As we shared recently, post-pandemic healthcare volume is not returning evenly. While outpatient volume is rebounding quickly, other settings remain sluggish, especially the emergency department. We partnered with healthcare data analytics company Stratasan to take a closer look at ED volume decline. As shown in the graphic above, nationally, ED visits were down 27 percent in 2020, compared to 2019. ED-only volume (cases that started and ended in the ED) took a large hit across last year, down nearly a third from 2019. We expect that a portion of this ED-only volume will never fully recover to pre-COVID levels, with patient demand permanently shifting to lower-acuity care settings, including virtual, and some patients avoiding care altogether for minor ailments as they learn to “live with” problems like back pain.
ED-to-observation volume saw the greatest decline in 2020, likely as a result both of patients avoiding the ED, and presenting in the ED sicker, meeting the criteria for inpatient admission. However,ED-to-inpatient volume, which fell only seven percent in 2020, has been returning. In the second half of 2020, the ED-to-inpatient admission rate was 20 to 30 percent higher than the pre-COVID baseline. Across all three categories of ED volume, pediatrics saw steeper declines compared to adult cases. While some further ED volume rebound is anticipated, health systems should expect that fewer, but sicker, patients will be the new normal for hospital emergency departments.
Fewer low-acuity patients utilizing high-cost emergency care is good news from a public health perspective, but health systems must bolster other access channels like urgent care and telemedicine to ensure patients have convenient access for emergent care needs.
HCA Healthcare, the nation’s largest for-profit hospital chain, which operates 185 hospitals and more than 2,000 care sites across 20 states, announced a landmark deal with search giant Google this week, aimed at extracting and analyzing data from more than 32M annual patient encounters.
The multiyear partnership will involve data scientists from both companies working together to develop care algorithms and clinical alerts to improve outcomes and efficiency. Data from HCA’s electronic health records will be integrated with Google’s cloud computing service, and the companies have pledged to adhere to strict limitations to protect individual patient privacy—a key concern raised by regulators after Google announced a similar partnership with another national health system, Ascension, at the end of 2019.
Despite those assurances, some experts pointed to this week’s announcement as further evidence that existing privacy protections are insufficient in the face of the deepening relationships between tech companies, like Google and Microsoft, and healthcare providers, who manage the sensitive health information of millions of patients.
We’d agree—we’re overdue for a major rethink of how patient privacy is handled. The healthcare industry spent much of the last decade “wiring” the health system, converting from paper records to electronic ones, and building vast storehouses of clinical data along the way. We’ve now reached a new phase, and the primary task ahead is to harness all of that data to actually improve care. That will require extensive data sharing, such as a recently announced initiative among several major health systems, and will also entail tapping the expertise of “big data” companies from beyond healthcare—the very same companies whose business practices have sometimes raised privacy concerns in the broader social context. But health information is different—more personal and more sensitive—than data about shopping preferences and viewing habits, requiring more rigorous regulation.
As more big data deals are inked in healthcare, the question of patient privacy will become increasingly pressing.
Average benchmark premiums for plans on the Affordable Care Act’s exchanges have fallen for the third straight year, according to a new analysis.
Researchers at the Urban Institute, a left-leaning think tank, found that the average benchmark premium on the exchanges fell by 1.7% for 2021. That follows decreases of 1.2% in 2019 and 3.2% in 2020.
By contrast, premiums for employer-sponsored plans increased by 4% in both 2019 and 2020, according to the report. Data for 2021 on the employer market are not yet available, the researchers said.
The national average benchmark premium was $443 per month for a 40-year-old nonsmoker, according to the report, before accounting for any tax credits.
The researchers found much significant variation in premium levels between states, though the difference in growth rates was smaller. Minnesota reported the lowest average benchmark premium at $292 per month, and the highest was in Wisconsin at $782 per month.
Average benchmark premiums topped $500 in 10 states, according to the report.
One of the key trends that’s slowing premium growth is increasing competition in the exchanges, as many insurers are expanding their offerings or returning to the marketplaces to offer plans, according to the report.
“New entrants included national and regional insurers, Medicaid insurers, and small start-up insurers,” the researchers wrote.
“Medicaid insurers are those who operated exclusively in the Medicaid managed-care market before 2014; they have increased their participation in the Marketplaces over time. Medicaid insurers are experienced in establishing narrow, low-cost provider networks that allow them to offer lower premiums than other insurers.”
UnitedHealthcare, for example, participated in just four regions included in the study in 2017, but had upped its participation to 11 for 2021. Aetna participated in three regions included in the study in 2017 before fully exiting the exchanges; CVS Health CEO Karen Lynch told investors earlier this year that the insurer plans to return to the marketplaces in 2022.
Several states have also launched programs that aim to lower premiums, according to the report. These include reinsurance programs, which have been rolled out in 12 states as of this year. Some states have also expanded Medicaid in recent years, which leads to some low-income people with costly health needs switching to that program, the researchers said.
The signs of progress are encouraging, but the metrics are still down slightly when compared to last month.
Slowly, the financial health of the nation’s healthcare institutions are improving. Hospitals and health systems continued to see performance improvements in April compared to the devastating losses experienced in the early months of the COVID-19 pandemic.
Hospital margins, volumes, and revenues were up across most performance metrics, both year-to-date and year-over-year, but were down compared to March, according to the latest issue of Kaufman Hall’s National Hospital Flash Report. There was no explicit reason given for the dip, but any number of factors small and large could play into the results. It’s possible that clearer trend lines will develop over time.
WHAT’S THE IMPACT?
While any signs of progress are encouraging, the April results draw a clear contrast to the severity of record-low performance seen during the first two months of the pandemic in 2020, rather than strong overall performance so far this year.
Operating margin, for example, rose 101.9% (or 8.6 percentage points) compared to January-April 2020, not including federal Coronavirus Aid, Relief, and Economic Security Act funding. With the funding, operating margin was up 90.6% year-to-date, or 6.9 percentage points.
Operating margin was up 113.1% (39.3%) without CARES and 109.5% (21.4%) with CARES, compared to the first full month of the pandemic in April 2020, when nationwide shutdowns and broad restrictions on outpatient procedures caused operating margins to plummet 282% year-over-year.
April 2021 hospital margins, however, remained relatively thin. The median Kaufman Hall hospital operating margin index was 2.4% for the month, not including CARES. Even with the funding, it was 3.3%.
When it came to volumes, hospitals saw them increase across most metrics compared to 2020 levels, but decrease slightly compared to March. Adjusted discharges were up 5.9% year-to-date and jumped 66.4% year-over-year, while adjusted patient days rose 10% year-to-date and 64.8% year-over-year. Both metrics fell 1% month-over-month.
Emergency department visits were mixed, falling 7% compared to the first four months of 2020, but rising 57.2% year-over-year and 5.3% month-over-month. Operating room minutes were down 3.6% from March, but increased 26.1% year-to-date, and shot up 189.2% compared to April 2020, when COVID-19 abruptly halted most outpatient procedures.
Revenues followed a similar pattern, with gross operating revenue (not including CARES) up 16.7% year-to-date and 71.8% year-over-year, but down 2.5% compared to the prior month. Inpatient revenue rose 10.6% year-to-date and 37.1% year-over-year, but was down 1.9% month-over-month. Outpatient revenue rose 20.3% year-to-date, jumped 114.8% compared to April 2020, but fell 2% from March.
Total expenses continued to increase both year-to-date and year-over-year, but saw moderate decreases month-over-month. Total expense was up 6.6% year to date and 13.1% year over year. Total labor expense increased 6.1% year-to-date and 9.4% year-over-year, and total nonlabor expense rose 7% year-to-date and 16.3% year-over-year.
Compared to March, though, all three metrics were down about 3%. Expense results were mixed when adjusted for the month’s volumes. Total expense per adjusted discharge, for example, increased 2% compared to January-April 2020, but fell 32.3% from April 2020 and 2% from March.
THE LARGER TREND
Despite the ongoing pandemic, the 2021 financial outlook for the global healthcare sector is mostly positive, as strong demand for products and services – including those related to COVID-19 – will more than offset lingering pressures from the public health emergency, Moody’s Investors Service found in December.
The demand will remain strong, largely due to aging populations, the improvement in access and the introduction of new and innovative products. There is one caveat: steadily rising healthcare expenditures, which will cause payers to continue to restrict utilization and lower prices.
In October, Moody’s found that owning a public hospital during the COVID-19 pandemic carriedoperational risk, which will compound the fiscal and credit difficulties facing many large urban counties across the U.S.
Whether recovery from the coronavirus this year is relatively rapid or relatively slow, America’s hospitals will face another year of struggle to regain their financial health.
Here are 10 health systems with strong operational metrics and solid financial positions, according to reports from Fitch Ratings, Moody’s Investors Service and S&P Global Ratings.
1. St. Louis-basedBJC HealthCare has an “AA” rating and stable outlook with S&P. The health system has a leading market share and highly regarded reputation, particularly for its flagship hospitals that are affiliated with Washington University School of Medicine in St. Louis, S&P said. The health system consistently has produced stable earnings and cash flow, even during the COVID-19 pandemic, according to the credit rating agency.
2. Cleveland Clinic has an “Aa2” rating and stable outlook from Moody’s. The credit rating agency said the health system benefits from its reputation as an international brand, which will allow it to grow revenue outside of the Ohio market. Moody’s said it maintains good cash flow margins and therefore very strong liquidity.
3. Fountain Valley, Calif.-basedMemorialCarehas an “AA-” rating and stable outlook with Fitch. The health system has a strong financial profile and maintains high liquidity, Fitch said. The credit rating agency expects the system to generate cash flows of approximately 7 percent in the years after fiscal 2021.
4. Winston-Salem, N.C.-based Novant Health has an “AA-” rating and stable outlook with Fitch. The health system has a solid market position in four regions and strong financial metrics that support the rating. The credit rating agency said Novant Health’s acquisition of New Hanover Regional Medical Center in Wilmington, N.C., will benefit the system financially and strategically in the long term.
5. OhioHealth has an “Aa2” rating and stable outlook from Moody’s. The credit rating agency said the health system has a leading market position with several growth opportunities in an attractive market and a favorable payer market that contributes to stability. Moody’s also said OhioHealth’s ongoing cost reductions and management discipline will continue to support strong margins and liquidity levels.
6. Rady Children’s Hospital and Health Center in San Diego has an “Aa3” rating and stable outlook with Moody’s. The credit rating agency said that Rady Children’s has an extremely high market share in San Diego County and benefits from its status as a regional referral center for tertiary and quaternary pediatric services. The health system also has very strong liquidity, Moody’s said.
7.Stanford (Calif.) Health has an “AA” rating and stable outlook with Fitch. The credit rating agency said the hospital has a broad reach and benefits, as it is a clinical destination for high-acuity services, a largely favorable service area and a close relationship with Stanford University. Fitch said it expects the health system’s post-2021 EBITDA margin to be closer to its historical 11 percent operating margin.
8. Spectrum Health in Grand Rapids, Mich., has an “Aa3” rating and stable outlook with Moody’s. The credit rating agency said the health system has a stable operating performance and strong balance sheet metrics. In particular, the system generated positive margins even without federal relief aid in fiscal year 2020. Moody’s added that the health system will continue to benefit from a strong market share for patient care in western Michigan.
9.SSM Health in St. Louis has an “AA-” rating and stable outlook with Fitch. The credit rating agency said it has a strong financial profile and a solid market presence in multiple states with no dependence on any one location. Fitch also said its expanding health plan is a credit positive.
10. Birmingham, Ala.-based UAB Medicine has an “Aa3” rating and stable outlook with Moody’s. The credit rating agency said the health system has high patient demand, strong margins and a leading market share in Birmingham. The credit rating agency expects UAB Medicine to generate strong cash flow in fiscal year 2021.
Advocate Aurora Health is implementing a new work model that will move 12,000 non-clinical employee positions in finance, consumer experience and more departments to remote-first operations, according to a May 21 BizTimes report.
Under the new work model, dubbed WorkForward, the 12,000 non-clinical employees who have been working remotely throughout the COVID-19 pandemic will continue to do so permanently; these employees will “no longer have dedicated workspaces” like cubicles or offices at the health system’s Milwaukee and Downers Grove, Ill.-based offices, the publication reports.
Affected departments include finance and accounting, consumer experience and public affairs, strategy and business development, government relations and administration. Employees will be able to choose to work from home, at a coffee shop or other locations, Advocate Aurora Chief Human Resources Officer Kevin Brady told BizTimes.
“For some departments, remote-first may come to mean monthly team meetings in the office, once-a-week collaboration sessions or a trip to an outside-the-box location that inspires the team,” he said.
Advocate Aurora will “regularly evaluate” its real estate needs with the work model transition; the health system recently vacated non-headquarters office space when its lease ended at the end of 2020. Advocate Aurora is also reconfiguring its remaining facilities to create more “innovative and productive” work areas that employees can use for meetings or temporary office space, according to the report.
CommonSpirit Health and Essentia Health have called off a deal for Essentia to acquire 14 CommonSpirit facilities in North Dakota and Minnesota, the two Catholic systems announced Tuesday.
The deal, nixed just four months after being announced, would have doubled the size of Duluth, Minn.-based Essentia’s hospital network. One of the facilities up for grabs, CHI St. Alexius Medical Center, is a tertiary hospital and the other 13 are critical access hospitals. The deal would also have included associated clinics and living communities.
The systems did not provide details as to why they scrapped the deal in their release, and an Essentia representative did not respond to a request for comment by time of publication.
Dive Insight:
CommonSpirit and Essentia signed a letter of intent in January to explore the sale, but talks have now fizzled following months of deliberation.
“While we share a similar mission, vision, values and strong commitment to sustainable rural healthcare, CommonSpirit and Essentia were unable to come to an agreement that would serve the best interests of both organizations, the people we employ and the patients we serve,” a joint statement from the two systems said.
Earlier this month, more than 700 nurses and medical workers filed a petition noting their concern over the deal. In the petition, the Minnesota Nurses Association and employees at Essentia and CommonSpirit said they feared layoffs and restricted access to patient care resulting from the acquisition.
Nurses cited Essentia’s partnership with Mercy Hospital in Moose Lake, Minn., last summer, which they claimed hurt the quality of patient care.
“Ever since the takeover, we’ve lost numerous staff, causing shortages in how we care for patients,” a nurse wrote in a news release about the petition May 4. “We don’t want CHI’s hospitals and clinics to lay off workers, cut the services they offer or close entirely.”
Essentia did not respond to a request for comment about whether workers’ concerns affected the decision to call off the deal.
Hospitals maintain consolidation betters the patient experience and improves care quality, but numerous studies have suggested that’s not the case. One from early last year published in the New England Journal of Medicine found acquired hospitals actually saw moderately worse patient experience, along with no change in 30-day mortality or readmission rates, while another from 2019 found mergers and acquisitions drive up prices for consumers.
Despite that, provider mergers and acquisitions have continued at a rapid clip even during COVID-19, as hospitals look to divest underperforming assets and bulk up market share in more lucrative geographies. The letter of intent CommonSpirit signed with Essentia suggests the roughly 140-hospital system is taking stock of its smaller rural facilities.
Chicago-based CommonSpirit was formed in 2019 by the merger of nonprofit giants Catholic Health Initiatives and Dignity Health. The nonprofit giant was hit hard by the pandemic, losing $550 million in the 2020 fiscal year.
The United States Supreme Court should keep in place a lower court ruling that bars hospitals from receiving higher Medicare reimbursements for outpatient services compared to other providers, according to a brief HHS filed late last week.
The 33-page brief filed with the high court is in response to a petition by the American Hospital Association and the Association of American Medical Colleges to hear the case. The Court of Appeals for the District of Columbia ruled last July that HHS had the right to cut payments to hospital-owned facilities in order to achieve site neutrality, reversing the judgment of a district court.
Hospitals and HHS have been wrangling about the issue since the federal agency moved to cut payments to hospital-owned outpatient sites in 2019. The Supreme Court will have the final say, whether it decides to hear the case or not.
Dive Insight:
Site-neutral payments have been a hot button issue in the healthcare world for the better part of a decade, after many larger hospital systems began buying up physician practices. Hospitals are reimbursed by Medicare for evaluation and management services at a higher rate than standalone physician groups.
They began collecting those higher fees at the outpatient sites they acquired or opened. From 2012 to 2015, E&M encounters per Medicare enrollee grew at outpatient sites by 22%, versus a 1% drop at physician practices, HHS noted in its brief.
That strategy not only drove up costs to the Medicare program but also put more pressure on individual medical practices to merge with one another to better compete with hospital-owned practices, or be bought out. HHS attempted to remedy the issue by moving toward a site-neutral payment scheme beginning in 2019. Acute care providers, led by AHA and AAMC, sued to stop the change. They appealed to the Supreme Court last summer.
The brief filed by HHS attorneys with the high court asked that its new site-neutral payment policy be retained. The department argued that it did not act beyond the powers delegated to it by Congress, and that body would remedy such a disturbing financial trend on its own if it needed to.
The likelihood the high court will hear the case is low. Attorneys note that the Supreme Court only agrees to hear no more than 5% of cases brought to it for review that involve a federal agency. Moreover, they are even less likely to act if there is no conflict on the issue between the appeals court — which HHS noted in its brief.
If the Supreme Court declines to hear the case, the appellate court ruling would stand and the site neutral payment rule would remain on the books.
UPDATE: May 21, 2021: Late Thursday, drug manufacturing giant Eli Lilly filed a motion in an Indiana district court to halt 340B-related monetary penalties, scant days after the Biden administration set a June 1 deadline for biopharmaceutical companies to comply with new conditions in the drug discount program and allow hospital contract pharmacies access to discounted drugs.
The suit alleges a Monday letter from Diana Espinosa, acting head of the Health Resources and Services Administration, gives “no legal explanation or justification for the arbitrary June 1 deadline.”
Lilly previously filed an almost identical lawsuit January 2020. The Indianapolis-based biopharma said it expected the government to follow the briefing schedule outlined in that suit before mandating compliance with 340B and forcing it to pay “substantial and irretrievable sums of money.”
“If the Court ultimately decides Lilly was required to extend 340B pricing to contract pharmacies, Lilly will comply with that decision. Conversely, if the Court ultimately decides manufacturers are not required to extend 340B pricing to contract pharmacies, then we surely expect the government will comply with that decision. But there is no explanation or justification for the government’s attempt to make Lilly pay now, other than to evade this Court’s review and leave Lilly without recourse for such payments,” the motion reads.
In the petition, Lilly, which brought in $6.2 billion in profit last year, alleges the shifting terms of the program are due to HHS director Xavier Becerra bending to political pressure to “take action” against drug manufacturers, as pharmaceutical prices continue to climb.
Lilly asked the district court to temporarily block HHS from moving against Lilly until the drugmaker’s request for a preliminary injunction is resolved; and for an accelerated legal schedule to settle its claims before the looming June deadline.
An HRSA spokesperson declined to comment on the suit.
Dive Brief:
HHS’ Health Resources and Services Administration called out six pharmaceutical companies Tuesday for violating rules under the 340B drug discount program, ordering them to repay affected providers for previous overcharges and warning of more penalties if they don’t comply.
In July 2020 some drugmakers stopped giving the 340B ceiling price on their products sold to covered entities and dispensed through contract pharmacies, while others limited sales by requiring specific data or selling products only after a covered entity demonstrated 340B compliance, according to HRSA.
In letters from Diana Espinosa, acting administrator of HRSA, the agency requested AstraZeneca, Eli Lilly, United Therapeutics, Sanofi, Novo Nordisk and Novartis give an update on their plans to restart selling covered outpatient drugs at the 340B price to covered entities that dispense medications through contract pharmacies by June 1.
Dive Insight:
Providers and drugmakers have sparred for years over the 340B drug discount program that requires pharmaceutical companies to give discounts on outpatient drugs for providers serving low-income communities.
AHA along with five other provider groups in December filed a federal lawsuit against HHS, alleging the department failed to enforce 340B program requirements and allowed actions from drug companies that undermined the program. That lawsuit was later dismissed.
But with the change in administrations, providers now seem to have an ally in the fight.
Previously, as California’s Attorney General, newly minted HHS chief Xavier Becerra led a group of states pushing the agency to force drugmakers to comply with the law late last year.
Provider groups cheered the move after raising the alarm last year that an increasing number of drug companies were refusing to offer discounts to such eligible hospitals.
“The denial of these discounts has damaged providers and patients and must stop. It is vital that these companies immediately begin to repay the millions of dollars owed to these providers,” 340B Health CEO Maureen Testoni said in a statement.
In separate letters to drugmakers, HRSA outlines complaints against them and their actions, ultimately saying their policies violated the statute and resulted in overcharges that need to be refunded. The companies must work to ensure all impacted entities are contacted and efforts are made to pursue mutually agreed upon refund arrangements, according to the letters.
Any additional violations will be subject to a $5,000 penalty for each instance of overcharging under the program’s Ceiling Price and Civil Monetary Penalties final rule.
The American Hospital Association also praised the agency in a release for “taking the decisive action we’ve called for against drug companies that skirt the law by limiting the distribution of certain 340B drugs through community pharmacies.”
Hospitals in the 340B program provide 60% of all uncompensated care in the U.S. and 75% of all hospital care to Medicaid patients, according to 340B Health.
HENRY KOTULA 