Category Archives: Health System

Academic Medicine: Where Privilege Compounds Organizational Dysfunction

Posted on by • Posted in Academic Medical Center, Affordability, Competition, Consumerism, Health System, Hospital, Hospital Industry, Medical Education, Quality of Care, Specialty Care, Tax Exempt Status, Value Proposition, Value-Based Healthcare • Leave a comment
Academic Medicine: Where Privilege Compounds Organizational Dysfunction

Academic medicine combines healthcare with higher education, the two sectors of the American economy that have exhibited outsized cost growth during the past 50 years. The result is a stunning disconnection between the business practices of academic medical centers (AMCs) and the supply-demand dynamics reshaping healthcare delivery.

Market, technological and regulatory forces are pushing the healthcare industry to deliver higher-value care that generates better outcomes at lower costs. A parallel movement is shifting resources out of specialty and acute care services into primary, preventive, behavioral health and chronic disease care services. In the process, care delivery is decentralizing and becoming more consumer-centric.

AMCs Double Down

Counter to these trends, academic medicine is doubling down on high-cost, centralized, specialty-focused care delivery. Privilege has its price. Several AMCs — including Mass General Brigham, IU Health, UCSF, Ohio State and UPMC — are undertaking multibillion-dollar expansions of their existing campuses. Collectively, AMCs expect American society to fund their continued growth and profitability irrespective of cost, effectiveness and contribution to health status.

Despite being tax-exempt and having access to a large pool of free labor (residents), AMCs charge the highest treatment prices in most markets. [1] Archaic formulas allocate residency “slots” and lucrative Graduate Medical Education payments (over $20 billion annually) disproportionately into specialty care and more-established AMCs. Given their cushy funding arrangements, it’s no wonder AMCs fight vigorously to maintain an out-of-date status quo.

Legacy practices from the early 1900s still dominate medical education, medical research and clinical care. Like tenured faculty, academic physicians manage their practices with little interference. Clinical deans rule their departments with a free hand. With few exceptions, interdisciplinary coordination is an oxymoron. The result is fragmented care delivery that tolerates duplication, medical error and poor patient service.

Irresistible consumerism confronts immovable institutional inertia. As exhibited by substantial operating losses at many AMCs, their foundations are beginning to crack. [2]

Medicine’s Rise from Poverty to Prosperity 

In his 1984 Pulitzer Prize-winning work, Paul Starr chronicles the social transformation of American medicine during the 19th and 20th centuries. Prior to the 1900s, doctors had low social status. Most care took place in the home. Pay was low. The profession lacked professional standards. There were too many quacks. Most doctors lived hand-to-mouth.

As the century turned, several cultural, economic, scientific and legal developments converged to elevate the profession’s status in American society. Stricter licensing reduced the supply of physicians and closed most existing medical schools. Legislation and legal rulings restricted corporate ownership of medical practices and enshrined physicians’ operating autonomy. Scientific breakthroughs gave medicine more healing power.

Through the decades that followed, the American Medical Association and state medical societies frustrated external attempts to control medical delivery externally and institute national health insurance. They insisted on fee-for-service payment and the absolute right of patients to choose their doctors. These are causal factors underlying healthcare’s skyrocketing cost increases, growing from 5% of the U.S. gross domestic product (GDP) in 1960 to over 18% in 2021.

Academic and community-based physicians have always had a tenuous relationship. Status and prestige accompany academic affiliations. Academic practices require referrals from community physicians but rarely consult with them on treatment protocols. For their part, community physicians marvel at the lack of market awareness exhibited by academic practices. They have tolerated one another to perpetuate collective physician control over healthcare operations.

Incomes and prestige for both community and academic physicians rose as the medical profession limited practitioner supply, established payment guidelines, encouraged specialization, controlled service delivery and socialized capital investment. One hundred years later, the business of healthcare still exhibits these characteristics. Gleaming new medical centers testify to the profession’s success in socializing capital investment and maintaining autonomy over hospital operations.

Entrenched beliefs and behaviors explain why most hospitals, despite their high construction costs, are largely deserted after 4 p.m. and on weekends. They explain the maldistribution of facilities and practitioners. They explain the overdevelopment of specialty care. They explain the underinvestment in preventive care, mental health services and public health.

Value-Focused Backlash Portends Reckoning

These beliefs and behaviors are contributing to AMC’s current economic dislocation. Dependent upon public subsidies and premium treatment payments to maintain financial sustainability, high-cost AMCs are particularly vulnerable to value-based competitors.

The marketplace is attacking inefficient clinical care with tech-savvy, consumer-friendly business models. Care delivery is decentralizing even as many AMCs invest more heavily in campus-based medicine. A market-based reckoning confronts academic medicine.

A visit up north illustrates the general unwillingness of academic physicians to accept market realities and their continued insistence on maintaining full control over the academic medical enterprise. It’s like watching a train wreck occur in slow motion.

Minnesota Madness

After experiencing severe economic distress, the University of Minnesota sold its University of Minnesota Medical Center (UMMC) to Fairview Health in 1997. Fairview currently operates UMMC in partnership with the University of Minnesota Physicians (UMP) under the banner of M Health Fairview.

In September 2022, Sanford Health and Fairview Health signed a letter of intent to merge. The new combined company would bear the Sanford name with its headquarters in Sioux Falls, South Dakota. Despite the opportunity to double its catchment area for specialty referrals, the University and UMP oppose the merger with Sanford. They fear out-of-state ownership could compromise the integrity of UMMC’s operations.

Fairview wants the Sanford merger to help it address massive operating losses resulting, in part, from its contractual arrangements with UMP. Negotiations between the parties have become acrimonious. Amid the turmoil, the University and UMP announced in January 2023 their intention to acquire UMMC from Fairview and build a new state-of-the-art medical center on the University’s Minneapolis campus.

The University has named this proposal “MPact Health Care Innovation.” It calls for the Minnesota state legislature to fund the multibillion-dollar cost of acquiring, building and operating the new medical enterprise. Typical of academic medical practices, UMP expects external sources to pony up the funding to support their high-cost centralized business model while they continue to call the shots.

The arrogance and obliviousness of the University’s proposal is staggering. Minnesota struggles with rising rates of chronic disease and inequitable healthcare access for low-income urban and rural communities. The idea that a massive governmental investment in academic medicine will “bridge the past and future for a healthier Minnesota” as the MPact tagline proclaims is ludicrous.

Out of Touch

Like the rest of the country, Minnesota is experiencing declining life expectancy. Despite spending more than double the average per-capita healthcare cost of other wealthy countries, the United States scores among the worst in health status measures. Spending more on high-end academic medicine won’t change these dismal health outcomes. Spending more on preventive care, health promotion and social determinants of health could.

The real gem in the University of Minnesota’s medical enterprise is its medical school. It has trained 70% of the state’s physicians. It ranks third and fourth nationally in primary care and family medicine. It is advancing a progressive approach to interdisciplinary and multi-professional care.

If the Minnesota state legislature really wants to advance health in Minnesota, it should expand funding for the University’s aligned health schools and community-based programs without funding the acquisition and expansion of the University’s clinical facilities.

No Privilege Without Performance

Our nation must stop enabling academic medicine’s excesses. Funding AMCs’ insatiable appetite for facilities and specialized care delivery is counterproductive. It is time for academic medicine to embrace preventive health, holistic care delivery and affordable care access.

Privilege comes with responsibility. AMCs that resist the pivot to value-based care and healthier communities deserve to lose market relevance.

America has the means to create a healthier society. It requires shifting resources out of healthcare into public health. We must have the will to make community-based health networks a reality. It starts by saying no to needless expansion of acute care facilities.

29 health systems ranked by operating margins

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https://www.beckershospitalreview.com/finance/29-health-systems-ranked-by-operating-margins.html?utm_medium=email&utm_content=newsletter

The median year-to-date operating margin index for hospitals improved slightly in April to 0 percent. While recent reports show signs of improving margins, they remain far below historical norms, and inflation and workforce expenses continue to challenge hospitals’ bottom lines.

“Hospital and health system leaders must figure out how to navigate the new financial reality and begin to take action,” Erik Swanson, senior vice president of data and analytics with Kaufman Hall, said in a May 31 report. “In the face of operating margins that may never fully recover and inflated expenses, developing and executing a strategic path forward to a future that is financially sustainable is crucial.”

Here are 29 health systems ranked by their operating margins in the first quarter: 

1. Tenet Healthcare (Dallas)

Revenue: $5.02 billion
Expenses: $4.48 billion
Operating income/loss: $603 million
Operating margin: 12 percent

2. HCA Healthcare (Nashville, Tenn.)

Revenue: $15.59 billion
Expenses: $13.67 billion
Operating income/loss: $1.54 billion
Operating margin: 9.9 percent

3. Community Health Systems (Franklin, Tenn.)

Revenue: $3.108 billion
Expenses: $3.111 billion
Operating income/loss: $210 million
Operating margin: 6.7 percent

4. BJC HealthCare (St. Louis)

Revenue: $1.72 billion
Expenses: $1.67 billion
Operating income/loss: $59.5 million 
Operating margin: 3.5 percent

5. Banner Health (Phoenix)

Revenue: $3.51 billion
Expenses: $3.38 billion
Operating income/loss: $128 million
Operating margin: 3.6 percent

6. Mayo Clinic (Rochester, Minn.)

Revenue: $4.27 billion
Expenses: $4.12 billion
Operating income/loss: $149 million
Operating margin: 3.5 percent

7. Intermountain Health (Salt Lake City)

Revenue: $3.99 billion
Expenses: $3.70 billion
Operating income/loss: $104 million
Operating margin: 2.6 percent

8. Sutter Health (Sacramento, Calif.)

Revenue: $3.82 billion 
Expenses: $3.74 billion
Operating income/loss: $88 million 
Operating margin: 2.3 percent

9. IU Health (Indianapolis)

Revenue: $2.08 billion
Expenses: $2.04 billion
Operating income/loss: $45.1 million
Operating margin: 2.1 percent

10. Trinity Health (Livona, Mich.) 

*Data is for nine-month period 
Revenue: $15.95 billion
Expenses: $16.21 billion
Operating income/loss: ($283.5 million) 
Operating margin: 1.8 percent

11. Montefiore (New York City) 

Revenue: $1.91 billion
Expenses: $1.88 billion
Operating income/loss: $32 million
Operating margin: 1.7 percent

12. UPMC (Pittsburgh)

Revenue: $6.9 billion
Expenses: $6.8 billion
Operating income/loss: $100.4 million
Operating margin: 1.5 percent

13. ThedaCare (Appleton, Wis.)

Revenue: $306.4 million
Expenses: $302.8 million
Operating income/loss: $3.6 million
Operating margin: 1.2 percent

14. Cleveland Clinic

Revenue: $3.51 billion
Expenses: $3.28 billion
Operating income/loss: $32.3 million
Operating margin: 0.9 percent

15. Kaiser Permanente (Oakland, Calif.)

Revenue: $25.2 billion
Expenses: $25 billion
Operating income/loss: $233 million
Operating margin: 0.9 percent

16. Advocate Health (Charlotte, N.C.)

Revenue: $7.54 billion
Expenses: $7.53 billion
Operating income/loss: $10.4 million
Operating margin: 0.1 percent

17. Universal Health Services (King of Prussia, Pa.)

Revenue: $3.47 billion
Expenses: $3.19 billion
Operating income/loss: $278,700
Operating margin: 0 percent

18. MedStar Health (Columbia, Md.)

Revenue: $1.928 billion
Expenses: $1.927 billion
Operating income/loss: $400,000 
Operating margin: 0 percent

19. Geisinger (Danville, Pa.)

Revenue: $1.84 billion
Expenses: $1.88 billion
Operating income/loss: ($36,068)
Operating margin: 0 percent

20. Mass General Brigham

Revenue: $4.5 billion
Expenses: $4.5 billion
Operating income/loss: ($6 million)
Operating margin: (0.1 percent)

21. Novant Health (Winston-Salem, N.C.) 

Revenue: $1.939 billion
Expenses: $1.954 billion
Operating income/loss: ($15.18 million) 
Operating margin: (0.8 percent)

22. Scripps Health

Revenue: $1.01 billion
Expenses: $1.03 billion
Operating income/loss: ($22.2 million) 
Operating margin: (2.2 percent)

23. UnityPoint Health

Revenue: $1.09 billion
Expenses: $1.12 billion
Operating income/loss: ($29.03 million)
Operating margin: (2.7 percent)

24. SSM Health (St. Louis)

Revenue: $2.46 billion 
Expenses: $2.53 billion
Operating income/loss: ($68.4 million)
Operating margin: (2.8 percent)

25. Marshfield (Wis.) Clinic

Revenue: $779.7 million
Expenses: $812.3 million
Operating income/loss: (32.6 million)
Operating margin: (4.2 percent)

26. Providence (Renton, Wash.) 

Revenue: $6.8 billion
Expenses: $7.145 billion
Operating income/loss: ($345 million)
Operating margin: (5.1 percent)

27. MultiCare (Tacoma, Wash.) 

Revenue: $1.16 billion
Expenses: $1.22 billion
Operating income/loss: ($59.9 million)
Operating margin: (5.2 percent)

28. CommonSpirit (Chicago) 

Revenue: $8.3 billion
Expenses: $8.9 billion
Operating income/loss: ($658 million) 
Operating margin: (8 percent)

29. Ascension (St. Louis)

Revenue: $6.94 billion 
Expenses: $7.62 billion 
Operating income/loss: ($1.36 billion)
Operating margin: (19.6 percent)

Headwinds facing Not for Profit Hospital Systems are Mounting: What’s Next?

Posted on by • Posted in Affordability, Board, Community Benefit, Financial Distress, Financial Performance, Financial Stewardship, Financial Transparency, Financial Viability, Financially Distressed, Health System, Hospital, Hospital Industry, Leadership, Leadership Vision, Market Consolidation, Market Power, Market Trends, Price Transparency, Strategic Change, Tax Exempt Status • Leave a comment
Headwinds facing Not for Profit Hospital Systems are Mounting: What’s Next? (Corrected Edition)

Correction: An earlier version incorrectly referenced a Texas deal between Houston Methodist and Baylor Scott and White.  News about deals is sensitive and unnecessarily disruptive to reputable organizations like these. I sourced this news from a reputable deal advisor: it was inaccurate. My apology!

Congressional Republicans and the White House spared Main Street USA the pain of defaulting on the national debt last week. No surprise.

Also not surprising: another not-for-profit-mega deal was announced:

  • St. Louis, MO-based BJC HealthCare and Kansas City, MO-based Saint Luke’s Health System announced their plan to form a $9.5B revenue, 28-hospital system with facilities in Missouri, Kansas, and Illinois.

This follows recent announcements by four other NFP systems seeking the benefits of larger scale:

  • Gundersen Health System & Bellin Health (Nov 2022): 11 hospitals, combined ’22 revenue of $2.425B
  • Froedtert Health & ThedaCare (Apr 2023 LOI): 18 hospitals, combined ’22 revenues of $4.6B

And all these moves are happening in an increasingly dicey environment for large, not-for-profit hospital system operators:

  • Increased negative media attention to not-for-profit business practices that, to critics, appear inconsistent with a “NFP” organization’s mission and an inadequate trade for tax exemptions each receives.
  • Decreased demand for inpatient services—the core business for most NFP hospital operations. Though respected sources (Strata, Kaufman Hall, Deloitte, IBIS et al) disagree somewhat on the magnitude and pace of the decline, all forecast decreased demand for traditional hospital inpatient services even after accounting for an increasingly aging population, a declining birthrate, higher acuity in certain inpatient populations (i.e. behavioral health, ortho-neuro et al) and hospital-at-home services.
  • Increased hostility between national insurers and hospitals over price transparency and operating costs.
  • Increased employer, regulator and consumer concern about the inadequacy of hospital responsiveness to affordability in healthcare.
  • And heightened antitrust scrutiny by the FTC which has targeted hospital consolidation as a root cause of higher health costs and fewer choices for consumers. This view is shared by the majorities of both parties in the House of Representatives.

In response, Boards and management in these organizations assert…

  • Health Insurers—especially investor-owned national plans—enjoy unfettered access to capital to fund opportunistic encroachment into the delivery of care vis a vis employment of physicians, expansion of outpatient services and more.
  • Private equity funds enjoy unfettered opportunities to invest for short-term profits for their limited partners while planning exits from local communities in 6 years or less.
  • The payment system for hospitals is fundamentally flawed: it allows for underpayments by Medicaid and Medicare to be offset by secret deals between health insurers and hospitals. It perpetuates firewalls between social services and care delivery systems, physical and behavioral health and others despite evidence of value otherwise. It requires hospitals to be the social safety net in every community regardless of local, state or federal funding to offset these costs.

These reactions are understandable. But self-reflection is also necessary. To those outside the hospital world, lack of hospital price transparency is an excuse. Every hospital bill is a surprise medical bill. Supporting the community safety net is an insignificant but manageable obligation for those with tax exemption status.  Advocacy efforts to protect against 340B cuts and site-neutral payment policies are about grabbing/keeping extra revenue for the hospital. What is means to be a “not-for-profit” anything in healthcare is misleading since moneyball is what all seem to play. And short of government-run hospitals, many think price controls might be the answer.

My take:

The headwinds facing large not-for-profit hospitals systems are strong. They cannot be countered by contrarian messaging alone.

What’s next for most is a new wave of operating cost reductions even as pre-pandemic volumes are restored because the future is not a repeat of the past. Being bigger without operating smarter and differently is a recipe for failure.

What’s necessary is a reset for the entire US health system in which not-for-profit systems play a vital role. That discussion should be led by leaders of the largest NFP systems with the full endorsements of their boards and support of large employers, physicians and public health leaders in their communities.

Everything must be on the table: funding, community benefits, tax exemption, executive compensation, governance, administrative costs, affordability, social services, coverage et al. And mechanisms for inaction and delays disallowed.

It’s a unique opportunity for not-for-profit hospitals. It can’t wait.

UPMC adds regional option to in-house travel program

Posted on by • Posted in Health System, Hospital, Hospital Industry, Labor Shortages, Labor Spend Management, Nurse Agency Staffing, Nurse Retention, Nurse Staffing, Nurse Travelers, Nurses Compensation, Nurses Shortage, Retention, Talent Management • Leave a comment
https://www.beckershospitalreview.com/workforce/upmc-adds-regional-option-to-in-house-travel-program.html?origin=BHRE&utm_source=BHRE&utm_medium=email&utm_content=newsletter&oly_enc_id=2893H2397267F7G

More than a year after launching an in-house travel staffing agency, UPMC is adding a new regional approach to the effort.

Maribeth McLaughlin, MPM, BSN, RN, chief nursing executive for the Pittsburgh-based health system, told Becker’s the approach provides a new option for nurses and surgical technologists who desire to travel. 

“Our overall travel program, when you travel for us, you travel across our hospitals in New York, Maryland and Pennsylvania,” she said. “And now we are launching a regional travel strategy where some staff can choose to travel only within certain regions.”

UPMC initially announced in December 2021 that it had created UPMC Travel Staffing, a new in-house travel staffing agency to address a nursing shortage and to attract and retain workers. 

Through the agency, nurses and surgical technologists earn $85 an hour and $63 an hour, respectively, in addition to a $2,880 stipend at the beginning of each six-week assignment.

Ms. McLaughlin said the rate is lower — about $60 an hour — for those who opt for the regional approach.

As of June 1, UPMC has hired more than 700 staff into the in-house travel staffing agency, with 60 percent of those workers being external hires, according to Ms. McLaughlin. And there have been fewer workers leaving UPMC to go to other travel agencies. 

“One of my goals since I’ve taken this role is to really look at building in as many flexible programs as I could for staff,” said Ms. McLaughlin, who has served in her current role since August 2022. “I think as we came out of the pandemic, it’s clear to me that work-life harmony means something different to staff today than it maybe meant when I was a young staff nurse years ago, and that we need to have as much flexibility and as many different programs as we can.”

She said UPMC Travel Staffing has delivered this flexibility and allowed the health system to cancel about 90 contracts with external travel agencies. Additionally, some external travelers have now moved into UPMC’s in-house agency. Ms. McLaughlin expects more to join the in-house agency now that UPMC has launched the regional approach. 

“We’re launching a win-back program where we’re going out and trying to see some of the people who we know we lost and see if they’re interested in coming back closer to home and traveling closer to home,” she explained.

Still, she acknowledged some of the challenges along the way.

“Our IT department built us an app to be able to manage all of this because, as you can imagine, we have external travel, internal travelers, core staff and at times it could get a little confusing,” said Ms. McLaughlin. “So we’ve been able to build that to be able to figure out the best ways to assign the staff where the greatest needs are.”

Another challenge she noted is that shifts for workers from external travel agencies are often 12 weeks, while shifts with UPMC Travel Staffing are six weeks. She said this is a purposeful move because those in UPMC Travel Staffing receive benefits and are considered UPMC employees, rather than receiving an hourly rate.

“Overall, it’s been a really successful program for us because it’s allowed us to look at things in a different way,” said Ms. McLaughlin. “It’s a central function. It’s not something we did and farmed out to every hospital to administer themselves. We did it as a system and as a core, which I also think is important.”

Now, she said she’s excited about the new regional approach and the opportunities it presents for recruiting and retention. 

“We’re growing our own students, we’re bringing in all these students, and we’re not saying, ‘You have to just work here.’ We’re saying, ‘You can work for us at UPMC, and here are all the options. You can even be a traveler with us,'” she said.

49 hospitals, health systems partnering with CVS

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https://www.beckershospitalreview.com/innovation/49-hospitals-health-systems-partnering-with-cvs.html?origin=BHRE&utm_source=BHRE&utm_medium=email&utm_content=newsletter&oly_enc_id=2893H2397267F7G

As the nation’s leading provider of retail healthcare, CVS Health partners with hospitals and health systems in many local markets.

The health systems assist providers at CVS MinuteClinic locations and accept referrals from patients needing a higher level of care. Here are CVS’ clinical affiliates, according to its website:

Arizona

Dignity Health (San Francisco)

Northwest Healthcare (Tucson)

Tucson Medical Center

California

John Muir Health (Walnut Creek)

Sharp HealthCare (San Diego)

Sutter Health (Sacramento)

UCLA Health (Los Angeles)

Connecticut

Hartford HealthCare

District of Columbia

MedStar Health (Columbia, Md.)

Florida

Baptist Health Care (Pensacola)

Cleveland Clinic Florida (Weston)

Florida Hospital Medical Group (Orlando)

Millennium Physician Group (Fort Myers)

St. Vincent’s HealthCare (Jacksonville)

Georgia

Emory Healthcare (Atlanta)

Memorial Health (Savannah)

Illinois

Franciscan Health (Mishawaka, Ind.)

Rush University Medical Center (Chicago)

Indiana

Franciscan Health (Mishawaka)

Kansas

Lawrence Memorial Hospital

Shawnee Mission Health (Merriam)

Louisiana

The Baton Rouge Clinic

LSU Healthcare Network (New Orleans)

Maryland

MedStar Health (Columbia)

University of Maryland Medical System (Baltimore)

Massachusetts

Baystate Health (Springfield)

Lahey Health (Burlington)

UMass Memorial Health (Worcester)

Michigan

Franciscan Health (Mishawaka, Ind.)

Henry Ford Health (Detroit)

Minnesota

Allina Health (Minneapolis)

Nevada

Dignity Health-St. Rose Dominican (Henderson)

New Hampshire

Dartmouth Health (Lebanon)

New York

CareMount Medical (Mount Kisco)

Mount Sinai Health System (New York City)

Northwell Health (New Hyde Park)

New Jersey

RWJBarnabas Health (West Orange)

Virtua Health (Marlton)

Ohio

Cleveland Clinic

Premier Health (Dayton)

TriHealth (Cincinnati)

Oklahoma

OU Physicians (Tulsa)

Pennsylvania

Lehigh Valley Health Network (Allentown)

St. Luke’s University Health Network (Bethlehem)

Rhode Island

Lifespan (Providence)

South Carolina

Prisma Health (Greenville)

Tennessee

Parkridge Health System (Chattanooga)

TriStar Health (Brentwood)

Texas

Texas Health Resources (Arlington)

University of Texas Medical Branch (Galveston)

UT Health Physicians (San Antonio)

Virginia

Inova Health System (Falls Church)

Assessing Progress on the Hospital Price Transparency Rule

Posted on by • Posted in Center for Medicare and Medicaid Services (CMS), Health Policy, Health System, Hospital, Hospital Industry, Price Transparency • Leave a comment

https://revcycleintelligence.com/features/assessing-progress-on-the-hospital-price-transparency-rule

More than a year after the regulation went into effect, compliance with the hospital price transparency rule remains low, as hospitals are hesitant to invest in necessary software and resources.

The Centers for Medicare and Medicaid Services (CMS) established the hospital price transparency rule to help individuals know the cost of a hospital item or service before receiving it.

CMS proposed the price transparency rule in the 2020 Medicare Outpatient Prospective Payment System (OPPS) and Ambulatory Surgical Center (ASC) Payment System Proposed Rule. The rule came in response to rising healthcare costs. Policymakers implemented regulations that give consumers more control over what they pay for healthcare services.

The rule went into effect on January 1, 2021, but hospitals have been slow to comply with the regulation. Without consistent compliance from hospitals and health systems, the rule does little to protect consumers from high healthcare prices.

WHAT IS THE PRICE TRANSPARENCY RULE?

The price transparency rule requires hospitals to publish the costs of their items and services on a publicly available website in two ways.

First, hospitals must have a single machine-readable digital file with standard charges for all their items and services. Standard charges include gross charges, discounted cash prices, payer-specific negotiated chargers, and de-identified minimum and maximum negotiated charges.

Hospitals must also display standard charges of at least 300 shoppable services that consumers can schedule in advance. That information must be displayed in a consumer-friendly format that includes plain language descriptions. Hospitals should also group the services with related ancillary services.

Hospitals may offer an online price estimator tool instead of publishing standard charges for the most common shoppable services. According to CMS, the price estimator tool must provide estimates for as many of the 70 CMS-specified shoppable services that the hospital offers and any additional shoppable services to reach a total of 300 services.

In addition, the tool must allow consumers to receive an estimate of the amount they will have to pay for a given service. Hospitals must display the price estimator tool on their websites and make it accessible to the public for free. Consumers also need to be able to access the tool without creating a user account.

CMS established an enforcement plan to ensure hospitals comply with the price transparency rule. The agency planned to evaluate complaints made by individuals or entities, review analyses of noncompliance, and audit hospital websites. However, more than one year after the regulation went into effect, hospitals are still not complying with the price transparency rule.

PRICE TRANSPARENCY RULE COMPLIANCE

The price transparency regulation received immediate pushback from hospital and provider groups. Before the policy went into effect, the American Hospital Association (AHA) sued HHS over the rule, stating that it would confuse consumers and increase prices.

In addition, AHA and fellow hospital and provider groups submitted an emergency stay of enforcement motion in December 2020 to pause the audits and fines that would result from noncompliance. The groups said the CMS enforcement actions would force hospitals to divert resources that hospitals needed to respond to COVID-19.

Since the rule was implemented, these concerns have perhaps been reflected in the high rates of noncompliance among hospitals.

Data from as early as January 2021 revealed that pricing information was inconsistent and incomplete among the top 20 largest hospitals in the country. The hospitals published some form of pricing information but not all complied with the price transparency requirements, including posting prices for 300 shoppable services.

The Kaiser Family Foundation (KFF) analyzed data from the two largest hospitals in each state and the District of Columbia and found similar trends. For example, 80 percent of the hospitals provided gross charge information on a price estimator tool and a machine-readable file, but only 35 of the 102 hospitals displayed payer-specific negotiated rates.

Moreover, research from Manatt Health found hospitals were more likely to comply with the shoppable services requirement than the machine-readable file requirement.

According to an Insights analysis from Xtelligent Healthcare Media, hospital networks frequently had inaccessible machine-readable files and shoppable services. In addition, many hospitals required patients to provide personally identifiable information in exchange for pricing data and had machine-readable files that lacked the required charges.

PatientRightsAdvocate.org has been tracking hospital compliance with the price transparency rule since May 2021. Between May and July, the organization found that out of 500 randomly selected US hospitals, only 5.6 percent were compliant with the rule.

Between December 2021 and January 2022, the organization reviewed 1,000 more hospitals and found that only 143 complied with all aspects of the price transparency rule.

WHY ARE HOSPITALS NOT COMPLYING?

Under the 2022 Medicare OPPS rule, CMS shared the penalties for not complying with the price transparency rule. Hospitals with less than 30 beds would receive penalties of $300 per day, while hospitals with 31 or more beds would receive a $10 per bed per day penalty, with a maximum daily fine of $5,500.

However, hospitals have not received any penalties for noncompliance as of February 2022. CMS has sent around 345 warning notices to noncompliant hospitals since the rule went into effect, the agency told Becker’s Hospital Review.

The threat of financial penalties does not seem to be enough to ensure compliance, though.

Shortly after the rule took effect, noncompliant hospitals said they were not fully complying due to resource constraints and a limited understanding of the rule. Some hospitals also mentioned that they were waiting to see how their competitors responded to the rule before achieving compliance.

More than one year later, in April 2022, financial leaders expressed similar concerns regarding compliance. Revenue cycle leaders told KLAS that a top barrier to achieving compliance was the confusing and complex regulations included in the rule.

Price transparency compliance also requires significant investment in software and outside resources, the KLAS report noted. As hospitals and health systems struggle financially due to the COVID-19 pandemic, investing in price transparency software may not be a top priority.

In addition, revenue cycle leaders reported experiencing difficulties with the software used to publish machine-readable files and a master list of prices online.

Until CMS starts delivering monetary penalties for noncompliance or adjusts the regulation to reduce the financial burden for health systems, hospital compliance with the price transparency rule will likely remain slim.

Unlocking Value in Non-Core Healthcare Assets

Posted on by • Posted in Capital Formation, Capital Structure, Cash, Cash Reserves, Days Cash on Hand, Debt Capacity, Debt Service Covenants, Debt Service Coverage Ratio, Health System, Hospital, Hospital Industry, Liquidity, Non-Core Assets, Non-Core Services • Leave a comment

Click to access Industry_Insights_6.1.23.pdf

Inflation, labor pressures, and general economic uncertainty have created
significant financial strain for hospitals in the wake of the COVID pandemic.
Compressed operating margins and weakened liquidity have left many
hospitals in a precarious economic situation, with some entities deciding to delay or even cancel planned capital expenditures or capital raising. Given these tumultuous times, hospital entities could look to the realm of the higher education sector for a playbook on how to leverage non-core assets to unlock significant unrealized value and strengthen financial positions, in the form of public-private partnerships.


These structures, also known as P3s, involve collaborative agreements between public entities, like hospitals, and private sector partners who possess the expertise to unlock the value of non-core assets. A special purpose vehicle (SPV) is created, with the sole purpose of delivering the responsibilities outlined under the project agreement. The SPV is typically owned by equity members. The private sector would be responsible for raising debt to finance the project, which is secured by the obligations of the project agreement (and would be non-recourse to the hospital). Of note, the SPV undergoes the rating process, not the hospital entity. Even more importantly, the hospital retains ownership of the asset while benefiting from the expertise and resources of the private sector.


Hospitals can utilize P3s to capitalize on already-built assets, in what is known as a “brownfield” structure. A brownfield structure would typically result in an upfront payment to the hospital in exchange for the right of a private entity to operate the asset for an agreed-upon term. These upfront payments can range from tens of millions to hundreds of millions of dollars.


Alternatively, hospitals can engage in “greenfield” structures where the underlying asset is either not yet built or needs significant capital investment. Greenfield structures typically do not result in an upfront payment to the hospital entity. Instead, (in the example of a new build) private partners would typically design, build, finance, operate and maintain the asset. The hospital still retains ownership of the underlying asset at the completion of the agreed upon term.


P3 structures can be individually tailored to suit the unique needs of the hospital entity, and the resulting benefits are multifaceted. Financially, hospitals can increase liquidity, lower operating expenses, increase debt capacity, and create headroom for financial covenants. These partnerships provide a means to raise funds without directly accessing the capital markets or undergoing the rating process. Upfront payments represent unrestricted funds and can be used as the hospital entity sees fit to further its core mission. Operationally, infrastructure P3s offer hospitals the opportunity to address deferred maintenance needs, which may have accumulated over time. Immediate capital expenditure on infrastructure facilities can enhance reliability and efficiency and contribute to meeting carbon reduction or sustainability goals. Furthermore, these structures provide a means for the hospital to transfer a meaningful amount of risk to private partners via operation and maintenance agreements.


For years, various colleges and universities have adopted the P3 model, which is emerging as a viable solution for hospitals as well.
Examples of recent structures in the higher education sector include:

  • Fresno State University, which partnered with Meridiam (an infrastructure private equity fund) and Noresco (a design builder) to
    deliver a new central utility plant. The 30-year agreement involved long-term routine and major maintenance obligations from
    the operator, with provisions for key performance indicators and performance deductions inserted to protect the university.
    Fresno State is not required to begin making availability payments until construction is completed.
  • The Ohio State University, which secured a $483 million upfront payment in exchange for the right of a private party to operate
    and maintain its parking infrastructure. The university used the influx of capital to hire key faculty members and to invest in their
    endowment.
  • The University of Toledo, which received an approximately $60 million upfront payment in exchange for a 35-year lease and
    concession agreement to a private operator. The private team will be responsible for operating and maintaining the university’s
    parking facilities throughout the term of the agreement.

  • Ultimately, healthcare entities can learn from the successful implementation of infrastructure P3 structures in the higher education sector. The experiences of Fresno State, The Ohio State University, and the University of Toledo (among others) serve as compelling examples of the transformative potential of P3s in the healthcare sector. By unlocking the true value of non-core assets through partnerships with the private sector, hospitals can reinforce their financial stability, meet sustainability goals, reduce risk, and shift valuable focus back to the core mission of providing high-quality healthcare services.

  • Author’s note: Implementing P3 structures requires careful consideration and expert guidance. Given the complex nature of these partnerships, hospitals can greatly benefit from the support of experienced advisors to navigate the intricacies of the process. KeyBank and Cain Brothers specialize in guiding entities through P3 initiatives, providing valuable expertise and insight. For additional information, please refer to a recording of our recent webinar and associated summary, which can be accessed here:
    https://www.key.com/businesses-institutions/business-expertise/articles/public-private-partnerships-can-unlock-hospitals-hiddenvalue.html

Trinity Health sees improving margins but still operating at a loss despite gains in Q3

Posted on by • Posted in Financial Performance, Financial Reserves, Financial Stewardship, Financial Strength, Financial Viability, Health System, Hospital, Hospital Industry, Net Income, Nonoperating Income, Operating Expense Reduction, Operating Expenses, Operating Income, Operating Margin, Operating Metrics, Operating Performance, Operating Revenue • Leave a comment

https://www.fiercehealthcare.com/providers/trinity-health-still-operating-loss-despite-gains-q3-improving-margins

Despite a reasonably solid third quarter, Trinity Health is still operating at a loss in its 2023 fiscal year, according to a new filing.

The health system’s fiscal year began July 1, 2022, with the latest figures covering the first nine months. Its latest operating loss shrank to $263.1 million from the prior six months’ $298 million loss. Fiscal year 2023 operating revenue currently stands at $15.9 billion, up from the same period last year.

The nonprofit health system attributed its operating revenue growth to several acquisitions (MercyOne, North Ottawa Community Health System, Genesis Health System), which collectively added $1 billion of operating revenue. Net income for the last nine months was $856.3 million, compared to $43 million in the same period the prior year.

Though inpatient volumes are stabilizing to “a new normal,” management wrote in the latest filing, most of Trinity’s revenue comes from outpatient and other non-patient revenue. Operating expenses rose $1.1 billion compared to the same period in fiscal year 2022, mostly driven by the acquisitions. 

Nonoperating income was $1.2 billion during the first nine months of fiscal year 2023, up from $264.6 million in the first six months. This hike was driven partly by a $629.3 million increase in investment returns.

The health system’s operating margin was 1.6%, per the latest filing, compared to 0.1% during the same period a year ago. Margins were affected by expenses outpacing revenue, primarily driven by premium labor rates and inflation impacting supplies as well as a $137 million reduction in CARES Act grant funding. 

Trinity reports $10.2 billion in unrestricted cash and investments, including 180 days cash on hand compared to 211 days in fiscal year 2022, in its latest filing.

Trinity is focused on diversifying its business by shifting to ambulatory, home health, PACE, urgent care, specialty pharmacy and telehealth. The filing also noted the recent launch of a new care delivery model dubbed TogetherTeam, involving on-site and virtual nurses, that is expected to be implemented systemwide by the end of its 2024 fiscal year.

Salaries, wages and employee benefit costs rose 2.2%, offset by a reduction of $54.6 million in executive compensation and $39.7 million more pharmacy rebates than in the same period in fiscal year 2022. Same-facility contract labor costs decreased more than 40% to $193.9 million, reflecting “unprecedented” pandemic-related costs during the third quarter in 2022. 

Trinity “continues to use strong cost controls over contract labor and other operational spending as colleague investment and utilization of its FirstChoice internal staffing agency promotes labor stabilization,” management wrote.

Trinity Health spans 88 acute care hospitals and hundreds of other care locations in 26 states and purports to have the second-largest Medicare PACE (Program of All-inclusive Care for the Elderly) program in the country. It provided services to 1.3 million people and reported a community benefit and charity of $1.4 billion in fiscal year 2022. 

Missouri nonprofit health systems BJC HealthCare, Saint Luke’s targeting $10B merger

Posted on by • Posted in Antitrust, Health System, Hospital, Hospital Industry, Market Consolidation, Market Power, Market Trends, Mergers & Acquisitions • Leave a comment

https://www.fiercehealthcare.com/providers/missouri-nonprofit-health-systems-bjc-healthcare-saint-lukes-targeting-10b-merger

BJC HealthCare of St. Louis and Saint Luke’s Health System of Kansas City are exploring a merger that would yield a 28-hospital, $10 billion, integrated, academic health system, the nonprofits announced Wednesday.

The two have signed a nonbinding letter of intent and “are working toward reaching a definitive agreement in the coming months” with a targeted close before the end of the year, they said. The cross-market deal would be subject to regulatory review and other customary closing conditions.

“Together with Saint Luke’s, we have an exciting opportunity to reinforce our commitment to providing extraordinary care to Missourians and our neighboring communities,” BJC HealthCare President and CEO Richard Liekweg said in the announcement. “Amid the rapidly changing health care landscape, this is the right time to build on our established relationship with Saint Luke’s. With an even stronger financial foundation, we will further invest in our teams, advance the use of technologies and data to support our providers and caregivers and improve the health of our communities.”

Both systems are based in Missouri but “serve distinct geographic markets,” they said.

St. Louis-based BJC Healthcare’s footprint is spread across the greater St. Louis, southern Illinois and southeast Missouri regions. It comprises 14 hospitals including two (Barnes-Jewish and St. Louis Children’s) affiliated with Washington University School of Medicine. It also operates multiple health service organizations providing home health, long-term care, workplace health and other offerings.

Kansas City, Missouri-based Saint Luke’s is a faith-based system with 14 hospitals and more than 100 offices throughout western Missouri and parts of Kansas. It also provides home care and hospice, adult and children’s behavioral care and a senior living community.

Should the deal close, both systems would continue to serve their existing markets and maintain their branding. The joined organization would be run from dual headquarters with BJC’s Liekweg as CEO but an initial board chair hailing from Saint Luke’s.

The organizations said their combination will expand the services available to patients and provide an estimated $1 billion in annual community benefits. The arrangement would also fuel clinical and academic research while supporting greater workforce investment.

“Our integrated health system, with complementary expertise and team of world-class physicians and caregivers, will set a new national standard for medical education and research,” Saint Luke’s President and CEO Melinda Estes, M.D., said in the announcement. “Through our decade-long relationship as a member of the BJC Collaborative, we’ve established mutual trust and respect, so the opportunity to come together as a single integrated system that can accelerate innovation to better serve patients is a logical next step.”

Years of health system consolidation have led to increased scrutiny from regulators and lawmakers, who have worried that mergers can harm competition. To date, however, efforts to block announced deals have been limited to situations where the parties are operating in the same geographic markets.

Larger, cross-market deals like BJC and Saint Luke’s have become more common in the past year, potentially due to the opportunity to distribute operational risks with limited regulatory scrutiny, analysts have noted.

Multiple health policy researchers have warned that these deals are relatively understudied and, according to some prior analyses, very rarely translate to the quality and consumer cost savings often touted by health systems.

Pennsylvania unions file antitrust complaint against UPMC

Posted on by • Posted in Antitrust, Dept of Justice (DOJ), Federal Trade Commission (FTC), Health System, Hospital, Hospital Industry, Labor Spend Management, Labor Union, Labor Union Grievance, Market Consolidation, Market Power, Monopoly, Monopoly Behavior, Retention, Staffing Ratios, Staffing Shortages, Talent Management • Leave a comment

https://www.healthcaredive.com/news/upmc-unions-antitrust-complaint-doj-workers/650739/

Dive Brief:

  • Pennsylvania unions have filed a complaint with the Department of Justice alleging integrated hospital giant UPMC is abusing its dominant market position to suppress wages and retain workers.
  • On Thursday, SEIU Healthcare Pennsylvania and a coalition of labor unions filed a 55-page complaint against UPMC, the largest private employer in the state, saying the hospital system’s size has allowed it to stamp out wage growth, “drastically increase” workload and keep workers from departing to other jobs.
  • The unions are asking federal regulators to investigate UPMC for antitrust violations, citing its dominance of the healthcare market in select regions of Pennsylvania. UPMC denied allegations of wage suppression.

Dive Insight:

The Pittsburgh-based system has seen a rise in labor complaints, according to the unions, as the system has grown into its 41-hospital footprint through a series of mergers and acquisitions. UPMC, which also operates 800 doctors offices and clinics and a handful of health insurance offerings, reported $26 billion in operating revenue last year.

Attempts in the last decade to organize UPMC’s hourly workers have been unsuccessful, according to SEIU.

Matt Yarnell, president of SEIU Healthcare Pennsylvania, called the complaints groundbreaking on a Thursday call with reporters, saying that no entity has ever filed a complaint arguing that mobility restrictions and labor violations are anticompetitive, and in violation of antitrust law.

The complaint alleges that, for every 10% increase in market share, the wages of UPMC workers falls 30 to 57 cents an hour on average. UPMC hospital workers face an average 2% wage gap compared to non-UPMC facilities, according to a study cited in the complaint.

In addition, the labor groups allege that UPMC’s staffing ratios have fallen over the past decade, resulting in its staffing ratios being 19% lower on average compared with non-UPMC care sites as of 2020.

The unions are going after UPMC for being a “monopsony,” or a company that controls buying in a given marketplace, including controlling a large number of jobs. UPMC has some 92,000 workers, according to the complaint, and has cut off avenues of competition through non-compete agreements, in addition to preventing employees from unionizing.

“If, as we believe, UPMC is insulated from competitive market pressures, it will be able to keep workers’ wages and benefits — and patient quality — below competitive levels, while at the same time continually imposing further restraints and abuses on workers to maintain its market dominance,” the complaint states. “Because we believe this conduct is contrary to Section 2 of the Sherman Act, we respectfully urge the Department of Justice to investigate UPMC and take action to halt this conduct.”

In response to the allegations, UPMC said it has the highest entry-level pay of any provider in the state, and offers “above-industry” employee benefits. UPMC’s average wage is more than $78,000, Paul Wood, UPMC’s chief communications officer, told Healthcare Dive in a statement.

“There are no other employers of size and scope in the regions UPMC serves that provide good paying jobs at every level and an average wage of this magnitude,” Wood said.

Healthcare workers are increasingly pushing for better working conditions and pay amid the COVID-19 pandemic, as hospitals grapple with recruitment and retention issues driven by burnout and heightened labor costs.