Category Archives: Hospital

Health plans ramp up physician practice acquisitions

Posted on by • Posted in Health Insurance Industry, Health System, Hospital, Hospital Industry, Medical Group, Medical Group Management Association (MGMA), Medicare Advantage, Mergers & Acquisitions, Physician, Physician Practice Management, Private Equity, Strategy • Leave a comment

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Health systems and private equity firms aren’t the only ones aggregating physician practices—many large insurers are rapidly acquiring or affiliating with physician groups, especially to support their Medicare Advantage (MA) strategies.

As the map below shows, most insurers are focusing this vertical integration in states like Florida, Texas, and California—places where they also have large populations of MA beneficiaries. Astonishingly, UnitedHealth Group—through its Optum division—is likely the largest employer of physicians in the US, employing or affiliating with 50,000 physicians—roughly 5,000 more than HCA Healthcare and nearly double the number of Kaiser Permanente. The number of Optum-controlled physicians has increased rapidly in recent years, the result of many large-scale deals, including the $4.3B acquisition of DaVita Medical Group.

When it comes to leveraging this growing physician network, United is setting its sights well beyond Medicare Advantage, as demonstrated by its recent introduction of Harmony, a commercial narrow network health plan in Southern California based almost exclusively on a network of Optum physicians.

Meanwhile, Humana’s physician strategy has focused more on affiliations with non-traditional groups serving MA patients, including Iora Health and Oak Street Health—though Humana also has two large primary care groups, Conviva and Partners in Primary Care, the latter of which just secured a $600M private equity investment to expand.

Notably absent from this map is Aetna, which has been pursuing a different strategy, focused around steering its MA population to its advanced practice provider-run HealthHUBs in CVS pharmacies.

This trend of insurer acquisition of physicians is obviously worrisome for health systems, as the health plans they negotiate with for payment are now directly competing with them at the front end of the delivery system.  

 

 

Settling in for a long fight against coronavirus

Posted on by • Posted in Centers for Disease Control & Prevention (CDC), Coronavirus, Health Policy, Health System, Hospital, Hospital Industry, Infection Control, Infectious Virus, Public Health, Public Safety, World Health Organization (WHO) • Leave a comment

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As of Friday, the number of confirmed cases of the novel coronavirus, or COVID-19, has surpassed 100,000 worldwide, with over 3,400 deaths. In the US, there have been 250 confirmed cases and 14 deaths reported so far—although the actual number of cases is certainly many times higher, with testing yet to be widely available and many patients exhibiting only mild to moderate symptoms.

Vice President Mike Pence, who was put in charge of federal response efforts last week, conceded Thursday that the country does not yet have enough coronavirus tests to meet demand, and the administration will not meet its goal of having 1M tests ready by the end of the week; perhaps the $8B emergency funding package approved by Congress will help expedite efforts.

Public worry and concern among officials hit new levels, with the Director-General of the World Health Organization warning that time to contain the virus may be running out, and expressing concern that countries may not be acting fast enough. New levels of containment effort have begun to take shape. Schools shut down in areas of the country most affected by the virus, including Seattle and some New York City suburbs. All told, the New York Times reports that 300M students are out of school around the world. Companies began to cancel conferences and other large gatherings—next week’s Health Information and Management Systems Society (HIMSS) conference was called off despite a planned appearance by President Trump, given rising cancellations and vendor exits.

Hospitals around the nation have rallied to prepare for a growing wave of patients that has yet to hit. Experts expressed concerns about whether hospitals have enough open capacity, but even more critical will be gaps in the supply of staff and equipment—especially the ICU beds and ventilators necessary for critically ill patients, and the nurses and respiratory therapists needed to care for them.

The vast majority of hospitals report having a coronavirus action plan in place; however, a recent survey of nurses suggests that critical information may not be making its way to frontline clinicians. Only 44 percent of nurses reported that their organization gave them information on how to identify patients with the virus, and just 29 percent said there is a plan in place to isolate potentially infected patients.

Worries about patient financial exposure to the costs of diagnosis and treatment intensified, with fears that individuals could be held accountable for the cost of government-mandated isolation. Most patients with high-deductible plans saw their deductibles “reset” at the beginning of the year, raising concerns that individuals might refrain from seeking treatment.

The heightened worry is palpable as we connect with hospital and physician leaders around the country, and we are deeply grateful for their around-the-clock efforts, and the willingness of doctors, nurses and other caregivers to put their own safety at risk to provide the best possible care to patients under increasingly difficult circumstances.

 

 

 

 

14 health systems with strong finances

Posted on by • Posted in Balance Sheet, Credit Quality, Credit Ratings, Health System, Hospital, Operating Expenses, Operating Income, Operating Margin, Operating Performance, Operating Revenue • Leave a comment

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Here are 14 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.

Note: This is not an exhaustive list. Health system names were compiled from credit rating reports and are listed in alphabetical order.

1. Roanoke, Va.-based Carilion Clinic has an “Aa3” rating and stable outlook with Moody’s and an “AA-” rating and stable outlook with S&P. The health system has a leading market position, strong operating cash flow and healthy debt metrics, according to Moody’s.

2. Wilmington, Del.-based ChristianaCare has an “AA+” rating and stable outlook with S&P, and an “Aa2” rating and stable outlook with Moody’s. The health system has excellent cash flow and a light debt burden, according to S&P. The credit rating agency expects ChristianaCare’s operational performance to remain near recent levels over the next two years, as the health system capitalizes on its cost containment initiatives and strong business position.

3. Santa Barbara, Calif.-based Cottage Health has an “AA-” rating and stable outlook with Fitch. The health system has a leading market position and strong profitability and cash flow, according to Fitch. Going forward, the rating agency expects Cottage Health to see moderate revenue growth.

4. Honolulu-based Hawaii Pacific Health has an “AA-” rating and stable outlook with Fitch. The health system has a solid market position and healthy operating profitability, according to Fitch. The credit rating agency expects the health system to sustain continued capital and strategic investments without the need for incremental debt in the foreseeable future.

5. Baltimore-based Johns Hopkins Health System has an “Aa2” rating and stable outlook with Moody’s. The six-hospital system has a national and international brand that supports resilient clinical demand, according to Moody’s. The rating agency expects the health system to continue to see benefits from its strong regional market position.

6. Philadelphia-based Main Line Health has an “Aa3” rating and stable outlook with Moody’s and an “AA” rating and stable outlook with S&P. The health system, which operates four acute care hospitals and a rehabilitation hospital, is a leading provider in the Philadelphia suburbs, according to Moody’s. The credit rating agency expects the health system to maintain recently improved cash flow margins, which are driven by better patient volume trends.

7. Dallas-based Methodist Health System has an “Aa3” rating and stable outlook with Moody’s. The health system has healthy balance sheet measures and operating performance as well as favorable leverage metrics, according to Moody’s. The credit rating agency expects Methodist Health System’s expense control initiatives and revenue growth opportunities to continue to drive sustainable operating performance.

8. Evanston, Ill.-based NorthShore University HealthSystem has an “AA-” rating and stable outlook with S&P and an “Aa3” rating and stable outlook with Moody’s. The health system has a strong balance sheet, good market presence and a management team that continues to execute its strategic plan, according to S&P. The rating agency expects NorthShore to maintain strong balance sheet metrics and low leverage.

9. Columbus-based OhioHealth has an “AA+” rating and stable outlook with Fitch. The 12-hospital system has a leading market position and solid liquidity, profitability and leverage metrics, according to Fitch.

10. Fort Wayne, Ind.-based Parkview Health System has an “AA-” rating and stable outlook with S&P. The nine-hospital system has stable operating performance and an excellent liquidity profile, according to S&P.

11. Chicago-based Rush University System for Health has an “AA-” rating and stable outlook with Fitch. The health system has a broad reach for high-acuity services as a leading academic medical center and its operating risk profile is strong, according to Fitch. The credit rating agency expects Rush to maintain strong capital-related ratios over the next five years.

12. Norfolk, Va.-based Sentara Healthcare has an “Aa2” rating and stable outlook with Moody’s. The health system has a leading market position in its core service area, strong patient demand, and solid margins, according to Moody’s. The credit rating agency expects Sentara’s liquidity and debt metrics to remain at recent levels.

13. Livonia, Mich.-based Trinity Health has an “AA-” rating and stable outlook with Fitch and S&P. The health system has a significant market presence in several states and a strong financial profile, according to Fitch. The credit rating agency expects the health system’s operating margins to continue to improve.

14. Madison, Wis.-based UW Health has an “Aa3” rating and stable outlook with Moody’s. UW Health has healthy margins from a large and growing clinical footprint, according to Moody’s. The rating agency expects UW Health’s margins to remain strong.

 

Coronavirus Covid-19 Global Cases by Johns Hopkins CSSE

Posted on by • Posted in Coronavirus, Health Policy, Health System, Hospital, Hospital Industry, Infection Control, Infectious Virus, Pandemic • Leave a comment

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128 cases have been reported in the U.S., along with nine related deaths, all in Washington state, as of 9 a.m., March 4. Eight people have recovered from the disease.

 

 

 

 

 

Supreme Court Will Hear First Major Abortion Case Since Two Trump Appointees Joined

Posted on by • Posted in 2020 Election Issues, Abortion, Health Policy, Health System, Hospital, Physician, Roe v. Wade, Supreme Court, Womens Health • Leave a comment

https://www.wsj.com/articles/supreme-court-will-hear-first-major-abortion-case-since-two-trump-appointees-joined-11583192925?mod=hp_lista_pos2

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Case will test new conservative makeup’s approach to precedent.

The Supreme Court hears its first major abortion case Wednesday since two Trump nominees joined the bench, potentially signalling whether—and how much——reproductive rights may change under a bolstered conservative majority.

“There’s a lot on the line in this case, and more than most people realize,” said Mary Ziegler, a law professor at Florida State University and author of the forthcoming book “Abortion and the Law in America.”

Most prominently, the case involves the Supreme Court’s approach to precedent, since it largely is a replay of an issue the court decided in 2016, when by a 5-3 vote it struck down a Texas law requiring that abortion providers obtain admitting privileges at a nearby hospital.

The case also tests the strategy for antiabortion forces, who have been divided over the best way to roll back court precedents recognizing women’s constitutional right to end pregnancy. While some advocates seek to reverse outright Roe v. Wade, the 1973 decision recognizing abortion rights, others believe a more prudent approach is to carve away at the precedent through increasingly restrictive regulations that would spare the Supreme Court the controversy of directly overruling a landmark case.

The law in question, known as the Louisiana Unsafe Abortion Protection Act, isn’t based on a state policy to protect potential life, an interest that the Supreme Court has recognized as valid justification for some abortion restrictions.

Instead, it is based on the argument that abortion itself can be harmful to women, and that restricting access to the procedure therefore is beneficial to women. For that reason, the state’s brief contends that abortion providers shouldn’t be permitted to challenge the law on behalf of their patients, arguing that “a serious conflict of interest” exists between them and Louisiana’s women.

In striking down the Texas law in 2016, the court found the admitting-privilege requirement provided no health benefits to women while forcing many of the state’s abortion clinics to close.

The opinion, by Justice Stephen Breyer, cited evidence that admitting privileges do little to ensure continuity of care, as the state maintained, because when abortion has complications, they generally arise not at the clinic but days after the procedure, when the patient would visit her regular physician or local hospital. The court also observed that hospital admitting privileges aren’t a general credential but are granted for other purposes, such a doctor’s ability to bring in patients for treatment.

Statistically, however, only a tiny number of women require hospitalization after abortion, the court said. “In a word, doctors would be unable to maintain admitting privileges or obtain those privileges for the future, because the fact that abortions are so safe meant that providers were unlikely to have any patients to admit,” Justice Breyer wrote.

But that decision, Whole Woman’s Health v. Hellerstedt, hinged on since-retired Justice Anthony Kennedy, a maverick conservative who joined more liberal justices in the majority. With the late Justice Antonin Scalia’s seat vacant, three conservatives dissented, contending that the majority skirted procedural rules to throw out the Texas law.

President Trump, who appointed Justice Brett Kavanaugh to the vacancy, had as a candidate predicted his Supreme Court picks would vote to overrule Roe v. Wade.

In September 2018, three months after Justice Kennedy’s retirement, the Fifth U.S. Circuit Court of Appeals, in New Orleans, upheld a Louisiana admitting-privileges law that critics argue is identical to the Texas measure struck down two years earlier. The appellate court found the Louisiana Unsafe Abortion Protection Act wouldn’t burden abortion rights in Louisiana to the degree the Texas law did in its state.

An abortion clinic in Shreveport, La., June Medical Services LLC, and three doctors who perform the procedure appealed to the Supreme Court.

That puts the spotlight particularly on Justice Kavanaugh, whose remarks and writings, which have praised the dissent in Roe and supported a Trump administration policy to prevent an underage illegal immigrant from obtaining an abortion, have given hope to abortion opponents.

However, the focus may equally fall on Chief Justice John Roberts, who typically has voted against abortion-rights positions in Supreme Court cases—but he also has stressed an institutional interest in distinguishing the courts from political bodies, where outcomes on legislation can swing wildly based on the latest election results. For that reason, he may be hesitant to overrule even a decision he opposed simply because Justice Kennedy’s retirement presents an opportunity.

In February 2019, he joined the court’s liberal wing to block implementation of the Louisiana law while the appeal proceeded; four other conservatives dissented, although Justice Kavanaugh appended a statement suggesting he was taking a middle ground. He said he wasn’t persuaded that the Louisiana doctors had fully explored opportunities to obtain hospital-admitting privileges.

Should a frontal assault on recent precedent alienate the chief justice or another conservative justice, it probably would end prospects for similar admitting-privilege laws.

But the door could remain open for other abortion restrictions that aren’t covered by existing precedent, particularly if the court signals a readiness to pare back the ability of abortion providers to challenge regulations, or suggests it is more inclined to defer to legislative judgments regarding the safety of abortions rather than evidence, such as scientific research or the views of the medical profession, presented at trial court.

 

Majority of hospitals not meeting minimum volumes for high-risk surgeries, Leapfrog says

Posted on by • Posted in Health System, High Risk Surgery, Hospital, Hospital Industry, Leapfrog Group, Quality of Care, Surgery, Surgical Safety • Leave a comment

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The majority of hospitals are electively performing high-risk surgical procedures without sufficient ongoing experience to safely do so, according to a new report.

The report from The Leapfrog Group, an independent hospital safety watchdog group, looked specifically at surgical volumes. The report, which relied on final hospital data from the 2019 Leapfrog Hospital Survey that had responses from more than 2,100 hospitals, also looked at the minimum standards those hospitals require surgeons to meet in order to gain privileges.

They were looking specifically at the safety of eight high-risk procedures identified by an expert panel as having a “strong volume-outcome relationship.” The report also looks at whether hospitals are working to make sure every surgery is necessary. 

According to the report, an increasing number of hospitals are meeting minimum volume standards if they perform high-risk hospitals. The majority of rural hospitals opt out of performing the high-risk surgeries because they can’t meet the volume standards. Further, more hospitals are implementing protocols to monitor for appropriateness of surgeries.

“The good news is we are seeing progress on surgical safety. The bad news is the vast majority of hospitals performing these high-risk procedures are not meeting clear volume standards for safety,” said Leah Binder, president and CEO of The Leapfrog Group, in a statement. “This is very disturbing, as a mountain of studies show us that patient risk of complications or death is dramatically higher in low-volume operating rooms.”

For instance, the report suggested hospitals should be performing a minimum of 20 esophageal resections for cancer and a minimum of 20 pancreatic resections for cancer to improve the odds of a safer surgery for their patients. Surgeons should perform at least seven and 10 of those procedures a year, respectively, to gain privileges.

But for those two procedures, only 3% and 8% of hospitals met the volume standards for patient safety, the report found.

Hospitals were most likely to meet the safety standard of a minimum of 50 procedures a year for the hospital and 20 procedures a year for bariatric surgery for weight loss. More than 48% reported meeting that standard in 2019, up from 38% in 2018.

The survey found more than 70% of reporting hospitals have protocols to ensure appropriateness for cancer procedures.

But for other high-risk procedures evaluated such as open-heart surgeries or mitral valve repair and replacement, hospital compliance with ensuring appropriateness dropped to a range of 32% to 60%, depending on the procedure.

 

 

 

Kaufman Hall: Hospital revenue, margins improved in 2019, but warning signs ahead

Posted on by • Posted in Credit Ratings, Health System, Hospital, Hospital Industry, Operating Expenses, Operating Income, Operating Margin, Operating Performance, Operating Revenue • Leave a comment

https://www.healthcaredive.com/news/kaufman-hall-hospital-revenue-margins-improved-in-2019-but-warning-signs/573192/

Dive Brief:

  • U.S. hospital finances experienced a comparatively strong 2019, according to Kaufman Hall’s 2019 Year In Review Flash Hospital Report, which labeled the performance as “cautiously optimistic.”
  • While revenue and margins increased for the hospitals surveyed, inpatient volumes were weaker and more uneven.
  • The report from the management consultancy and data provider did unearth some potential warning signs for 2020, including a trend in rising expenses. The report also warned of a slowing economy and the potential economic impact from the coronavirus.

Dive Insight:

Hospitals are complex, high-volume and low-margin enterprises that often experience operational volatility. The latest report by Kaufman Hall confirmed the uneasy environment in which they operate.

Operating earnings were up 2% in 2019 compared to the prior year, and overall operating margin was up 7.4%. That was driven primarily by small bumps in revenue and patient volume. Net patient revenue per adjusted discharge rose 3.7%, and was up 1.5% per adjusted patient day.

Yet both pre-tax and overall operating margin were down 1.7% and 0.3%, respectively, when hospital budget forecasts were factored in. However, that drop was all attributable to hospitals in the Northeastern U.S.

Nevertheless, overall margins fell into the red in August and November, although they rebounded strongly in December, up 20% in that month compared to December 2018.

However, cost pressures were significant. Total expenses per adjusted discharge were up 3.4%, while labor expenses rose 2.6%. Non-labor expenses per adjusted discharge was up 4%. Adjusted discharges themselves were up only 0.7%, and showed year-over-year declines not only for the first quarter of 2019 but in June, August and November. And overall discharges declined among hospitals compared to budget forecasts in the Midwest and Northeast, down nearly 6% and 4%, respectively. Adjusted patient days were up 2.5%, although the average length of stay rose 1.9%.

While operating room minutes were up 2.2%, they were 0.3% below budget forecasts. Emergency department visits were down 0.4% compared to 2018, and were a full percentage point below forecasts.

“While it was good to see improvements in many financial areas, the long-term trendlines indicate that this is not a time for the C-suite to relax,” said Kaufman Hall Managing Director Jim Blake.

“These modest gains were made during a time when the economy was strong, unemployment was historically low, and government regulations favored business. There also were no existential health threats, such as the COVID-19 coronavirus outbreak nor the risks that come any time there is a national election,” Blake continued.

 

 

 

FTC to block Philadelphia area health system merger in 1st big hospital challenge in 3 years

Posted on by • Posted in Antitrust, Competition, District Court, Federal Trade Commission (FTC), Health Policy, Health System, Hospital, Hospital Industry, Market Consolidation, Market Power, Mergers & Acquisitions, Monopoly, Monopoly Behavior, Preliminary Injunction, Restraining Order • Leave a comment

https://www.healthcaredive.com/news/ftc-to-block-philadelphia-area-health-system-merger-in-1st-big-hospital-cha/573165/

Dive Brief:

  • The Federal Trade Commission has moved to block the proposed merger between two nonprofit Pennsylvania health systems over anticompetitive concerns in its first challenge to hospital M&A in more than three years.
  • Jefferson Health and Albert Einstein Healthcare Network both provide inpatient general acute care and inpatient acute rehabilitation services in Philadelphia County and Montgomery County. A marriage between the two systems, which agreed to definitively merge in September 2018, would harm patients because the two systems would no longer compete for patients and for inclusion in payer networks, the FTC says.
  • Jefferson and Einstein defended the deal Thursday in a joint statement provided to Healthcare Dive, saying they remain “confident our merger will result in continued high-quality care for our consumers.”

Dive Insight:

FTC Commissioner Christine Wilson has pledged to be tougher on hospital deals in 2020, including reviewing previously closed deals to see if they’ve delivered on promised cost and quality metrics. The last time the FTC questioned a major hospital merger was in 2016, when it urged Virginia and Tennessee not to approve the union of large operators Mountain States Health Alliance and Wellmont. The push was unsuccessful, and the two coalesced into rural system Ballad Health.

The deal, first announced in March 2018, has stagnated over the past two years as it was scrutinized by regulators at the FTC and Pennsylvania Attorney General Josh Shapiro.

“This merger would eliminate the competitive pressure that has driven quality improvements and lowered rates,” Ian Conner, Director of the FTC’s Bureau of Competition, said in a statement. The rivalry between the two nonprofit players for market dominance has resulted in upgraded medical facilities and technological investments, but that progress could stall if Jefferson and Albert Einstein combined, FTC said.

Jefferson and Einstein boast a combined roughly $5.9 billion in annual revenue, along with 18 hospitals, more than 50 outpatient and urgent care centers and a handful of rehab and post-acute facilities. Jefferson, the bigger player, has 14 hospitals across South Jersey and Philadelphia, Montgomery and Bucks counties.

The regulators said they will soon file a formal complaint in the U.S. District Court for the Eastern District of Pennsylvania.

The complaint alleges that as a result of the merger, Jefferson and Einstein would control at least 60% of the inpatient general acute care services market in North Philadelphia, and 45% in Montgomery. That includes services like medical or surgical diagnostics and treatments requiring an overnight stay.

Jefferson and Einstein manage six of the eight inpatient rehab facilities for recovering from serious, acute conditions in the Philadelphia region, and would control at least 70% of that market if combined.

The hospitals said their marriage represents a “creative effort” to increase access at a time when safety net hospitals are struggling.

“We believe we have presented a strong and comprehensive case as to how the merger would benefit the patients we serve and advance our academic mission without reducing competition for healthcare services,” the systems, which have had an academic partnership for more than two decades, said.

Several studies have debunked theories that bigger is better in terms of quality of care when it comes to health systems.

FTC plans to seek a temporary restraining order and preliminary injunction to prevent Jefferson and Albert Einstein from consummating the merger pending an administrative trial scheduled to being in September this year.  

 

 

Why Are Nonprofit Hospitals So Highly Profitable?

Posted on by • Posted in Charity Care, Community Benefit, Executive Compensation, Health Policy, Health System, Hospital, Hospital Industry, Internal Revenue Service (IRS), Market Consolidation, Market Power, Mergers & Acquisitions, Monopoly, Monopoly Behavior, Social Determinants of Health, Tax Exempt Status, Tax-Exempt Status • Leave a comment

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These institutions receive tax exemptions for community benefits that often don’t really exist.

“So, how much money do you guys make if I do that test you’re ordering for me?” This is a question I hear frequently from my patients, and it’s often followed by some variant of, “I thought hospitals were supposed to be nonprofit.”

Patients are understandably confused. They see hospitals consolidating and creating vast medical empires with sophisticated marketing campaigns and sleek digs that resemble luxury hotels. And then there was the headline-grabbing nugget from a Health Affairs study that seven of the 10 most profitable hospitals in America are nonprofit hospitals.

Hospitals fall into three financial categories. Two are easy to understand: There are fully private hospitals that mostly function like any other business, responsible to shareholders and investors. And there are public hospitals, which are owned by state or local governments and have obligations to care for underserved populations. And then there are “private nonprofit” hospitals, which include more than half of our hospitals.

Nearly all of the nation’s most prestigious hospitals are nonprofits. These are the medical meccas that come to mind when we think of the best of American medicine — Mayo Clinic, Cleveland Clinic, Johns Hopkins, Mass General.

The nonprofit label comes from the fact that they are exempt from federal and local taxes in exchange for providing a certain amount of “community benefit.”

Nonprofit hospitals have their origins in the charity hospitals of the early 1900s, but over the last century they’ve gradually shifted from that model. Now their explosive growth has many questioning how we define “nonprofit” and what sort of responsibility these hospitals have to the communities that provide this financial dispensation.

It’s time to rethink the concept of nonprofit hospitals. Tax exemption is a gift provided by the community and should be treated as such. Hospitals’ community benefit should be defined more explicitly in terms of tangible medical benefits for local residents.

It actually isn’t much of a surprise that nonprofit hospitals are often more profitable than for-profit hospitals. If a private business doesn’t have to pay taxes, its expenses will be lower. Additionally, because nonprofit hospitals are defined as charitable institutions, they can benefit from tax-free contributions from donors and tax-free bonds for capital projects, things that for-profit hospitals cannot take advantage of.

The real question surrounding nonprofit hospitals is whether the benefits to the community equal what taxpayers donate to these hospitals in the form of tax-exempt status.

On paper, the average value of community benefits for all nonprofits about equals the value of the tax exemption, but there is tremendous variation among individual hospitals, with many falling short. There is also intense disagreement about how those community benefits are calculated and whether they actually serve the community in question.

Charity medical care is what most people think of when it comes to a community benefit, and before 1969 that was the legal requirement for hospitals to qualify for tax-exempt status. In that year, the tax code was changed to allow for a wide range of expenses to qualify as community benefits. Charitable care became optional and it was left up to the hospitals to decide how to pay back that debt. Hospitals could even declare that accepting Medicaid insurance was a community benefit and write off the difference between the Medicaid payment and their own calculations of cost.

An analysis by Politico found that since the full Affordable Care Act coverage expansion, which brought millions more paying customers into the field, revenue in the top seven nonprofit hospitals (as ranked by U.S. News & World Report) increased by 15 percent, while charity care — the most tangible aspect of community benefit — decreased by 35 percent.

Communities are often conflicted about the nonprofit hospitals in their midst. Many of these institutions are enormous employers — sometimes the largest employer in town — but the economic benefits do not always trickle down to the immediate neighborhoods. It is not unusual to see a stark contrast between these gleaming campuses and the disadvantaged neighborhoods that surround them.

In some communities, nonprofit hospitals are beloved institutions with a history of caring for generations of families. In other communities, the sums of money devoted to lavish expansions, aggressive advertising and eye-popping executive compensation are a source of irritation.

The average chief executive’s package at nonprofit hospitals is worth $3.5 million annually. (According to I.R.S. regulations, “No part of their net earnings is allowed to inure to the benefit of any private shareholder or individual.”) From 2005 to 2015, average chief executive compensation in nonprofit hospitals increased by 93 percent. Over that same period, pediatricians saw a 15 percent salary increase. Nurses got 3 percent.

A number of communities that think nonprofit hospitals take more than they give back have started to sue. The University of Pittsburgh Medical Center fought off one lawsuit from the city’s mayor to revoke its tax-exempt status. Last year it faced another from the Pennsylvania attorney general, alleging that the medical center, valued at $20 billion, did not fulfill “its obligation as a public charity” (the lawsuit was dismissed).

Morristown Hospital in New Jersey lost most of its property-tax exemption because it was found to be behaving as a for-profit institution. The judge in the case wrote that if all nonprofit hospitals operated like this, then “modern nonprofit hospitals are essentially legal fictions.”

It’s important to recognize the extreme variance in hospitals’ financial status. Many nonprofit hospitals, especially in rural areas, struggle mightily; scores of rural hospitals have closed — and hundreds more are teetering — leading to spikes in local death rates. At the other end are hospitals that earn several thousand dollars in profit per patient.

The most profitable nonprofit hospitals tend to be part of huge health care systems. Consolidations are one of the driving forces behind the towering profits, because monopoly hospitals are known to charge more than nonmonopoly hospitals.

Should these highly profitable institutions be exempt from the taxes that pay for local roads, police services, fire protection and 911 services? Should local residents have to pay for the garbage collection for institutions that can afford multimillion-dollar salaries for top executives?

Tax exemption needs to be redefined. Low-impact projects such as community health fairs that function more like marketing shouldn’t be allowed as part of the calculation. Nor should things that primarily benefit the institution, like staff training.

Additionally, hospitals should not be allowed to declare Medicaid “losses” as a community benefit. While it’s true that Medicaid typically pays less than private insurance companies, Medicaid plays a crucial role for private insurance markets by acting as a high-risk pool for patients with severe illness and disability. Hospitals benefit mightily from this taxpayer-funded arrangement. These large medical centers also enthusiastically accept taxpayer money for research, something that burnishes their image and bolsters their rankings. That enthusiasm needs to be mandated to extend toward Medicaid patients and the face value of their insurance.

The I.R.S. states that charitable hospitals “must be organized and operated exclusively for specific tax-exempt purposes.” Thus charitable care should be front and center. Spending on social determinants of health can also be a legitimate community benefit, but the community that is footing the tax break needs to have a forceful say in how this money is spent, rather than leave it solely up to the hospital.

As many policy scholars have noted, tax exemption is a blunt instrument. For struggling hospitals, particularly in communities with a shortage of health care resources, tax exemption can make sense. In medically saturated areas, where profits and executive compensation approach Wall Street levels, tax exemption should raise eyebrows.

If society decides that tax exemption is a worthwhile means to improve health — and it certainly can be — then our regulations need to be far stricter and more explicitly tied to community health. As the United States continues to fall behind its international peers in terms of health outcomes in local communities, there is certainly no lack of opportunity.

 

 

 

Five Healthcare Industry Changes to Watch in 2020

Posted on by • Posted in 2020 Election Issues, Consumerism, Data Governance, Data Management, Data Ownership, Health Insurance Coverage Adequacy, Health Insurance Industry, Health Policy, Health System, HIPAA, Hospital, Hospital Industry, Market Consolidation, Market Power, Market Trends, Privacy, Value-Based Healthcare • Leave a comment

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Innovation

Industry experts expect significant changes to shake up the healthcare landscape in the next few years, which will affect both health insurers and providers. Many are the result of a shift toward value-based care, a move toward decreased care in hospital settings, technological advances, and other forces.

Here’s a look at what can payers and providers can expect to occur, why each change is occurring, and how payers and providers can prepare for each change:

1. A shift in healthcare delivery from hospital to ambulatory settings

Healthcare delivery will continue to move from inpatient to outpatient facilities. “More surgeries and diagnostic procedures that historically have required an inpatient hospital stay can now be performed more safely and efficiently in an outpatient setting,” says Stephen A. Timoni, JD, an attorney and partner at the law firm Lindabury, McCormick, Estabrook & Cooper, in Westfield, New Jersey, who represents healthcare providers in areas of reimbursement and managed care contracting. A growing volume of outpatient care will be provided in ambulatory surgery centers, primary care clinics, retail clinics, urgent care centers, nurse managed health centers, imaging facilities, emergency departments, retail clinics, and patients’ homes.

This change is occurring as the result of clinical innovations, patient preferences, financial incentives, electronic health records, telemedicine, and an increased focus on improving quality of care and clinical outcomes. “The upward trend in value-based payment models is also influencing this shift, with the goal of reducing the cost of care and improving the overall patient experience,” Timoni says.

Payers and providers can prepare for this shift by analyzing and forecasting the cost and reimbursement implications of providing care in outpatient settings compared to inpatient settings. They should continue to analyze changing patient demographics, consumer preferences, and satisfaction trends, Timoni says. Collecting and analyzing data regarding quality and clinical outcomes as the result of changes in delivery of care from inpatient to outpatient is also key. Healthcare providers should develop effective strategies to grow capacity and infrastructure for outpatient services and invest in innovative mobile technologies, diagnostic tools, and telemedicine systems.

2. Consolidation will continue industry wide

More healthcare entities will continue to merge together. “Even though the number of available partners for transactions is shrinking, new deals pop up all the time because smaller entities are being targeted or entities that had been holding out are now changing their position,” says Matthew Fisher, JD, partner and chair of the Health Law Group at Mirick O’Connell, a law firm in Westborough, Massachusetts. Increased consolidation will result in higher healthcare prices as larger sized institutions use their size to their advantage. Another impact will be narrowing the field of contracting options, which will result in greater dominance by fewer entities in a market.

This change is occurring because industry stakeholder believes that consolidation is the way to survive in a healthcare landscape still being shaped by the ACA. “The belief is that value-based care models require single unified entities as opposed to more contractual-based ventures to succeed,” Fisher says. Another factor is that momentum for consolidations across the industry has continued to build and no player wants to be left behind.

Along these lines, Timoni says that consolidation has been motivated by the evolving and challenging commercial and government reimbursement models which include lower fee-for-service payment rates, value-based payment components, and incentives to move care from inpatient to outpatient settings. “Basic economic theory suggests that consolidation of hospitals and physicians enables these combined providers to charge higher prices to private payers as the result of a lack of competition,” Timoni says. “Likewise, combined insurers are able to charge higher premiums to their subscribers.”

Payers and providers can prepare for this change by evaluating their operations and determining whether consolidation with another entity is advantageous. “This requires assessing an entity’s operations and the risks of consolidation,” Fisher says.

Timoni advises payers and providers to monitor the consolidation landscape and develop effective merger and acquisition strategies. These strategies should focus on optimizing economies of scale to reduce costs and finding the best partners to achieve improved quality of care and effectively manage population health.

3. Protecting data privacy

Ongoing attention will be given to protecting the privacy of healthcare data. New laws, at both the federal and state levels, will be considered that could introduce new regulatory requirements, Fisher says.

While a federal law in an election year may be doubtful, individual states are proceeding. The California Consumer Protection Act (CCPA), intended to enhance privacy rights and consumer protection, will become effective in 2020, for example. Even though the CCPA doesn’t cover all healthcare data, healthcare organizations will still collect additional information that could be subject to CCPA, which means more compliance obligations, Fisher says. Other states are considering how to jump on the privacy legislation bandwagon, which means that regulatory requirements will increase. “Even in the absence of legislation, payers and providers can expect individuals to assert concerns and use public pressure to drive increased attention to privacy issues,” Fisher says.

Meanwhile, debates around what is meant by privacy continue to evolve, Fisher continues. A backlash against the non-transparent sharing of healthcare data and arguable profiteering is creating anger among patients and other groups. Simultaneously, data breaches continue to be reported on a daily basis. Add in that healthcare is a prime target, and all of the factors point to healthcare needing to do more to protect data.

Payers and providers can embrace increased data privacy by focusing on existing compliance efforts, which will require taking time to better understanding HIPAA. “Ignoring or only making superficial efforts to respect data privacy is insufficient,” Fisher says. “Merely doing what is legally permissible may not be good enough.”

4. Consumerization of healthcare

As patients assume more financial responsibility for their healthcare costs due to higher premiums, co-pays, co-insurance, and deductibles, they have become more concerned with the value of the care they receive as well as cost. Patients will likely demand improved access to clearer benefits, billing, and network information to improve transparency, says Brooks Dexter, MBA, Los Angeles-based managing director and head of the healthcare M&A advisory practice at Duff & Phelps, a global consultancy firm.

“Healthcare providers must follow suit to meet value expectations and deliver more consumer-friendly services or may risk losing market share to innovative new healthcare arrangements, such as direct primary care, which offer convenient and quality care with simplified medical billing,” Dexter says. Some ways to do this are to offer better patient portals, expanded hours, improved access, and clear procedure pricing. Despite the trend, payers and providers will most likely continue to resist CMS’ efforts to force greater cost transparency by requiring hospitals to post payer-specific negotiated charges for common services that can be shopped.

Furthermore, Peter Manoogian, principal at ZS, a consulting firm focused on healthcare in Boston, says that the voices of older adults will become comparatively louder as this rapidly growing segment becomes more tech-savvy. The Trump Administration supports increased use of Medicare Advantage and expanding consumer choices. Plan options will reach a record high this year and create an unprecedented amount of choices for this population. The average number of plans a beneficiary has access to this year will be 28, up by a whopping 50% from 2017. What’s more, new entrants that boast a customer-driven approach such as Oscar Health are entering the fray in major markets such as New York and Houston.

Health plans need to be laser focused on improving their understanding and engagement of their customers—who are evolving themselves. “To stay ahead of the change, health plans need access to the right data coupled with leading-edge analytics and technology to continuously mine insights on what members are seeking in their healthcare experience, how patients and providers interact throughout their healthcare journey, and how to meet the needs of future healthcare customers,” Manoogian says.

Health plans will need to take more of a retail focus than what they’re accustomed to, Manoogian says. The bar for providing a great experience and retaining members will also increase.

5. More technological innovations will emerge

Technological innovation will continue to dramatically and rapidly change the manner in which healthcare is delivered, resulting in more personalized care, improved clinical outcomes and patient experience, and overall quality of life. “Information systems, mobile technology, high-tech digital devices, and electronic medical records will allow payers and providers to accurately measure clinical outcomes and effectively manage the continuum of medical care and their population’s overall health,” Timoni says.

One specific way that care will change is that providers will start seeing telehealth play a more critical role in care delivery as the brick-and-mortar, in-person care model becomes less common. “Telehealth will grow past a nice-to-have tool into a standard of care, particularly for low-risk and predictable appointments,” says Cindy Gaines, MSN, RN, clinical leader, Population Health Management, Philips, a company focused on transforming care through collaborative health management in Alpharetta, Georgia. This transformation will enable providers to better tailor their care to patients’ unique needs, while increasing patient autonomy and engagement.

Technological innovations are occurring due to booming private sector interest and investment in medical technology innovation. “Patients are demanding real-time health information, personalized medicine, higher quality of care, and convenient treatment options,” Timoni says. “Payers are demanding more detailed and expansive outcomes data to scientifically manage the reimbursement system to lower costs and improve their subscribers’ health. The medical and information technology fields are attracting more high-skilled workers, who will continue to drive innovation to new levels as long as investor interest is sustained.”

Regarding the increased use of telehealth, Gaines says that many appointments that occur in a hospital today can take place outside of the hospital. And, as the healthcare industry increasingly moves toward value-based care, providers need to extend their line-of-sight outside of a hospital’s four walls. For example, a low-risk follow-up appointment after an operation is usually mostly dialogue and has a predictable outcome—it could be conducted electronically. “By filling up hospitals with visits that could occur virtually, it makes it harder for patients who need face-to-face healthcare access to get it,” she says.

A lack of insurance coverage is a major impediment to telehealth adoption for most health systems. Therefore, providers should pair guaranteed reimbursement opportunities with change management workflows to advance these efforts, Gaines says. They would also be smart to leverage their patients’ everyday devices to manage their care, whether it’s on their smart phone, a fitness watch, or voice assistant.

To embrace technological innovation, payers and providers must continue to be educated and aware of the expanding medical technology landscape and develop technology investment and deployment strategies. “Consider investing and participating in technology venture capital funds and partnering with private sector technology manufacturers and research institutions,” Timoni says.