Healthcare Financial News

The Centers for Medicare & Medicaid Services (CMS) today announced that acute care hospitals will receive a 2.1 percent inflation update for their payment rates effective fiscal year 2010. Earlier this year, CMS had proposed to reduce payments by 1.9 percent.

The update was included in a final rule making policy changes and setting payment rates for inpatient services in general acute care hospitals. The changes will be effective beginning with discharges on or after Oct. 1, 2009.

The final rule will be published in the Aug. 27 Federal Register.

Read the CMS press release.

The Centers for Medicare & Medicaid Services (CMS) announced a proposed 2.2 percent home health market basket update to the home health prospective payment system (HH PPS) rates for calendar year (CY) 2010.

CMS is also proposing to cap outlier payments at 10 percent per agency and target total aggregate outlier payments at 2.5 percent of total HH PPS payments. Currently, the target for outlier payment targets is 5 percent of total HH PPS payments.

In the rule, CMS proposes a 2.75 percent reduction to the national standardized 60-day episode payment rates and non-routine medical supply factor in CY10 to offset for an increase in home health case-mix that is not associated with any underlying change in the clinical condition of patients. This reflects the third year of a four-year phase-in of adjustments to HH PPS rates, which were finalized in the HH PPS Refinement and Rate Update for CY 2008 final rule.
 
HHAs that submit required quality data will receive payments based on the full proposed home health market basket update of 2.2 percent for CY 2010.  The proposed home health market basket percentage would be reduced by 2 percentage points to 0.2 percent for CY 2010 for those HHAs that do not submit the quality data.

The proposed rule will be published in the Aug. 6 Federal Register with comments accepted through Sept. 28. 

An initiative to reduce healthcare-associated infections (HAIs) in ambulatory surgical centers (ASCs) has been launched by the Centers for Medicare & Medicaid Services (CMS), using funding from the American Recovery and Reinvestment Act of 2009 (ARRA). The 12 states—Maine, New Jersey, Maryland, Florida, North Carolina, Indiana, Michigan, Arkansas, Oregon, Utah, Wyoming, and Kansas—will survey more than 125 ASCs before September 30, 2009, at an estimated cost of up to $1 million. The onsite reviews, paid for out of ARRA funds, are designed to ensure that the facilities are following Medicare health and safety standards. As part of the new initiative, state surveyors will employ a new CMS survey process that uses a tool developed in conjunction with the Centers for Disease Control and Prevention (CDC). ARRA funds will also increase the number of ASCs surveyed.

Supplementing the funds being made available today, CMS will make $9 million available in October for all states to make additional inspections of ASCs with the new survey tool.  The CDC will also make $40 million available to state public health departments to create or expand state-based HAI prevention and surveillance efforts, and strengthen the public health workforce trained to prevent HAIs.  These funds support activities outlined in the HHS 2009 Action Plan to Prevent Healthcare-Associated Infections.

A new agreement would move the stalled reform bill forward in the U.S. House of Representatives, according to news accounts in The Washington Post, The New York Times, and other media outlets. An estimated $100 billion has been trimmed from the projected total cost of the bill, bringing cost estimates under $1 trillion. Among other compromises, House leaders reportedly agreed today that a public health insurance option would not use payment rates based on Medicare; instead, providers would be able to negotiate their rates. Also, small businesses with payrolls of $500,000 or less (as compared with a $250,000 threshold in the original draft bill) would not be required to offer insurance to employees. House Energy and Commerce Chairman Henry Waxman (D-Calif.) reportedly said that his committee will resume meetings on healthcare legislation on Wednesday with the hope of approving the legislation by Friday, before the House starts its August recess. A vote by the full House would take place in September.

Meanwhile, Senate Finance Committee Chair Max Baucus (D-Mont.) said that the Congressional Budget Office (CBO) is now estimating the cost of the health reform bill under development in the Senate at less than $900 billion over a 10-year period, substantially less than previous estimates. The cost of the Senate bill would be fully offset by tax increases and Medicare savings, the CBO reportedly concluded.

The Federal Trade Commission (FTC) has delayed until Nov. 1 enforcement of a provision of the “red flags” rule that requires physicians, hospitals, and other covered entities to develop and implement written identity theft prevention programs. The previous deadline for compliance was Aug. 1. Additional educational materials will be made available by the FTC during this period.

Read the FTC press release.

U.S. Department of Health and Human Services Secretary Kathleen Sebelius announced the availability of $200 million to support grants, loans, loan repayment, and scholarships to expand the training of healthcare professionals. The funds are expected to train approximately 8,000 students and credentialed health professionals by the end of fiscal year 2010.

These funds are part of the $500 million allotted to HHS’ Health Resources and Services Administration (HRSA), to address workforce shortages under the American Recovery and Reinvestment Act (ARRA).

The remaining $300 million in ARRA workforce funds is being used to expand HRSA’s National Health Service Corps, which provides scholarships and loan repayment for primary care providers who serve in health professional shortage areas.  In addition, HRSA received $2 billion through ARRA to expand healthcare services to low-income and uninsured individuals through its health center program.

Read the HRSA press release.

The Kaiser Family Foundation has issued several new resources related to the national debate about health reform:

How Might a Reform Plan Be Financed? examines the challenges of paying for a major reform plan, including a look at some of the options under consideration by Congressional leaders. The brief explains the various approaches being discussed to finance the likely costs of the health reform plans under consideration.

Key Questions about Changes for Medicaid and Low-Income Individuals: American's Affordable Health Choices Act of 2009 summarizes the Medicaid and Children's Health Insurance Program provisions included in H.R.3200, America's Affordable Health Choices Act. It also looks at some key questions about the legislation's provisions affecting low-income individuals.

Summary of Key Medicare Provisions in H.R. 3200, America's Affordable Health Choices Act of 2009 provides a detailed look at the provisions in this bill that affect the Medicare program, including breakouts of savings and new spending.

In the past year, hospitals and health systems witnessed a once-in-a-generation financial downturn that decimated all portfolios. Although some stock indices have recovered, the broader picture makes it clear that difficult times are far from over. A set of new resources on HFMA's Healthcare Financial Pulse web site help hospitals navigate today's credit markets and hone their investment strategies.

In Hospital Strategies for Navigating Today's Credit Markets, David W. Johnson answers questions regarding credit market expectations and the orientation of credit markets today, as well as strategies to improve liquidity, better manage unfunded liabilities, optimize performance reporting, and choose the right financing vehicles.

According to Johnson, managing director and co-head of Ziegler's healthcare investment banking practice in Chicago, it will be prudent for healthcare organizations "to be more conservative in managing investments, strive for higher liquidity, focus on the core business, and prepare for whatever regulatory changes may emerge from Washington."

Investment management is the topic of two additional resources on the Pulse site. GE Asset Management's Dave Wiederecht offers Three Keys to Investing in Turbulent Times, focusing on liquidity, diversity, and investment wild cards. And Tim Sheehan, managing director with Cain Brothers, provides Three Tips for Optimal Hospital Portfolio Investing. One piece of advice: Focus on potential worst-case scenarios to reorient your investment decisions toward a more conservative perspective that emphasizes cash preservation.

Under a healthcare reform proposal currently being considered by Congress, hospitals that accept Medicare and public plan payment would see payments for services reduced by an average of 32 percent below what private insurers pay for the same treatment. This projection is included in The Lewin Group’s analysis of the draft legislation introduced in the U.S. House of Representatives earlier this month, America’s Affordable Health Choices Act of 2009.

Other key findings in the report about the impact of the draft legislation include the following: 

• The number of uninsured Americans would be reduced by 32.6 million.
• Payments for physician services would be reduced by an average of 14 percent below what private insurers reimburse for the same treatment.
• Premiums for a public plan would be an average of 20 percent less than private insurance premiums for families, and 25 percent less for individuals.

The Lewin Group’s analysis examines two scenarios that would result from a Commissioner’s determination of eligibility for the public plan option. It concludes that costs to federal, state and local governments would vary significantly, depending on eligibility limitations.

The objective of the analysis was to understand how alternative proposals for enacting the legislation would affect various public and private stakeholders. The 61-page report includes a discussion of the Act and its effects on each stakeholder.

Funding in the form of grants and loans will be awarded by the U.S. Department of Agriculture’s Rural Utilities Service to build and improve hospitals, clinics and other facilities in low-income rural areas. The funds, totaling $1.19 billion, were authorized by the American Recovery and Reinvestment Act of 2009, and will be awarded on a rolling basis through Sept. 30, 2010. Contact the USDA rural development office in the state where the project is located for more information.

Read the notice in the July 23 Federal Register.

According to a new commentary from the Center for Studying Health System Change (HSC), until consumers are motivated to use quality information to choose providers, the main value of public quality reporting will be to motivate providers to improve their performance. Unlike price transparency—where consumer needs vary greatly depending on their insurance coverage and benefits—theoretically, all consumers can benefit from the same information on the quality of care provided by individual physicians, medical groups, hospitals, and other providers. However, most Americans still rely on recommendations from friends, family members, and physicians when choosing doctors or hospitals. Effective quality reporting needs to reflect different consumer abilities to understand and use information, according to the commentary, entitled Health Care Quality Transparency: If You Build It, Will Patients Come? For example, layering information would allow consumers to choose whether they want to access broad quality assessments or drill down to detailed information about specific facets of performance. Providers should also realize that communicating their beliefs about flaws in quality data or analyses to consumers undermines consumers’ willingness to rely on the information.

An updated policy brief from the Robert Wood Johnson Foundation looks at the structure and distribution of existing tax subsidies for employer-sponsored health insurance and the implications of modifying these subsidies to help pay for health reform. Federal tax subsidies for employer-sponsored insurance will amount to more than $240 billion in 2010, according to the brief, with higher-income workers receiving the most benefit most from the current tax subsidies.

Experience with Medicare's Part D prescription drug benefit is assessed in an article authored by Kaiser Family Foundation researchers and published in the July 23 issue of the New England Journal of Medicine. The article reviews the evidence to date about Part D to assess how well the program is working for the nearly 27 million Medicare beneficiaries enrolled in these plans.  It examines the effects of Part D on drug coverage, access to medications, out-of-pocket spending, cost-related noncompliance, and Medicare spending overall—identifying strengths, shortcomings, and potential areas for improvement. The authors suggest that policymakers consider taking steps to improve coverage, simplify plan choices, shrink or eliminate the coverage gap, improve coverage for low-income beneficiaries, and reduce drug prices.

The number of community-based electronic health information exchanges between physicians, hospitals, health plans, and patients has increased to 57 in the last year, up from 42 in 2008, according to results of a survey released by the eHealth Initiative. Some hospital-based exchange participants reported achieving reductions in staff time spent handling laboratory and radiology results and performing clerical and administrative tasks. A total of 40 initiatives reported cost savings as a result of health information exchange.

Senate Democratic leaders told reporters that they are no longer pushing for a vote on healthcare reform before Congress' August recess, according to the Associated Press and The Washington Post. Senate Majority Leader Harry Reid (D-Nev.) was quoted as saying, "It's better to have a product based on quality and thoughtfulness rather than try to jam something through." Reid reportedly said that the Senate Finance Committee will act on its portion of the bill before the Senate starts its recess on August 7. That bill with then be merged with separate legislation passed by the Senate Health, Education, Labor and Pensions Committee this month. The decision to delay a vote was said to have been made Wednesday night in the hopes of getting a final bill that can win at least 60 votes in the Senate.

A new study of community benefit spending by Maryland’s nonprofit hospitals, published by Health Affairs, suggests that caution is needed in creating community benefit expenditure thresholds for tax exemption.

Overall community benefit spending by Maryland hospitals increased over the first four years of the reporting program, say the study authors. Nevertheless, in 2007, virtually all Maryland hospitals would have failed to meet a spending threshold proposed that year by the Senate Finance Committee’s minority staff.

The issue of community benefit thresholds is being examined by the U.S. Congress this year as they consider healthcare reform legislation.

Read the article in Health Affairs.

Fiscal 2008 key median ratios for the 134 health systems rated by Standard & Poor’s worsened across all rating categories, according to a new report issued by the credit ratings agency. Overall, the median operating margin was 2.4% in 2008, as compared with 2.8% the previous year. The median net margin dropped to 2.5%, down from 6.3% in 2007. The median number of days systems could operate on cash reserves fell to 154 days in 2008 from 181 days the prior year.

The number of health system rating downgrades doubled to 18 and Standard & Poor’s lowered the outlook for 27 systems, up from 14 in 2007.

This is the third consecutive year of declining operating margins and a decline in upgrades for the sector, says the credit rating agency. Additionally, 2008 represented a 10-year peak in downgrade volume on an absolute basis.

These results are partially attributable to the economic slowdown; however, the recession also exacerbated declines brought about by core operating challenges, Standard & Poor’s says. Results presented in the report, U.S. Not-for-Profit Health Care Stand-Alone Fiscal 2008 Median Ratios Weaken Across the Board, support the conclusions in Standard & Poor’s August 2008 report that declining operating margins would no longer be offset by strong nonoperating revenues.

Inpatient volumes are expected to decline but outpatient volume will increase correspondingly, according to results of a new survey from HFMA’s Healthcare Financial Pulse project. Some financial executives surveyed anticipate that volume will grow in selected inpatient areas, including cardiac, surgical, and intensive care unit/critical care unit services. Two-thirds of survey respondents anticipate a modest increase in net patient revenue over the previous year. Uninsured and underinsured patients will present significant challenges as hospitals are called upon to provide greater amounts of charity care and community benefits.

In response to patient volume changes, hospitals are adjusting staffing and related costs; increasing their focus on service line management; targeting physician recruitment, relationships, and referrals; and reexamining payer and supplier contracts and relationships.

Asked to consider prospects for long-term change, the top two areas for transformational change cited by respondents are related to clinical and business IT.

Read the full survey results.

The Centers for Medicare & Medicaid Services (CMS) launched a web site and helpline (866-400-6689) where certain unemployed workers may request expedited review of a denial by their former employers of eligibility for COBRA premium assistance under the American Recovery and Reinvestment Act of 2009 (ARRA).

CMS has contracted with MAXIMUS Federal Services, Inc., to review requests for expedited review of denials and make recommendations—subject to CMS’s review—on whether individuals are eligible for health insurance premium assistance under the Recovery Act’s expansion of COBRA continuation coverage. MAXIMUS will also answer questions about the premium assistance program and the expedited review process. 

To help displaced workers maintain healthcare coverage for themselves and their families, ARRA provides a 65 percent subsidy for health insurance premiums for workers who have elected COBRA after they have been involuntarily terminated from their jobs. ARRA’s premium assistance applies to periods of continuation coverage beginning on or after February 17, 2009 (when ARRA became law), and lasts for up to nine months. 

Read the CMS press release.

Hospitals participating in the Hospital Quality Alliance can now preview their most recent quarterly data at the QualityNet web site. The data that displays in the preview reports will be released to the public on the Hospital Compare web site in mid-September. After previewing the data, hospitals should report any errors to their Quality Improvement Organization by August 11.

A gap between individual and small group health insurance coverage rates and the rates offered in plans provided by larger firms has been documented in a new report from Changes in Health Care Financing & Organization, an initiative of the Robert Wood Johnson Foundation. According to the report, individuals choosing from small group plans typically pick plans with a $1,000 to $1,500 deductible and those enrolled in individual plans typically have deductibles between $2,000 and $2,500. In contrast, most enrollees in insurance plans provided through a larger employer choose plans with deductibles between $500 and $1,000. The researchers point out that little attention has been paid to how health benefits are structured for individuals purchasing healthcare coverage in the small group or individual markets. The research analyzes survey data provided by America’s Health Insurance Plans.

HFMA recently sent a letter to Sen. Max Baucus (D-Mont.) and Sen. Chuck Grassley (R-Iowa), leaders of the Senate Committee on Finance, regarding the importance of maintaining the tax exemption for not-for-profit hospitals. The letter urged the Senate Finance Committee to consider this issue in the same cautious and deliberative manner as other aspects of healthcare reform. Examples of the many community and societal benefits provided by hospitals are highlighted in HFMA’s letter, which also describes the potential impact of revoking or limiting hospitals’ tax-exempt status on the well-being of their communities.

Including both private and public insurance choices in a new insurance exchange would save the United States as much as $265 billion in administrative costs from 2010 to 2020, according to projections in a new report from The Commonwealth Fund. Savings from the mixed private-public reform approach would be realized through less marketing and underwriting, reduced costs of claims administration, less time spent negotiating provider payment rates, and fewer or standardized commissions to insurance brokers.

On the other hand, an insurance exchange that provided a choice of private plans only would increase administrative costs by $32 billion over the same period, according to the report.

"Health reform can help pay for itself, but both private and public insurance choices are critically important," said Commonwealth Fund President Karen Davis, who coauthored the new report. "A public insurance plan can help drive new efficiencies in the system that will produce large cost reductions. Without a public plan, much of those potential savings will be lost."

The health reform bill released this week by House Democrats would increase rather than reduce public spending on healthcare, according to a preliminary analysis conducted by the Congressional Budget Office (CBO) and the staff of the Joint Committee on Taxation.

As reported by The Washington Post, CBO director Douglas Elmendorf told the Senate Budget Committee in a hearing on Thursday that the bill would not bend the long-term healthcare cost curve downward. "The changes we've looked at so far don't represent the fundamental change on the order of magnitude that would be necessary," Elmendorf reportedly said.

Uninsured persons accounted for nearly one-fifth of the 120 million hospital-based emergency department visits in 2006, according to data released by the Agency for Healthcare Research and Quality (AHRQ) from the Nationwide Emergency Department Sample. This database contains 26 million records from emergency department visits from approximately 1,000 community hospitals nationwide, representing 20 percent of all U.S. hospital emergency departments.   

Read the AHRQ press release.

A community-based prevention program in Nebraska helped bring about a 5.4 percent reduction in 10-year estimated chronic heart disease risk and a 7.5 percent reduction in five-year estimated cardiovascular disease risk, according to a report released by HHS. This is the second in a series of HHS healthcare success story reports.

The Nebraska WISEWOMAN program, funded by the Centers for Disease Control and Prevention, provides screenings and counseling for low-income women, including referrals to specialists for those identified as being at risk. The program started in 2000; there are now 21 similar programs across the country.

A new members-only PowerPoint presentation has been posted to the HFMA Resource Library: An Overview of the Proposed 2010 Outpatient Prospective Payment Rule. This presentation identifies key features of the proposed rule, implications for hospitals, and how hospitals can respond to these changes.

House Democrats have released a sweeping 1,018-page reform bill. Key changes proposed by the draft legislation, America’s Affordable Health Choices Act, as described in a four-page summary of the bill, are outlined here.

To enhance coverage and choice, the bill would:

• Implement a health insurance exchange designed to allow individuals and small employers to comparison shop among private and public insurers
• Create a self-sustaining public health insurance option, to be financed only by its premiums
• Prohibit lifetime and annual benefit limits and exclusions for pre-existing health conditions
• Create an “essential benefit package” designed to become the minimum quality standard for employer plans

To help ensure affordability, the bill proposes to:

• Institute “affordability credits” for low- and moderate-income individuals and families that phase out when household income reaches 400 percent of the federal poverty level
• Cap annual out-of-pocket spending on healthcare
• Expand Medicaid eligibility for those with incomes at or below 133 percent of the federal poverty level

To control costs, the bill would:

• Implement major Medicare reform initiatives, including accountable care organizations, medical homes, and bundling of acute and postacute provider payments
• Create new incentives to decrease preventable hospital readmissions
• Make changes in the Medicare Part D prescription drug program, including eliminating the coverage “doughnut hole”
• Reform the sustainable growth rate formula with an update that “wipes away accumulated deficits, provides for a fresh start, and rewards primary care services, care coordination, and efficiency”
• Make changes in Medicare payments to Medicare Advantage Plans and other providers as recommended by the Medicare Payment Advisory Commission
• Develop new tools to fight waste, fraud, and abuse

In addition, the draft legislation proposes to implement various prevention and wellness measures, with cost sharing for preventive services prohibited. Funding to expand the healthcare workforce is also proposed.

Individuals who choose not to obtain health insurance coverage would pay a penalty of 2.5 percent of modified adjusted gross income above a specified level. Employers that do not participate would be required to pay an amount equivalent to 8 percent of each uninsured worker’s wages, with exemptions for small businesses.

The bill would tax high earners to help cover the costs of reform, phasing in with a 1 percent tax for households with incomes of $350,000.

A joint partnership that helped reduce the number of healthcare-associated infections in Michigan saved more than 1,500 lives and $200 million, as described in the first in a series of healthcare “success story” reports, released on July 13 by the U.S. Department of Health and Human Services (HHS). The report describes the Michigan Keystone ICU Project, a joint partnership between the Michigan Health & Hospital Association and the Johns Hopkins University.

The Michigan Keystone ICU Project worked to reduce catheter-related bloodstream infections in over more than 100 intensive care units in the state by promoting use of a simple checklist during catheter insertions.

The American Recovery and Reinvestment Act included $50 million in grants available for states to help fight healthcare-associated infections. HHS Secretary Kathleen Sebelius called on hospitals across the country to commit to reducing central line-associated bloodstream infections in ICUs by 75 percent over the next three years by using the checklist from the Michigan Keystone ICU Project.

Despite being the third quarter in a row to register more downgrades than upgrades in the not-for-profit healthcare sector, the majority of rating activity in the second quarter of this year took the form of affirmations, also continuing a longstanding trend, says Moody's Investors Service in a quarterly report on industry rating activity.

It was the third consecutive quarter in which downgrades well surpassed upgrades—17 to 4—resulting in a wide 4.3 to 1 margin, compared to 19 to 5 (3.8 to 1 margin) in the first quarter of 2009. This is a contrast with the second quarter of 2008 when the number of downgrades equaled the number of upgrades with 10 each.

Moody's Public Finance Group affirmed 86 ratings in the second quarter 2009 in the not-for-profit healthcare sector, representing a high 80% of total rating actions and affecting approximately $41 million of debt, on par with 86 rating affirmations—81% of total rating actions—in the second quarter 2008, reports the rating agency.

President Obama announced his nominee for the U.S. surgeon general, Dr. Regina Benjamin, today at the White House. Dr. Benjamin is the founder and CEO of the Bayou La Batre Rural Health Clinic in Alabama, which aims to provide primary care to people of any age regardless of their financial situation. Benjamin has been acclaimed for founding the clinic in 1990 and rebuilding it after it was repeatedly destroyed in a series of disasters, including Hurricane Katrina in 2005. In his remarks at the ceremony, President Obama chronicled Dr. Benjamin’s dedication to providing health care for her rural community in the face of adversity.

Dr. Benjamin previously served as chair of the Federation of State Medical Boards of the United States, and as the associate dean for rural health at the University of South Alabama College of Medicine. Additionally, she was chosen as president of the Medical Association of Alabama in 2002, becoming the first African-American woman to be president of a state medical society. She was also the first African-American woman and physician under 40 to be elected to the American Medical Association Board of Trustees. Dr. Benjamin received the Nelson Mandela Award for Health and Human Rights in 1998, among other honors.

A new report examines the potential effects of national health reform on the nation’s 96.2 million residents of urban and rural medically underserved communities. Using government data, the research brief from The George Washington University Department of Health Policy estimates that 72 percent of medically underserved community residents are insured; yet residents of these communities experience ongoing barriers to adequate health care, as measured by population health and social risk, a shortage of primary health care, or both. The report, entitled National Health Reform: How Will Medically Underserved Communities Fare?, identifies key investments and safeguards that can help ensure that insurance expansions into a lower income, at-risk population actually translate into improved healthcare quality, the reduction of disparities in health and health care, and greater system efficiencies.

About 45,000 office-based physicians, including nearly all physicians who practice at federally qualified health centers and half of office-based pediatricians, may be eligible for up to $63,750 over six years to improve and maintain their health information technology systems because of their participation in Medicaid, according to a new analysis by researchers at The George Washington University. 

The report, Boosting Health Information Technology in Medicaid: The Potential Effect of the American Recovery and Reinvestment Act, examines the Medicaid HIT adoption incentives contained in the American Reinvestment and Recovery Act. The funds are intended to help physicians establish, upgrade and operate electronic health record systems. The study is described as the first to map the potential impact of the Medicaid provisions on physicians’ access to incentive funding.

HFMA’s Principles and Practices Board submitted a comment on the proposed Financial Accounting Standards Board Staff Position amending FASB Statement No. 157, Fair Value Measurements, to provide application guidance for estimating the fair value of investments in investment companies that have calculated net asset value per share in accordance with the AICPA Audit and Accounting Guide, Investment Companies.

In the proposed draft, the FASB sought comments on all matters in the proposed FSP, including specific issues that need to be considered in the deliberations on guidance for estimating the fair market value of investments in investment companies that have calculated the net asset value per share. HFMA comments centered on these issues.

Portions of the reduction in federal spending to help finance healthcare reform would be phased in after insurance coverage expansions start, under the terms of an agreement with three major hospital industry groups announced by Vice President Joe Biden on Wednesday. According to the American Hospital Association, the agreement on reductions to be made over a 10-year period includes the following components:

• Reduced Medicare update factors in the form of market-basket cuts averaging market-basket minus 1.0 percent over the next 10 years. Cuts would be smaller at first, with a trigger attached to coverage expansions.
• Disproportionate share hospital payment reductions that would be phased in starting in 2015 and would be linked to coverage expansions. After 10 years, approximately 60 percent of total DSH payments would be preserved.
• Reductions in payment for hospital readmissions, focusing on cases deemed to be avoidable and related to the initial admission

Various system reforms are also reportedly included in the package, according to AHA:

• Value-based purchasing provisions that are described as budget-neutral
• Bundling undertaken on a pilot project basis with a specified end to the project and an evaluation
• Restrictions on physician self-referral to hospitals in which they have an ownership interest and limits placed on expansion for those that are grandfathered
• Increased number of Medicare-approved slots for physician graduate medical education
• Administrative simplification
• Other provisions related to extending expiring provisions, adjusting physician payments, supporting prevention and wellness, and establishing accountable care organizations

The community benefit standard for hospital tax exemption would be maintained, with no formulas or tests on the amount of charity care provided.

As coverage expands and more Americans are insured, the American Hospital Association estimates that hospitals would see reduced uncompensated care of at least $171 billion over 10 years.

New information has been added to the CMS Hospital Compare web site that reports how frequently patients return to a hospital after being discharged. The new data on 30-day readmissions for heart attack, heart failure, and pneumonia supplement the mortality rate data Hospital Compare already provides for these three conditions. Reducing the rate of hospital readmissions to improve quality and achieve savings are key components of President Obama’s healthcare reform agenda.

Hospital Compare data show 30-day readmission rates of 19.9 percent for patients admitted for heart attack treatment, 24.5 percent for patients admitted for heart failure, and 18.2 percent for patients admitted for pneumonia.

This year, CMS has changed the way it calculates the mortality data. In 2007 and 2008, Medicare used only one year of claims data to compute mortality; the new rates encompass three full years of claims data. Using the three-year data method, CMS estimates that the national 30-day mortality rate for patients originally admitted for heart attack care is 16.6 percent. For heart failure patients, the national 30-day mortality rate is 11.1 percent, and for pneumonia patients the national rate is 11.5 percent.

Read the CMS press release.

Hospital groups have agreed to support a proposal to reduce federal healthcare spending by $155 billion over the next 10 years, announced Vice President Joe Biden today. Biden was joined by leaders of the Hospital Corporation of America, Community Health Systems, Catholic Health Association, and American Hospital Association.

The majority of the savings will come from reducing the rate of increase of Medicare and Medicaid payments to hospitals. These reductions "will be more than offset as health reform takes hold and hospitals bear less of the financial burden of caring for the uninsured or underinsured," said Biden. The proposal was developed by hospital groups working with Senate Finance Committee Chairman Max Baucus, with the goal of using the savings to finance healthcare reform.

"Enacting meaningful healthcare reform, including expanding health insurance coverage, is something everyone supports," commented HFMA President and CEO Richard L. Clarke, DHA, FHFMA. "To keep reform efforts on track, significant funding issues must be addressed. HFMA welcomes specific proposals for all stakeholders to share the financial responsibilities of reforming our healthcare system, including proposals that address not only spending reductions but also incentive alignment and other important aspects of payment reform. Along with these proposals there must be significant progress on the many challenges facing hospital leaders, as well as an appropriate transition period. Today's announcement by the Vice President and hospital groups is a concrete start and a powerful reminder to hospitals that they need to critically examine their business strategies to ensure they can provide high-value care and service in the changing payment landscape."

Healthcare reform discussions have yielded more agreement than may at first meet the eye, according to a new report published by The Robert Wood Johnson Foundation. An Emerging Middle Ground: An Analysis of Health Reform Positions identifies and explores eight areas in which diverse business, medical, and consumer interests are beginning to find middle ground and earn the support of bipartisan lawmakers. The report provides a side-by-side explanation of the different perspectives for each issue and then identifies the areas where consensus may be forming.

The Department of Health and Human Services announced the availability of up to $40 million in grants to help reach families whose children qualify but are not yet enrolled in state Medicaid and Children’s Health Insurance Programs. The funds are available to states and community-based organizations. This is the first cycle of outreach funding under the Children’s Health Insurance Program Reauthorization Act, which provides a total of $100 million for outreach campaigns aimed at reducing the number of low-income, uninsured children.  Grants to states and organizations will ultimately total $80 million with the remaining funds going to other outreach efforts specified by the law. Applications for the first cycle of funding are due by Aug. 6 if submitted electronically; those submitted by mail are due by Aug. 10. Grants will be awarded by Sept. 30.

Read the HHS press release.

Hospitals would be able to bill Medicare for pulmonary and intensive cardiac rehabilitation services furnished in outpatient departments beginning January 1, 2010 under a proposed rule issued by CMS. The proposed rule would also provide for payments to rural hospitals for kidney disease education services furnished in their outpatient departments for Medicare beneficiaries with Stage IV chronic kidney disease.

The proposals, which would implement provisions of the Medicare Improvements for Patients and Providers Act of 2008, were contained in a notice of proposed rulemaking that would revise payment policies and update the payment rates for services furnished to beneficiaries during CY 2010 in hospital outpatient departments. Additional proposals incorporate an adjustment for hospital pharmacy costs that would result in OPPS payment at the Average Sale Price plus four percent for most separately payable drugs and biologicals and would adapt current requirements for physician supervision of hospital outpatient services.
The NPRM also includes proposals for policy changes and payment rates for services in ambulatory surgical centers, which would continue the expansion of surgical procedures Medicare would cover when performed in ASCs. 

The proposed rule has been published in the Federal Register. CMS will accept comments on the proposed rule until August 31, 2009, and will respond to comments in a final rule to be issued by November 1, 2009.

CMS has announced proposed changes to policies and payment rates for services to be furnished during CY 2010 by over 1 million physicians and nonphysician practitioners. CMS is making several proposals to refine Medicare payments to physicians, which are expected to increase payment rates for primary care services. The proposals include an update to the practice expense component of physician fees. For 2010, CMS is proposing to include data about physicians’ practice costs from the Physician Practice Information Survey, a new survey designed and conducted by the American Medical Association.

The proposed rule has been published in the Federal Register. CMS will accept comments on the proposed rule until August 31, and will respond to all comments in a final rule to be issued by November 1, 2009. Unless otherwise specified, the new payment rates and policies will apply to services furnished to Medicare beneficiaries on or after January 1, 2010.

An estimated 43.8 million Americans had no health insurance in 2008, approximately 2.8 million more than in 1997, according to new data from CDC’s National Center for ealth Statistics. The report, Health Insurance Coverage: Early Release of Estimates from the National Health Interview Survey, 2008, contains new estimates of health insurance coverage for the 20 largest states, and shows Massachusetts had the lowest percentage of uninsured individuals under age 65 (3.4 percent) in 2008. In contrast, approximately one in four persons under age 65 lacked coverage in Florida and Texas, and one in five lacked coverage in Arizona, California and Georgia. Nationally, 16.7 percent of those under age 65 were uninsured in 2008. The report provides information on both private and public insurance coverage. Among the states examined, private coverage rates for people under age 65 ranged from 78.9 percent in Massachusetts to 56.2 percent in Florida. Nationally, 65.4 percent of people under age 65 had private health insurance coverage.

A new report from the Institute of Medicine recommends 100 health topics that should get priority attention and funding from a new national research effort to identify which healthcare services work best. The report also spells out actions and resources needed to ensure that this comparative effectiveness research initiative will be a sustained effort with a continuous process for updating priorities as needed and that the results are put into clinical practice.

A committee convened by the IOM developed the list of priority topics at the request of Congress as part of a $1.1 billion effort to improve the quality and efficiency of health care through comparative effectiveness research outlined in the American Recovery and Reinvestment Act of 2009. The committee's report provides independent guidance—informed by extensive public input—to Congress and the secretary of HHS on how to spend $400 million on research to compare health services and approaches to care.

Wal-Mart, the nation’s largest private employer, sent a letter to President Obama and congressional officials expressing support for an employer mandate that would require large companies to provide health insurance to their workers. As reported by Kaiser Health News and the Associated Press, Wal-Mart’s chief executive, Michael Duke, was joined in signing the letter by Andrew L. Stern, president of the Service Employees International Union, which represents more than a million healthcare workers, and John Podesta, who leads the Center for American Progress. The letter also states that any employer mandate should be balanced by a healthcare cost containment guarantee, perhaps through a trigger mechanism that would impose reductions if designated spending targets were not met.