 150 percent of the federal poverty level.

The Hospital Insurance (HI) Trust Fund, or Medicare Part A, is projected to be exhausted in 2017—two years earlier than expected—as a result of declining payroll tax income from workers who have lost their jobs during the economic recession, according to the 2009 annual report of the Boards of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds. Calling the situation urgent, a summary of the report states, “Correcting the financial imbalance for the HI Trust Fund—even in the short range alone—will require substantial changes to program income and/or expenditures.” According to the report, the HI Trust Fund could be brought into actuarial balance over the next 75 years by an immediate 134 percent increase in the payroll tax (from a rate of 2.9 percent to 6.78 percent), or an immediate 53 percent reduction in program outlays, or a combination of both.

While rapid spending for Medicare Part B and Part D remains a concern, both programs remain adequately financed, said the report. It did, however, warn that adhering to “this status will be challenging as a result of reductions in premiums and general revenues under the ‘hold harmless’ provision of current law. Moreover, if Congress acts to prevent a scheduled 21.5-percent reduction in physician payment rates in 2010 and further reductions in 2011-2015, then actual Part B costs could exceed the current law projections shown in this report by 18 to 21 percent in the short range and by up to 10 percent in the long range.” One-fourth of Part B beneficiaries will also be paying large premium increases in the next two years.

Total Medicare expenditures are projected to increase from 3.2 percent of GDP in 2008 to 11.4 percent by 2083 and are projected to surpass Social Security expenditures in 2028.

Forty-five Democrats in the U.S. House want their colleagues who are drafting healthcare legislation to follow the example of Senate leaders, who have made public the policy options they’re considering for healthcare reform. The fiscally conservative members of the Blue Dog Coalition sent a letter to the three House committee chairmen drafting the bill, asking for an end to the secrecy and a more collaborative approach in creating the legislation. “We don’t need a select group of members of Congress or staff members writing this legislation,” Representative Mike Ross (D-Ark.) told The New York Times. “We want to help write it.” The moderate to conservative House Democrats say they support universal healthcare coverage, but they want input on controlling the cost of reform and want more details about the public health plan under consideration.

While members of the House praised the Senate Finance Committee’s open approach to debating healthcare reform, five people who support single-payer healthcare were arrested on Monday for staging a protest before the Senate Finance Committee. The protesters, who are members of the National Nurses Organizing Committee/California Nurses Association, Physicians for a National Health Program, and Health Care Now, said that the Finance Committee invited America’s Health Insurance Plans to take part in a discussion on healthcare reform but excluded them.

Modernizing the antiquated way healthcare is currently delivered will generate enough savings to pay for universal healthcare coverage for all Americans, according to Harvard economics professor David Cutler in the report Health System Modernization Will Reduce the Deficit. The report has been sent to Congress by the two groups sponsoring the research, the Center for American Progress and the Democratic Leadership Council. Cutler maintains that eliminating waste, lowering costs, and finding more efficient ways to provide care could increase productivity growth in healthcare by 1.5 to 2.0 percentage points annually. The savings in health spending to the U.S. government would be $600 billion over the next 10 years and $9 trillion over 25 years. 

Cutler notes that the –0.2-percent productivity growth rate of healthcare is very low compared to industries like information technology, which has productivity growth of 5.7 percent. He says that medicine can adapt strategies from other industries to improve productivity, such as the efficiency management used by Wal-Mart. “Health care could reduce layers of back office personnel through the same type of billing system harmonization used in retail sales” and reassign tasks from physicians to nurses and physician assistants, he writes. And comparative effectiveness research could achieve the same reduction of waste and error that made Toyota legendary. “Health care modernization involves four broad steps: investing in infrastructure; measuring what is done and how well it is performed; rewarding high-value care, not just high-volume care; and realigning consumer incentives to encourage better health behavior,” says Cutler.

President Obama told the nation that Monday was “an historic day, a watershed event in the long and elusive quest for health care reform” after meeting with leaders of health groups who pledged to support cost savings of 1.5 percentage points over the next 10 years. The savings of $2 trillion, which will be generated from administrative simplification, alignment of incentives, use of evidence-based practices, improved delivery models, IT support, and regulatory reform, is all the more “remarkable,” said Obama, because the cuts were proposed by some groups that have historically opposed federal healthcare reform proposals. The effort on the part of the healthcare industry recognizes that “reform is not a luxury that can be postponed, but a necessity that cannot wait,” Obama said.

While the measures to be enacted by the health groups--which include hospitals, physicians, insurers, pharmaceutical companies, device manufacturers, and a union--are significant, said Obama, “the only way these steps will have an enduring impact is if they are taken not in isolation, but as part of a broader effort to reform our entire health care system. What they're doing is complementary to and is going to be completely compatible with a strong, aggressive effort to move healthcare reform through here in Washington with an ultimate result of saving healthcare costs for families, businesses and the government.”

Consumer groups expressed concern that cost-cutting by the healthcare industry would amount to medical rationing, but Paul Ginsberg, president of the Center for Studying Health System Change, told CNNMoney that not reducing “wasteful expenditures” would more readily lead to rationing. “Although I am troubled by the vagueness of the efforts, it is still very positive that these groups that are most affected are recognizing the importance of efforts to contain [healthcare] costs," Ginsberg said.

The National Coalition on Health Care said that although it was “heartened” by the healthcare groups’ proposed solutions to runaway health costs, it said it was “very cautious about the particulars,” since most of the measures “should not be counted on to produce substantial savings soon.” The group called for legislation to “incorporate short-term constraints to slow the rate of increase in reimbursements of health care providers, sooner rather than later.”

Medicaid physician fees rose 15.1 percent between 2003 and 2008, representing an average annual growth rate of 2.6 percent, according to a study by researchers from the Urban Institute published on the Health Affairs web site. Over the same period, the Consumer Price Index (CPI) increased 20.3 percent (3.4 percent annually) and the medical care services component of the CPI--which includes physician services--increased 28.1 percent (4.6 percent annually). Among all categories of Medicaid physician fees, only fees for primary care services kept pace with inflation.

The gap between Medicare and Medicaid physician fees closed slightly between 2003 and 2008, as Medicare physician fees fell even more in real-dollar terms than did Medicaid fees. In 2008, Medicaid physician fees were 72 percent of Medicare fees, up from 69 percent in 2003. The ratio of Medicare physician payments to payments from private health plans has remained fairly stable since 2003, which suggests that Medicaid physician fees may have also increased relative to physician fees from private payers.

The increase in Medicaid fees relative to Medicare fees resulted from changes in reimbursement for primary care and obstetrics. Medicaid payments to physicians for primary care services increased from 62 percent of Medicare fees in 2003 to 66 percent of Medicare fees in 2008, while Medicaid fees for obstetrical services increased from 84 percent of Medicare fees in 2003 to 93 percent of Medicare fees. Medicaid physician fees for all other types of physician services remained at about 73 percent of Medicare levels over the 2003-2008 period.

A coalition of key healthcare stakeholder representatives--including hospitals, physicians, labor, and pharmaceutical companies--have pledged support for $2 trillion in savings in a letter presented to President Obama today.

The American Hospital Association, America's Health Insurance Plans, the American Medical Association, the Pharmaceutical Research and Manufacturers of America, the Advanced Medical Technology Association, and the Service Employees International Union have come together to support a 1.5 percentage point reduction in healthcare spending over the next ten years to fund healthcare reform. The reduction would come from administrative simplification, alignment of incentives, use of evidence-based practices, improved delivery models, IT support, and regulatory reform.

The Health and Human Services budget released late last week included $635 billion for healthcare reform, but some have argued that reform start-up will require twice that amount, making these proposed savings especially important.

This collaboration among stakeholders--and between these stakeholders and the federal government--is a significant departure from the relationships during the last significant push for reform, during the Clinton administration.

The full text of the letter follows:

May 11, 2009
The President
The White House
Washington, D.C. 20500

Dear Mr. President:

We believe that all Americans should have access to affordable, high quality health care services. Thus, we applaud your strong commitment to reforming our nation’s health care system. The times demand and the nation expects that we, as health care leaders, work with you to reform the health care system.

The annual growth in national health expenditures—including public and private spending—is projected by government actuaries to average 6.2% through the next decade. At that rate, the percent of gross domestic product spent on health care would increase from 17.6% this year to 20.3% in 2018—higher than any other country in the world.

We are determined to work together to provide quality, affordable coverage and access for every American. It is critical, however, that health reform also enhance quality, improve the overall health of the population, and reduce cost growth. We believe that the proper approach to achieve and sustain reduced cost growth is one that will: improve the population's health; continuously improve quality; encourage the advancement of medical treatments, approaches, and science; streamline administration; and encourage efficient care delivery based on evidence and best practice.

To achieve all of these goals, we have joined together in an unprecedented effort, as private sector stakeholders—physicians, hospitals, other health care workers, payors, suppliers, manufacturers, and organized labor—to offer concrete initiatives that will transform the health care system. As restructuring takes hold and the population's health improves over the coming decade, we will do our part to achieve your Administration’s goal of decreasing by 1.5 percentage points the annual health care spending growth rate—saving $2 trillion or more. This represents more than a 20% reduction in the projected rate of growth. We believe this approach can be highly successful and can help the nation to achieve the reform goals we all share.

To respond to this challenge, we are developing consensus proposals to reduce the rate of increase in future health and insurance costs through changes made in all sectors of the health care system. We are committed to taking action in public-private partnership to create a more stable and sustainable health care system that will achieve billions in savings through:

• Implementing proposals in all sectors of the health care system, focusing on administrative simplification, standardization, and transparency that supports effective markets;
• Reducing over-use and under-use of health care by aligning quality and efficiency incentives among providers across the continuum of care so that physicians, hospitals, and other health care providers are encouraged and enabled to work together towards the highest standards of quality and efficiency;
• Encouraging coordinated care, both in the public and private sectors, and adherence to evidence-based best practices and therapies that reduce hospitalization, manage chronic disease more efficiently and effectively, and implement proven clinical prevention strategies; and,
• Reducing the cost of doing business by addressing cost drivers in each sector and through common sense improvements in care delivery models, health information technology, workforce deployment and development, and regulatory reforms.

These and other reforms will make our health care system stronger and more sustainable. However, there are many important factors driving health care costs that are beyond the control of the delivery system alone. Billions in savings can be achieved through a large-scale national effort of health promotion and disease prevention to reduce the prevalence of chronic disease and poor health status, which leads to unnecessary sickness and higher health costs. Reform should include a specific focus on obesity prevention commensurate with the scale of the problem. These initiatives are crucial to transform health care in America and to achieve our goal of reducing the rate of growth in health costs.

We, as stakeholder representatives, are committed to doing our part to make reform a reality in order to make the system more affordable and effective for patients and purchasers. We stand ready to work with you to accomplish this goal.

Sincerely,

Stephen J. Ubl
President and CEO
Advanced Medical Technology Association

J. James Rohack, MD
President-elect
American Medical Association

Karen Ignagni
President and CEO
America’s Health Insurance Plans

Billy Tauzin
President and CEO
Pharmaceutical Research and Manufacturers of America

Rich Umbdenstock
President and CEO
American Hospital Association

Dennis Rivera
Chair, SEIU Healthcare
Service Employees International Union

President Obama’s proposed $3.6 trillion FY 2010 budget would provide $879 billion for the Department of Health and Human Services, an estimated $63 billion increase over FY 2009, announced HHS as details of the President’s budget were released. The budget also establishes a healthcare reserve fund of $635 billion over 10 years to finance health reform, funded by new revenue and by savings from Medicare and Medicaid. “This budget sends a clear message that we can’t afford to wait any longer if we want to get health care costs under control and improve our fiscal outlook,” said HHS Secretary Kathleen Sebelius.

The proposed budget would invest $311 million in programs to prevent fraud and waste within Medicare and Medicaid, for an estimated $2.7 billion in savings. It also includes over $1 billion in funding to increase the number of health care workers, especially in underserved areas, $354 million to reduce health disparities, $584 million to help prepare for and treat pandemic flu, $4 billion for the Indian Health Service, and $511 million for the FDA—the largest increase ever requested—with $259 million devoted to food safety efforts. 

Obama’s budget, however, doesn’t address how the country will reduce the federal deficit, and new spending will far exceed the savings projected from the 121 programs the Administration has earmarked to be eliminated or reduced, reports The Wall Street Journal. Republicans were also dismissive of Obama’s belt-tightening. “I don’t see any tough choices being made,” says Senator John Cornyn (R-Tex.)

The U.S. Government Accountability Office announced the appointment of two new members and the reappointment of five existing members to the Medicare Payment Advisory Commission (MedPAC). The new members are Dr. Robert A. Berenson, senior fellow at the Urban Institute, and Herb B. Kuhn, an independent health care consultant specializing in Medicare and Medicaid issues. Dr. Berenson is appointed to a term that runs through 2012, and Kuhn will complete the remaining year of the MedPAC seat vacated by Jack Ebeler in March.

The Department of Health and Human Services also announced the appointment of three members to the Health Information Technology (HIT) Policy Committee as well as members of the HIT Standards Committee. The HIT Policy Committee, which was established by the American Recovery and Reinvestment Act of 2009, will make recommendations to the National Coordinator for Health Information Technology on policies to develop and adopt a nationwide interoperable health information infrastructure. The appointees to the Policy Committee are Dr. David Blumenthal, HHS’ National Coordinator for Health Information Technology; Dr. Michael J. Kalg, Dean of the Johns Hopkins Bloomberg School of Public Health, and Deven C. McGraw, director of the Health Privacy Project for the Center for Democracy & Technology.

Legislation that would create a new foundation for healthcare quality improvement within a National Health Care Quality Improvement Office was introduced by Senator John Rockefeller IV (D-WV), Senator Sheldon Whitehouse (D-RI), and Congresswoman Diana DeGette (D-CO). The National Health Care Quality Act would establish and routinely update healthcare quality priorities based on a number of mandatory considerations and implemented across all federal agencies involved in purchasing, providing, studying, or regulating health care. It would also expand the authority of the Agency for Healthcare Research and Quality in order to improve the public-private process for healthcare quality measure development and to streamline the implementation of quality improvement measures within federal health programs.

In other news, Standard & Poor’s Ratings Services issued a report that states that healthcare reform will bring greater transparency in healthcare delivery, which “could prove to be transformative to the industry.” Providers will likely be divided into winners and losers, according to the report, “which could ultimately impact key rating factors, and thus have far-reaching implications for our credit ratings.” The report, Health Care Reform Is Likely to Bring Increased Focus on Transparency, is available by calling 212-438-9823.

Charles Rangel (D-NY), chairman of the House Ways and Means Committee, on Tuesday told HHS Secretary Kathleen Sebelius that he was categorically opposed to taxing employer-provided health insurance—a tax that some Democrats hope will fund universal health coverage, reports The New York Times. Currently, employers get a tax deduction for the contributions they make for their employees’ healthcare insurance, and workers don’t report benefits as taxable income. Those who favor taxing healthcare benefits say it results in more controlled health spending by eliminating a subsidy. Max Baucus, (D-MT), chairman of the Senate Finance Committee, favors limiting the tax break on health insurance. Rangel, however, did not propose another source of funding for universal health coverage other than saying what was not an option. “I would not want to get involved in cutting hospital payments,” he said.

Patient safety measures have worsened by nearly 1% each year for the past 6 years and 40% of patients do not receive recommended care, said HHS Secretary Kathleen Sebelius. She challenged hospitals to reduce central-line-associated blood stream infections in ICUs by 75% over the next three years. Two new HHS reports published by the Agency for Healthcare Research and Quality (one on quality and one on disparities) found that 1 in 7 Medicare patients experience one or more adverse events; at least 60% of quality measures have not improved for minorities compared to Caucasians in the past 6 years; only 40% of diabetic patients received three recommended diabetic preventive exams in the past year; 7 out of 10 adults with mood, anxiety, or impulse disorders received inadequate treatment; and the percentage of patients acquiring central-line-associated blood stream infections has steadily increased.

Sebelius announced that HHS will make $50 million in grants funded by the American Recovery Act available to states to fight healthcare-associated infections (HAI). HHS plans to make $40 million available through competitive grants to eligible states to create or expand state-based HAI prevention and surveillance efforts, and strengthen the public health workforce trained to prevent HAIs. HHS is also allocating $10 million in grants to states to improve the process and increase the frequency of inspections for ambulatory surgical centers.

Health insurers would be willing to eliminate a surcharge levied against women, Karen Ignagni, president of America’s Health Insurance Plan told the Senate Finance Committee in a discussion on expanding healthcare coverage on Tuesday. Women who buy private health insurance often pay 25% to 50% more in premiums, reports The New York Times. “We don’t believe gender should be a subject of rating,” Ignani told the committee. Previously, insurers have agreed to stop denying coverage to people with medical problems and to eliminate the practice of charging them higher premiums—concessions that could keep legislators from including a public health plan as part of healthcare reform. On Tuesday, Senator John Kerry (D-Mass) also introduced a bill that would eliminate premium disparities based on gender.

To appease some who oppose the idea of a government-run health plan, influential Senator Charles Schumer (D-NY) has proposed that any public health plan that emerges out of healthcare reform would have to adhere to the same rules and regulations that private insurers follow, reports The New York Times. Schumer outlined the following principles for a public health plan: It would pay claims from premiums and co-pays, not from government funds; it would pay more than Medicare does; doctors and hospitals wouldn’t be required to participate; it would have a reserve fund; and it would offer the same minimum benefits as private plans.

Last week, Schumer cited a new Consumers Union survey showing that 66% of Americans support the establishment of a public health plan that would compete alongside private insurers. Another 16 percent of Americans polled expressed no objection to a public plan option, and 16% opposed the idea. The survey also found that support for a public plan reached across all segments of the population, including households with incomes of $75,000 or more and those with employer-sponsored health insurance.

Providing homeless adults who have chronic medical conditions with housing and medical case management reduced hospitalizations by 29% emergency department visits by 24%, according to a new study published in JAMA. The 407 participants were randomized to standard discharge planning from hospital social workers or to intervention, which included transitional housing after hospitalization discharge, followed by placement in long-term housing. Case managers facilitated the participant’s housing placement and coordinated appropriate medical care, with substance abuse and mental health treatment referrals coordinated as needed.

After 18 months, 73% of participants had at least 1 hospitalization or emergency department visit. There were 583 hospitalizations in the intervention group (1.93 hospitalizations/person per year) and 743 in the usual care group (2.43 hospitalizations/person per year), with a reduction of 0.5 hospitalizations/person per year, and a reduction of 2.7 hospital days/person per year in the intervention group compared with the usual care group. Over 18 months, there were 2.61 emergency department visits/person per year in the intervention group and 3.77 visits/person per year in the usual care group, a reduction of 1.2 emergency department visits/person per year. “These results provide a rationale and a blueprint for programs that address the needs of this vulnerable population,” the authors conclude.

Hospital systems are much more interested in affiliating with each other today than they were last year, according to a survey of healthcare executives by Noblis Health Innovation. More than half the 84 healthcare organizations surveyed indicated they are likely to pursue affiliation in the coming year, especially if they already have existing affiliations or are experiencing deteriorating operating margins. The study’s findings also suggest that affiliation may help the bottom line. Ninety percent of surveyed organizations with existing affiliation relationships have break-even or better operating margins, while only 65% of the unaffiliated are in the black. Hospitals that are part of already affiliated organizations reported being most interested in gaining access to new geographic markets through affiliation, while independent organizations were more interested in using affiliation to enhance their access to capital. Both groups were interested in improving contracting leverage through affiliation.

Although the software supporting the Veteran’s Health Administration’s electronic medical-record system is available without cost to hospitals, few have used it to create their own EMR system. Fewer than 2% of non-VA hospitals have fully operational EMRs, frequently citing cost as a barrier. The VA’s system, named VistA, has the advantage of using open-source software that allows hospitals to share data, a drawback with proprietary systems sold by private vendors, reports The Wall Street Journal. And the costs to a hospital to install and maintain VistA is about a third of the cost of building a custom EMR. Private vendors, however, say that after a hospital adds billing and financial modules to VistA, which is designed for a single payer, the expense isn’t much less than building a customized system.

Still, many see VistA as a missed opportunity for some hospitals. "I would think there would be a tremendous opportunity for using this as a platform, particularly for smaller hospitals that have a real challenge in coming up with the money for electronic medical records," said Dr. William Weeks, an associate professor at Dartmouth Institute for Health Policy and Clinical Practice, reports The Boston Globe. Senator Jay Rockefeller (D-WV) is introducing a bill to give safety-net hospitals an incentive to use VistA by providing the $10 billion cost of installing and maintaining the EMR in hospitals that serve the poor. 

CMS is proposing to update acute-care hospital rates by 2.1% for inflation less an adjustment of 1.9 percentage points. The rate adjustment is intended to remove the effect of increases in aggregate payments due to changes in hospital coding practices that do not reflect increases in patients’ severity of illness, according to a CMS announcement. Long-term care hospital rates would increase by 2.4% for inflation less an adjustment of 1.8 percentage points. The proposed rule would apply to approximately 3,500 acute care hospitals paid under the Inpatient Prospective Payment System (IPPS), and 400 long-term care hospitals paid under the Long-Term Care Hospital Prospective Payment System, beginning with discharges occurring on or after October 1, 2009. The proposed rule was published in the May 1, 2009, Federal Register.

The Medicare Actuary found that additional coding that did not reflect actual changes in the severity of patients’ illnesses increased total payments under IPPS by 2.5% in FY 2008 and will further increase total payments in FY 2009. Therefore, the Medicare Actuary estimates that total adjustments of approximately 8.5% would have to be made to the acute-care hospital rates to address changes in hospitals’ coding practices. CMS is proposing a prospective adjustment of 1.9 percentage points for FY 2010, which means additional adjustments of approximately 6.6 percentage points will be needed in FY 2011 and FY 2012.

In addition, the proposed rule adds four new quality measures for which hospitals must submit data under the Reporting Hospital Quality Data for Annual Payment Update program to receive the full market basket update. CMS is also proposing changes to regulations affecting payment adjustments to teaching hospitals and disproportionate share hospitals and to clarify the regulations implementing the Emergency Medical Treatment and Labor Act. CMS will accept comments on the proposed rule until June 30 and will respond to comments in a final rule no later August 1, 2009.

The Federal Trade Commission will delay enforcement of the new “Red Flags Rule” until August 1, 2009, to give creditors and financial institutions more time to develop and implement written identity theft prevention programs. For entities that have a low risk of identity theft, the Commission will release a template to help them comply with the law. The FTC’s announcement does not affect other federal agencies’ enforcement of the original November 1, 2008, compliance deadline for institutions subject to their oversight.

“Given the ongoing debate about whether Congress wrote this provision too broadly, delaying enforcement of the Red Flags Rule will allow industries and associations to share guidance with their members, provide low-risk entities an opportunity to use the template in developing their programs, and give Congress time to consider the issue further,” FTC Chairman Jon Leibowitz said.

The Fair and Accurate Credit Transactions Act of 2003 (FACTA) directed financial regulatory agencies, including the FTC, to promulgate rules requiring creditors and financial institutions with covered accounts to implement programs to identify, detect, and respond to patterns, practices, or specific activities that could indicate identity theft.

The Senate Finance Committee has released recommendations on revising Medicare payments to reward high-quality care, align incentives across multiple settings, and reduce costs. Among the recommendations is a proposal to create a hospital value-based program to pay for hospitals’ performance on quality measures. Medicare IPPS payments would be reduced to create an incentive pool to pay bonuses to hospitals “either attaining a certain performance standard or making improvements on performance relative to a previous performance period.” IPPS payments would be reduced by 2% in FY 2013, 3% in FY 2014, 4% in FY 2015, and 5% in FY 2016 and beyond. Performance standards would be announced 60 days in advance of the performance period, and unused incentive pool dollars would be returned to the Medicare trust fund.

“As the shape of healthcare reform legislation begins to emerge,” comments Richard L. Clarke, DHA, FHFMA, president and CEO of HFMA, “healthcare finance leaders should be more focused than ever on making the structure and process changes that will drive costs out of their organizations while enhancing coordination and quality. Value will be key to success under the kinds of pay-for-performance and bundled payment options being discussed.”

To reduce preventable hospital readmissions, the Senate Finance Committee proposed that CMS calculate national and hospital-specific rates of readmissions for eight medical conditions that have the highest volume and rates of readmission. Beginning in FY 2013, hospitals with readmission rates above the 75th percentile for selected conditions would have 20% of their inpatient payments withheld, based on their performance the previous year. Hospitals could be repaid the withhold if the patients do not have preventable readmissions within 30 days of discharge. In addition, acute-care IPPS hospital services and post-acute care services occurring or initiated within 30 days of discharge would be paid through a bundled payment beginning in 2015. Initially, bundled payments would apply to conditions that account for 20% of post-acute care spending, followed by admissions for conditions that comprise the next 30% of post-acute care spending in 2017, and concluding with conditions that make up the remaining 50% in 2019. The bundle would be calculated as the inpatient MS-DRG amount plus post-acute care costs “adjusted to capture savings from the expected efficiencies gained from improving patient care and provider coordination.”

The recommendations also include updates to the Medicare physician fee schedule, physician quality reporting incentive payments, requirements for physicians to disclose financial interest in imaging services and to follow appropriateness standards for those services, bonuses to physicians who provide most of their care in ambulatory setting ,and payments for care management activities performed in physician offices.

Nominations are now being accepted for Modern Healthcare magazine’s 8th annual 100 Most Powerful People in Healthcare recognition program. HFMA president and CEO Richard L. Clarke, DHA, FHFMA, has made the list each year since it inception. Click here to nominate Dr. Clarke and other worthy leaders. The deadline for nominations is May 8.

A survey of 28 hospital systems representing 429 hospitals finds that group purchasing organizations are achieving $36 billion annually in direct pricing savings. The study was conducted by Eugene S. Schneller, principal of Health Care Sector Advances, Inc., and was funded by the Health Industry Group Purchasing Association. The savings associated with GPO services consist of $6.8 billion for hospital pharmaceuticals; $8.5 billion for medical/surgical purchases; $1.9 billion in attributed savings in the $10.4 billion cardiology implant marketplace; and $840 million in attributed savings in the $7-billion orthopedic implant marketplace. Other savings include over $1.8 billion in reduced hospital purchasing costs by eliminating the need for hospitals to comprehensively carry out strategic sourcing, contracting and other key GPO activities for inpatient pharmacy, general medical products, orthopedic products, other clinical products and housekeeping products.

Over half of U.S. hospitals and systems use GPO pricing as the benchmark for starting their own negotiations for physician preference items. In addition, hospitals with low GPO contract use have higher expenses per adjusted discharge than do hospitals with high GPO utilization. “For every thousand admissions, a hospital underperforming in this area could save as much as $400,000 and a system could save as much as $900,000,” says the report.