Cartoon – Creating a Paper Trail
Author Archives: henrykotula
Cartoon- Leadership Struggle Looming
Cartoon – Issue Transparency
AMA president details ‘Kafkaesque’ prior authorization process
American Medical Association President Jack Resneck Jr., MD, detailed in a post on the medical group’s website the “Kafkaesque” prior authorization process that an unnamed insurance company allegedly put one of his patients through.
Dr. Resneck, a San Francisco-based dermatologist, was treating a patient with severe head-to-toe eczema, who was unable to sleep because of the condition, according to the post. Dr. Resneck found a medication that allowed the patient to sleep and return to work.
Several months later, however, the patient was unable to get the prescription refilled at the pharmacy, according to the report. Dr. Resneck completed the paperwork describing how well the patient had responded to the medication, as required by the insurance company, and faxed it over. The prior authorization request for the prescription refill was rejected.
Dr. Resneck said the insurance company rejected the refill on the grounds that the patient no longer met the severity criteria because not enough of his body was covered and he was not missing enough sleep.
The insurance company allegedly wanted to take the patient off the medication for several weeks to let his eczema flare up again, according to the post. It took more than 20 additional telephone calls until the patient’s prescription was refilled.
5 questions Medicare Advantage data doesn’t answer
https://www.beckerspayer.com/payer/5-questions-medicare-advantage-data-doesnt-answer.html
A lack of data about Medicare Advantage plans means there are several unanswered questions about the program, according to an analysis from Kaiser Family Foundation.
The analysis, published April 25, breaks down the kinds of Medicare Advantage data not publicly available. Some missing data is not collected from insurers by CMS, and some data is collected by the agency but not available to the public.
Here are five questions researchers can’t answer without more data, according to Kaiser Family Foundation:
- Insurers are not required to report how many enrollees use supplemental benefits and if members incur out-of-pocket costs with their supplemental benefits. Without this data, researchers can’t answer what share of enrollees use their supplemental benefits, how much members spend out of pocket for supplemental benefits, and if these benefits are working to achieve better health outcomes.
- CMS does not require Medicare Advantage plans to report prior authorizations by type of service. Without more granular data, researchers can’t determine which services have the highest rates of denial and if prior authorization rates vary across insurers and plans.
- Insurers are also not required to report the reasons for prior authorization denials to CMS. This leaves unanswered questions, including what is the most common reason for denials and if rates of denials vary across demographics.
- Medicare Advantage plans do not report complete data on denied claims for services already provided. Without this data, researchers cannot determine how often payers deny claims for Medicare-covered services and reasons why these claims are denied.
- CMS does not publish the names of employers or unions that receive Medicare funds to provide Medicare Advantage plans to retired employees. Without more data, researchers can’t tell which industries use Medicare Advantage most often and how rebates vary across employers.
Where are the 20 Leapfrog straight-‘A’ hospitals?
Twenty U.S. hospitals have received consecutive “A” safety grades from The Leapfrog Group since 2012, according to the group’s spring safety grades released May 3.
Since 2012, Leapfrog has assigned letter grades to nearly 3,000 acute-care general hospitals across the nation every fall and spring. The safety grades evaluate hospitals’ performance on up to 22 patient safety measures from CMS, the Leapfrog Hospital survey and other supplemental sources. The safety grades are the only hospital ratings program solely based on hospitals’ ability to protect patients from preventable errors, accidents, injuries and infections.
Twenty hospitals have received 23 consecutive “A” grades since the launch.
Last fall, 22 hospitals achieved consecutive “A” grades. For the spring grades, two hospitals lost their consecutive “A” streak: Sentara Williamsburg Regional Medical Center in Virginia and Sierra Vista Regional Medical Center in San Luis Obispo, Calif., both earned a “B.”
Read more about Leapfrog’s hospital safety grade methodology here.
Here are the 20 hospitals that have achieved 23 consecutive “A” grades:
Arizona
Mayo Clinic Hospital (Phoenix)
California
French Hospital Medical Center (San Luis Obispo)
Kaiser Permanente Orange County-Anaheim Medical Center
Colorado
Rose Medical Center (Denver)
Florida
AdventHealth Daytona Beach
Illinois
Elmhurst Memorial Hospital
University of Chicago Medical Center
Northwestern Medicine Central DuPage Hospital (Winfield)
Massachusetts
Beverly Hospital
Saint Anne’s Hospital (Fall River)
Michigan
University of Michigan Health (Ann Arbor)
Mississippi
Baptist Memorial Hospital Golden Triangle (Columbus)
North Carolina
Rex Hospital (Raleigh)
Ohio
OhioHealth Dublin Methodist Hospital
OhioHealth Grady Memorial Hospital (Delaware)
Texas
St. David’s Medical Center (Austin)
Virginia
Inova Loudoun Hospital (Leesburg)
Sentara CarePlex Hospital (Hampton)
Sentara Leigh Hospital (Norfolk)
Washington
Virginia Mason Medical Center (Seattle)
CHS looking for more M&A, share price slumps
Franklin, Tenn.-based CHS, which reported a net loss of $20 million in the first quarter on revenues of $3.1 billion, is on the hunt for new acquisitions just as it is also in discussions to sell off more assets.
“We are considering further opportunities to expand our portfolio,” CEO Tim Hingtgen said in a webcast discussing first-quarter results.
Selling off certain assets would also help balance the system and further reduce some of its debt, President and CFO Kevin Hammons confirmed on the call.
“Moreover, we may give consideration to divesting certain additional hospitals and non-hospital businesses,” CHS said in an SEC filing. “Generally, these hospitals and non-hospital businesses are not in one of our strategically beneficial services areas, are less complementary to our business strategy and/or have lower operating margins. In addition, we continue to receive interest from potential acquirers for certain of our hospitals and non-hospital businesses.”
The health system, which operates 79 hospitals in 15 states, has agreed to sell four more hospitals effective Jan. 1, the filing stated.
CHS recently completed the $92 million sale of Oak Hill, W.Va.-base Plateau Medical Center to Charleston, W.Va.-based Vandalia Health. It also finalized on Jan. 3 an $85 million sale of its former 122-bed facility in Ronceverte, W.Va, also to Vandalia Health.
CHS shares were trading at $6.24 before its results were released. It is currently trading at approximately $3.70.
15 healthcare mergers and acquisitions making headlines in April
Here are 15 major hospital and healthcare merger and acquisition-related transactions from April:
- Brentwood, Tenn.-based Quorum Health is selling Waukegan, Ill.-based Vista Medical Center East to American Healthcare Systems, the Lake County News-Sun reported April 28. The hospital will change hands by May 31. American Healthcare Systems is based in Los Angeles.
- West Virginia will soon likely see a combined four-hospital system as Huntington-based Mountain Health Network, Marshall Health and Marshall University seek to combine. The combination should be completed by the end of this year.
- Yale New Haven (Conn.) Health continues to push for the acquisition of three hospitals owned by private equity-backed Prospect Medical Holdings. The system made its case to the state’s certificate of need committee as to why it is better placed to acquire the three sites.
- Oakland, Calif.-based Kaiser Permanente agreed to acquire Geisinger Health in a deal that will make the Danville, Pa.-based health system the first to join Risant Health, a new nonprofit organization created by the Kaiser Foundation Hospitals. The newly formed entity, which still has to be approved by regulators, would eventually look to acquire four to six other systems.
- Mobile, Ala.-based University of South Alabama confirmed April 19 it is buying Ascension Providence Hospital in the city in an $85 million transaction that includes the hospital’s clinics.
- The Oregon Health Authority on April 13 approved Roseville, Calif.-based Adventist Health‘s acquisition of the Mid-Columbia Medical Center in The Dalles, Ore., according to the Columbia Community Connection.
- Lumberton, N.C.-based UNC Health Southeastern is transitioning two of its business areas, seeking to sell a long-term care facility and transferring its current outpatient hospice program.
- Salt Lake City-based Intermountain Health is partnering with two Idaho hospitals as a minority investor. The 33-hospital system is investing in Idaho Falls Community Hospital and 43-bed Mountain View Hospital, also based in Idaho Falls.
- Two Wisconsin health systems — Froedtert Health and ThedaCare — signed a letter of intent to merge into a single system. Milwaukee-based Froedtert and Neenah-based ThedaCare announced the plan to combine April 11 with the goal to close the deal by the end of the year.
- Franklin, Tenn.-based Community Health Systems has struck agreements to sell four hospitals across three states in 2023.
- Mechanicsburg, Pa.-based Select Medical has acquired Vibra Hospital of Richmond, a 63-bed acute care facility in Richmond, Va. Terms were not disclosed. The hospital, which will take up the name Select Specialty Hospital-Richmond, will continue to provide post-ICU medical care for chronic and critically ill patients requiring long-term care, according to an April 5 release.
- Carle Health has added three Peoria, Ill.-based UnityPoint Health-Central Illinois hospitals into its system. The closing, which took place April 1, integrates Methodist, Proctor and Pekin hospitals under Carle, along with 76 clinics and Methodist College, according to an April 3 news release from Carle Health. Urbana, Ill.-based Carle Health now has eight hospitals in its system following the deal’s closing.
- Ann Arbor-based University of Michigan Health acquired Lansing, Mich.-based Sparrow Health System to become a $7 billion health system with more than 200 sites of care.
- Franklin, Tenn.-based Community Health Systems completed a $92 million sale of Oak Hill, W.Va.-based Plateau Medical Center to Charleston, W.Va.-based Vandalia Health. The healthcare giant closed on the transaction April 1.
- South Arkansas Regional Hospital signed a definitive agreement to acquire El Dorado-based Medical Center of South Arkansas from subsidiaries of Community Health Systems. The deal is expected to close in the summer.
With bankruptcy looming, Bright Health is fully ditching its insurance business
Embattled insurtech Bright Health will fully ax its insurance business as a potential bankruptcy looms, the company announced Friday.
The company secured an extension to its credit facility through June 30, giving it a few extra months to avoid going belly-up. To ensure it qualifies for the extension, the company must find a buyer for its California-based Medicare Advantage (MA) business by the end of May, according to a filing with the Securities and Exchange Commission.
Bright Health revealed March 1 that it had overdrawn its credit and would need to secure $300 million by the end of April to stay afloat.
The MA business includes nearly 125,000 California seniors across its Brand New Day and Central Health Plan brands. In the announcement, Bright said the sale would “substantially bolster” its finances.
“Since our founding, Bright Health has worked to make healthcare simpler, more personal and affordable for consumers,” CEO Mike Mikan said in the announcement. “As our markets evolve, we are taking steps to adapt and ensure our businesses are best positioned for long-term success.”
In late 2022, the company announced that it would exit the Affordable Care Act’s (ACA’s) exchanges and slashed its reach in MA down to just California and Florida as its financial challenges mounted. It later cut the Florida plans as well.
Manny Kadre, lead independent director of Bright Health’s board of directors, said in the announcement that the company has “received inbound interest” about the California MA business as it explores its options.
With the full divestiture of its insurance business, that means Bright Health will be all-in on its NeueHealth care delivery services. Mikan said in the announcement that the segment performed well in the first quarter and has grown to serve about 375,000 value-based care customers.
As Bright shops for a buyer for its MA plans, it’s also continuing to unwind the ACA business, a process that hit a snag as it was hit with a lawsuit from Oklahoma-based health system SSM Health, which alleged that the insurer owed it more than $13 million in unpaid claims.
Bright Health is also under the gun to boost its stock price, as the New York Stock Exchange has threatened to delist its shares. Shares in the company were trading at 17 cents on Friday afternoon.
Financial Reserves as a Buffer for Disruptions in Operation and Investment Income
For the first time in recent history, we saw all three
functions of the not-for-profit healthcare system’s
financial structure suffer significant and sustained
dislocation over the course of the year 2022
(Figure above).
The headwinds disrupting these functions
are carrying over into 2023, and it is uncertain how
long they will continue to erode the operating and
financial performance of not-for-profit hospitals
and health systems.
The Operating Function is challenged by elevated
expenses, uncertain recovery of service volumes, and
an escalating and diversified competitive environment.
The Finance Function is challenged by a more
difficult credit environment (all three rating agencies
now have a negative perspective on the not-forprofit healthcare sector), rising rates for debt, and
a diminished investor appetite for new healthcare
debt issuance. Total healthcare debt issuance in
2022 was $28 billion, down sharply from a trailing
two-year average of $46 billion.
The Investment Function is challenged by volatility and
heightened risk in markets concerned with the Federal
Reserve’s tightening of monetary policy and the
prospect of a recession. The S&P 500—a major stock
index—was down almost 20% in 2022. Investments
had served as a “resiliency anchor” during the first
two years of the pandemic; their ability to continue
to serve that function is now in question.
A significant factor in Operating Function challenges is
labor: both increases in the cost of labor and staffing
shortages that are forcing many organizations to
run at less than full capacity. In Kaufman Hall’s 2022
State of Healthcare Performance Improvement Survey, for
example, 67% of respondents had seen year-over-year
increases of more than 10% for clinical staff wages,
and 66% reported that they had run their facilities at
less-than-full capacity because of staffing shortages.
These are long-term challenges,
dependent in part on
increasing the pipeline of new talent entering healthcare
professions, and they will not be quickly resolved.
Recovery of returns from the Investment Function
is similarly uncertain. Ideally, not-for-profit health
systems can maintain a one-way flow of funds into
the Investment Function, continuing to build the
basis that generates returns. Organizations must now
contemplate flows in the other direction to access
funds needed to cover operating losses, which in
many cases would involve selling invested assets at a
loss in a down market and reducing the basis available
to generate returns when markets recover.
The current situation demonstrates why financial
reserves are so important:
many not-for-profit
hospitals and health systems will have to rely on
them to cover losses until they can reach a point
where operations and markets have stabilized, or
they have been able to adjust their business to a
new, lower margin environment. As noted above,
relief funding and the MAAP program helped bolster
financial reserves after the initial shock of the
pandemic. As the impact of relief funding wanes
and organizations repay remaining balances under
the MAAP program, Days Cash on Hand has begun
to shrink, and the need to cover operating losses is
hastening this decline. From its highest
point in 2021, Days Cash on Hand had decreased, as
of September 2022, by:
29% at the 75th percentile, declining from 302 to 216
DCOH (a drop of 86 days)
28% at the 50th percentile, declining from 202 to 147
DCOH (a drop of 55 days)
49% at the 25th percentile, declining from 67 to 34
DCOH (a drop of 33 days)
Financial reserves are playing the role
for which they were intended; the only
question is whether enough not-for-profit
hospitals and health systems have built
sufficient reserves to carry them through
what is likely to be a protracted period of
recovery from the pandemic.
KEY TAKEAWAYS
All three functions of the not-for-profit healthcare
system’s financial structure—operations, finance,
and investments—suffered significant and
sustained dislocation over the course of 2022.
These headwinds will continue to challenge not-forprofit
hospitals and health systems well into 2023.
Days Cash on Hand is showing a steady decline, as
the impact of relief funding recedes and the need
to cover operating losses persists.
Financial reserves are playing a critical role in
covering operating losses as hospitals and health
systems struggle to stabilize their operational and
financial performance.
Conclusion
Not-for-profit hospitals and health systems serve
many community needs. They provide patients
access to healthcare when and where they need it.
They invest in new technologies and treatments that
offer patients and their families lifesaving advances
in care. They offer career opportunities to a broad
range of highly skilled professionals, supporting the
economic health of the communities they serve.
These services and investments are expensive and
cannot be covered solely by the revenue received
from providing care to patients.
Strong financial reserves are the foundation of good
financial stewardship for not-for-profit hospitals and
health systems.
Financial reserves help fund needed
investments in facilities and technology, improve an
organization’s debt capacity, enable better access to
capital at more affordable interest rates, and provide a
critical resource to meet expenses when organizations
need to bridge periods of operational disruption or
financial distress.
Many hospitals and health systems today are relying
on the strength of their reserves to navigate a difficult
environment; without these reserves, they would
not be able to meet their expenses and would be at
risk of closure.
Financial reserves, in other words,
are serving the very purpose for which they are
intended—ensuring that hospitals and health systems
can continue to serve their communities in the face of
challenging operational and financial headwinds.
When these headwinds have subsided, rebuilding these
reserves should be a top priority to ensure that our
not-for-profit hospitals and health systems can remain
a vital resource for the communities they serve.
HENRY KOTULA 