December 13, 2006
In October 2006, HFMA asked its members about the healthcare issues that were most critical to them. Nearly 2,000 individuals responded to the survey, a group largely made up of healthcare providers as well as some payers and consultants. The survey found that for many senior-level healthcare financial executives, day-to-day issues that revolve around revenue cycle improvement and cost containment continue to be their top priorities. Issues involving consumer-focused practices, payment trends, and business development also scored very high on the survey.
HFMA's Healthcare Finance Outlook 2007 examines these topics and presents opinions of thought leaders about which trends are likely to be most significant to the industry and the actions they think CFOs need to plan for over the next 18 months.
Summary of Healthcare Financial Manager Issues and Concerns
Revenue Cycle Improvement
- Simplifying charging systems
- Understanding and improving performance related to key performance indicators
- Capturing full and accurate charges
Consumer-Focused Practices
- Adopting transparent and justifiable pricing
- Improving quality
- Demonstrating community benefit
Medicare Payment Trends
- Coding for severity of illness
- Responding to pay-for-performance
- Expecting cost-based weights
- Overhauling ambulatory surgical center payments
Business Issues
- Managing labor costs
- Generating new revenue
- Leveraging services for market advantage
Payer Contracting Will Need to Become More Transparent
Some payers already are posting on their websites contracted rates with physicians. Contract clauses that have inhibited sharing of information, such as nondisclosure clauses, will likely be abandoned to a large degree in the next two years. Also, contracting is likely to enter a tougher negotiation phase as health insurers consolidate and strengthen their bargaining stance. HFMA members report widespread frustration with the lack of standardization among most payers and the inability to rebase prices because of contracting language. One bright spot is that more than 20 health organizations, including several leading health plans, have agreed to adopt operating rules governing the electronic exchange of eligibility and benefits information, following rules developed through the Council for Affordable Quality Healthcare (CAQH). HFMA was among the organizations that endorsed the operating rules, developed by the CAQH Committee on Operating Rules for Information Exchange.
Physicians and Hospitals Will Join Forces More Frequently
The forms of this integration may vary from physician leadership development to physician incentives to enter into joint ventures. Why the push for greater collaboration? If annual pressure on Medicare physician payments continues, hospitals will likely see increased competition from physicians in the form of outpatient surgery centers and specialty hospitals as they attempt to make up for lost income. Also, it should be noted that as of November 2006, the Office of Inspector General has released eight opinions approving gainsharing arrangements that have significant safeguards to avoid violating antikickback and other Medicare regulations. An increasing number of providers will be structuring their arrangements to mirror these safeguards in an attempt to align financial incentives between physicians and hospitals while maintaining compliance and integrity with Medicare oversight rules.
Federal and State Government Will Continue to Press Toward Posting Aggregate, Average List Prices
Many payers already are posting this information on their websites for enrollees. These initiatives will become commonplace because they are a relatively simple way to report and compare gross data on charges, and such comparisons have some value for uninsured individuals, as well as for health plans and healthcare policymakers. As of November 2006, the AHA reported 32 states had statutes requiring hospitals to report hospital charges or payment rates, and six states had voluntary reporting initiatives. However, these efforts are not expected to get to the root of the issue: patients want to know what their out-of-pocket costs are going to be. Providing this level of service requires collaboration of all the parties that can't be forced by just one side of the pricing equation. 2007 will see accelerated progress toward this vision, but the tipping point—in which all parties cooperate enough to make a significant breakthrough in resolving barriers and eliminating fragmentation—is not likely until 2008 or later.
Reporting Community Benefit Will Grow in Importance
Don't expect relief anytime soon from challenges to exempt status as the number of uninsured individuals grows, pressure on the federal deficit continues, and mismanagement scandals among for-profit and not-for-profit businesses alike continue to play out in the media. However, comparable, scaleable reporting standards will greatly help tax exempt hospitals accurately document and report the entire range of the community benefits they provide. These comprehensive reports should be communicated regularly and clearly to the public.
The Budget Will Be the Most Favorable Near-Term Vehicle for Medicare Change
Although legislative action regarding significant Medicare changes, including new pay-for-performance laws, is unlikely in the short term, a wild card for the coming year is the annual budget process. Legislators often try to use budget bills, which are hard to vote against solely because of one amendment, as a vehicle for slipping in Medicare or Medicaid changes that can have a significant effect. Hospitals are advised to pay closer attention than usual to the budget process.
Price Will Prevail in Highly Profitable Outpatient Arenas
Hospitals will have to decide whether they will compete with physicians and freestanding services for lucrative outpatient services on price and be able to drive costs down to that price. Otherwise, they may need to exit the market. Although there is growth within the ambulatory services field, for hospitals, inpatient services are still their strong suit.
EXCERPTED FROM: HFMA's Healthcare Finance Outlook 2007
What do you think? HFMA welcomes comments on how you feel about healthcare finance. Contact Laura Noble at (800) 252-4362, extension 607.
Additional Resources:
If you have questions or comments about HFMA Wants You to Know," contact editor Maxine Harrison.
HFMA Wants You to Know ISSN: 1540-0697. Volume V, Issue 26. Copyright 2006, Healthcare Financial Management Association. All rights reserved.