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Top Three Trends in Mergers, Acquisitions, and Partnerships

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Learn how MAP activity is reshaping the healthcare landscape with these three key findings.

Mergers, acquisitions, and partnerships (MAP) show no sign of slowing down, and their momentum is expected to increase in the coming years, according to the HealthLeaders Media report Mergers, Acquisitions, and Partnerships: Examining Financial and Operational Impacts. MAP activity is “driven by the move to value-based care and provider needs for greater scale and geographic coverage,” says Jonathan Bees, senior research analyst at HealthLeaders Media.

The report also includes findings from a HealthLeaders Media survey, which polled 190 senior executives on recent and future MAP activity. The majority of respondents (71%) say their organizations plan to increase MAP activity in the next three years, with 68% exploring potential deals and completing deals underway over the next 12–18 months.

Here are three key findings from the latest wave of MAP activity.

1. MAPs lead to positive clinical and financial results

When healthcare organizations commit to a MAP activity, they are equally focused on meeting financial and care delivery objectives. Organizations cite a variety of financial reasons for pursuing MAP planning or activity, including to improve financial stability (63%), to improve operational cost efficiencies (61%), to increase market share in their geographical area (60%), and to improve position for payer negotiations (59%).

The results show that larger organizations are more interested in expanding geographic reach compared to smaller entities, which are more focused on meeting financial goals. Respondents say their top care delivery objectives include improving their position for care delivery efficiencies (65%), improving clinical integration (55%), and improving their position for population health management (54%).

Respondents are generally positive about MAP financial and clinical results. Nearly half (46%) say their net patient revenue increased following a recent MAP activity, while 28% report it remained the same. Only 6% experienced a decrease. Moreover, 73% of respondents expect the cumulative total dollar value of their organization’s MAP activity to increase within the next three years. Clinical markers are up as well, with 35% reporting quality outcomes increased after a MAP activity and 40% saying they remained the same. Patient readmission results were mixed. Forty percent mention they stayed the same, while 18% saw a decrease, and 11% experienced an increase.

2. New partnership deals are emerging

The majority of recent MAP activities don’t fall under a merger or acquisition category, technically. Twenty-nine percent of survey respondents report their most recent MAP activity was a contractual relationship that wasn’t an M&A. “The use of non-M&A partnerships is expected to grow because this type of agreement is typically less expensive than traditional M&A and usually doesn’t require an exchange of assets or a change of local governance,” according to the  report.

In the broader healthcare environment, transformative developments are also taking place, says Brent McDonald, head of Healthcare Strategic Advisory Services, managing director at Bank of America Merrill Lynch. “The U.S. healthcare landscape is certainly undergoing changes that are beyond the more traditional horizontal (hospital-to-hospital) mergers,” he says, pointing to Amazon’s announcement that it will enter the healthcare space, United/Optum’s acquisition of DaVita Medical Group, and the contemplated merger between CVS and Aetna.

3. Why most deals fall apart

As a MAP comes together, the due diligence period begins, and so does the potential for derailment. Financial liabilities and cultural issues are the leading causes for shutting down a MAP deal. The top three financial reasons MAPs are abandoned before or during due diligence are concerns about assumption of liabilities (21%), costs to support the transaction were too high (19%), and concerns about price (19%).

The operational reasons for backing out of a MAP include incompatible cultures (30%), concerns about governance (24%), and concerns about the operational transition plan (21%). Cultural clashes can occur at every level of the organization. “Oftentimes, you have cultural compatibility at the senior level (those who are consummating the deal), but find that culture throughout the remaining levels of the organization is not as conducive to a merger,” says Pamela Stoyanoff, MBA, CPA, FACHE, executive vice president, chief operating officer at Dallas-based Methodist Health System, and lead advisor for the HealthLeaders Media MAP survey. “That is something you don’t necessarily see until later, after the deal is done.”

Don’t lose sight of your key stakeholders

In this period of heightened MAP activity and an uncertain future, it’s important that healthcare organizations focus on building sustainable consumer-centered care models. It is critical to set strategic goals that strengthen an organization’s relevance with and attractiveness to employers and payers, as well as increase patient convenience and connectivity, says McDonald. “It would be prudent to keep a keen focus on positioning health systems with their key stakeholders in mind and on becoming/continuing as the healthcare delivery network of choice and a ‘must have.’ ”

 

 

Virginia Senate approves Medicaid expansion

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Virginia Senate approves Medicaid expansion

Virginia Senate approves Medicaid expansion

Virginia is on the cusp of expanding Medicaid after the Senate on Wednesday narrowly approved a budget that would allow the state to cover as many as 400,000 low-income people.

The House, which already voted in favor of expansion earlier this year, will have to vote again before the bill can go to Gov. Ralph Northam (D). Northam has made expansion one of the top priorities of his administration.

When it passes, Virginia will become the 33rd state, along with Washington, D.C., to expand Medicaid under ObamaCare.

The 23-17 vote for expansion is a major victory for Virginia Democrats and other ObamaCare advocates, who have been fighting for six years to convince enough Republicans in the state to accept federal money to pay for the expansion.

“We have the ability to move something through that’s very sure in these uncertain times,” said Sen. Emmett Hanger, Jr., (R), the sponsor of the Medicaid expansion compromise bill. “We can develop a uniquely Virginia plan. While it draws from the experience of many states that have been out there before us, it will serve our citizens.”

Northam’s predecessor, Gov. Terry McAuliffe (D), was unable to get Republicans in the state to expand Medicaid, but Democrats in the state have been gaining power and nearly flipped the state’s House of Delegates in November.

Under ObamaCare, the federal government originally covered 100 percent of the costs of states that expanded Medicaid beginning in 2014. In 2017, the federal share dropped to 95 percent; it will drop to 90 percent in 2020, but never fall below that amount.

The Virginia expansion relies on provider taxes as a way to raise money.

The expansion agreement comes at a cost for Democrats, as the state will eventually submit a waiver request to the federal government to impose work requirements and premiums on beneficiaries who earn more than the federal poverty level.

The Trump administration has made state innovation a priority and has promised to fast-track Medicaid waivers, especially those that will impose work requirements on beneficiaries.

Four states have been granted permission to do so — Arkansas, Kentucky, Indiana and New Hampshire — and six others have pending waivers.

Virginia has yet to work out the final details of the work requirement, but Senate proponents of the policy rejected arguments from expansion opponents that the requirement would be weak and unenforceable.

Northam has not said he supports work requirements, but he has said he will sign any legislation that expands Medicaid.

National Republicans have been attempting to derail Medicaid expansion in Virginia. White House Office of Management and Budget Director Mick Mulvaney in March urged Virginia not to pursue expansion, saying it was unsustainable, and that the administration is committed to addressing it.

Earlier on Wednesday, former Pennsylvania Sen. Rick Santorum (R) met with Virginia Republicans to speak about efforts in Washington to repeal ObamaCare, including the Medicaid expansion. Santorum has been working with conservative groups on a long-shot plan to keep repeal alive this year.

 

 

Anthem Fraud Investigator Arrested in Fraud Investigation

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A federal indictment alleges that a former fraud investigator for Anthem Blue Cross took bribes and provided coconspirators with billing codes that would bypass the insurer’s fraud protection firewalls.

Five Californians—including a physician and a former fraud investigator—have been arrested and charged in a scheme that submitted bogus claims to health insurers and used some of the proceeds to provide patients with “free” cosmetic procedures, the Department of Justice said.

The arrest follows the unsealing of a federal indictment this week that details a multi-year scheme that lured patients into two San Fernando Valley clinics to receive free cosmetic procedures—including facials, laser hair removal and Botox injections—which were not covered by insurance.

The conspirators allegedly submitted at least $20 million in claims to the insurance companies, which paid approximately $8 million on those claims, the indictment said.

The scam used the patients’ insurance information to fraudulently billed insurers for unnecessary medical services or for services that were never provided. In exchange, the alleged scammers calculated a “credit” that patients could use to receive “free” or discounted cosmetic procedures, the indictment said.

One of the coconspirators, Gary Jizmejian, 44, of Santa Clarita, was a former senior investigator at the Anthem Special Investigations Unit, the anti-fraud unit within Anthem.

The indictment alleges that Jizmejian took bribes in exchange for providing his coconspirators with confidential Anthem information that helped them submit fraudulent bills to Anthem.

In September 2012, Jizmejian gave his coconspirators insurance billing codes—CPT Codes—that Jizmejian knew could be used to submit fraudulent claims to Anthem without Anthem detecting the fraudulent claims, the indictment said.

Jizmejian also allegedly gave his coconspirators the billing code for an allergy-related lab test and told them to submit to Anthem large numbers of bills with this CPT code. The coconspirators used this billing code to submit approximately $1 million in fraudulent claims to Anthem, according to the indictment.

Jizmejian allegedly helped mask the fraud at the clinics by helping coconspirators avoid responding to inquiries from fraud investigators, diverting attention of other Anthem SIU investigators away from the clinics, and closing Anthem investigations into fraud at the clinics, the indictment said.

When reached for comment, Anthem Blue Cross issued the following response:

  • Mr. Jizmejian is no longer an Anthem employee.
  • Anthem fully cooperated with the government’s investigation.
  • We have no further comment on pending government charges or activity.

The indicted coconspirators were identified as:

  • Roshanak Khadem, aka “Roxanne” and “Roxy” Khadem, 50, of Sherman Oaks. Khadem owned and operated the two clinics at the center of the alleged scheme—R&R Med Spa, which was located in Valley Village until early 2016, and its successor company, Nu-Me Aesthetic and Anti-Aging Center, which operated in Woodland Hills.
  • Roberto Mariano, MD, 59, of Rancho Cucamonga, a physician who helped operate the clinics;
  • Marina Sarkisyan, 49, of Panorama City, who was the office manager at the clinics;
  • Lucine Ilangezyan, 38, of North Hills, an employee and insurance biller for the clinics.

All five defendants are charged with one count of conspiracy to commit healthcare fraud and 13 counts of healthcare fraud. Each count charged in the indictment carries a statutory maximum sentence of 10 years in prison.

 

 

The costs hospitals can control: 7 insights from clinical leaders on talent turnover, recruitment and retention

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https://www.beckershospitalreview.com/workforce/the-costs-hospitals-can-control-7-insights-from-clinical-leaders-on-talent-turnover-recruitment-and-retention.html

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High levels of employee turnover is costly in any industry, but as the demand for talented medical staff increases, issues with employee retention and recruitment can be particularly problematic for hospitals and health systems.

Hospitals are labor-driven entities dependent on talented frontline providers for fiscal success. In order to keep operations cost-effective, administrators must successfully recruit and retain highly skilled staff members or shoulder the financial burden of high turnover. The cost of turnover for just one experienced registered nurse can reach $88,000, according to a 2017 study published in SAGE Open Nursing. When factoring in the cost of recruitment, onboarding and lost revenue, the cost of physician turnover can reach as much as $1 million per physician, according to a 2012 study published in Recruiting Physicians Today.

High costs associated with turnover are likely to become even more palpable for many hospitals as the percentage of Americans over age 65 continues to increase, driving up provider demand. According to a 2017 projection from the Association of American Medical Colleges, the United States may face a physician shortage as high as 104,900 by 2030.

“The demand for talent, particularly for clinical executive talent, has never been greater,” Gail Wurtz, MSN, MBA, RN, vice president and account relationship executive with healthcare leadership solutions company B.E. Smith, told a room of more than 20 clinical healthcare leaders during a May 11 executive roundtable discussion at Becker’s Hospital Review Health IT + Clinical Leadership in Chicago. “You and the clinical staff you lead are the key to providing superior patient care, which supports your organization’s future success and services.”

During the roundtable event, clinical leaders split into groups to discuss issues related to turnover, recruitment and retention. After these mini-discussions, designated leaders relayed the most crucial elements of their group’s discourse to the larger group.

Here are seven insights from the roundtable.

“Location, location, location.”

1. During the discussion, an administrator from a 300-plus bed hospital in the Midwest described physician recruitment as all about “location, location, location.” While the leader’s hospital is located in a city of less than 30,000, it is located within driving distance of a major metropolitan area. The hospital tries to market its proximity to the big city when recruiting top talent.

2. The CMO of a Midwestern children’s hospital said his organization is not located in what is generally considered a “destination community.” The hospital’s location proves challenging for physician recruitment. The leader said his organization addresses these issues in a number of ways, including investment in medical residents.

“We’ve done some innovative things to tap into resident talent,” the CMO said. “We invest in them during their training with stipend programs and three-year [employment] guarantees upon residency completion, which have worked out pretty well for us.”

The CMO said the three-year mark is a critical turning point for his organization. “Within the first three years, we have a reasonably high turnover rate,” the CMO said. “Once they’re employed with us for three years, they get really engaged and they stay.”

3. Ms. Wurtz said a B.E. Smith survey of 800 hospital leaders published in January reflect executives’ comments about the importance of location when recruiting talent. In the survey, 33 percent of respondents identified location as their organization’s greatest challenge to staff recruitment, making it the most identified challenge in the survey. Twenty-four percent of respondents said access to high quality talent was their organization’s greatest challenge, making it the second-most identified challenge.

Prioritize retention to combat turnover

4. In the B.E. Smith survey, which participants completed in November and December of 2017, 35 percent of respondents said they were contemplating a job change in 2018. Ms. Wurtz said this finding highlights the importance of implementing retention programs within organizations to “foster a culture of continuity” and staff engagement.

5. During the discussion, a nurse leader who heads the intensive care unit at a medical center in the Southwest said her organization is piloting programs to hold onto top nurse talent. “There’s been more of an emphasis on new nurse hires at my organization rather than a focus on retaining top nursing talent,” the ICU leader said. “We’re looking to do more to hold onto leaders that are seasoned.”

6. The assistant director of clinical support for an academic health system based in the Midwest said her discussion group believes mentorship programs should receive more attention and resources to help develop leaders from within. Such programs could help mitigate potential overreliance on outside recruitment for leadership positions.

Focus on the nurse-physician relationship

7. During the roundtable, multiple leaders discussed the importance of creating an environment of inclusion and collaboration to facilitate positive relationships between providers — specifically nurses and physicians. As a nurse leader, the ICU director from the Southwest said strong nurse-physician relationships require both provider groups to keep the perspective of the other in mind.

“When we have good relationships, those can help retain talented employees,” the ICU director said. “For my part, I know I think very often about, ‘Do I like to work with this doctor?’ But I don’t often think, ‘Does this doctor like to work with me?’ To be successful, that kind of thinking has to go both ways.”

For more insights into hospital workforce recruitment and retention trends, click here.

 

Vanderbilt University Medical Center points to Epic rollout for 60% drop in operating income

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https://www.beckershospitalreview.com/finance/vanderbilt-university-medical-center-points-to-epic-rollout-for-60-drop-in-operating-income.html

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Nashville, Tenn.-based Vanderbilt University Medical Center saw revenues increase in the first nine months of fiscal year 2018, but the hospital ended the period with lower operating income.

Here are four things to know about the hospital’s most recent financial results.

1. VUMC reported revenues of $3.04 billion in the nine months ended March 31, up from revenues of $2.85 billion in the same period of the year prior, according to recently released bondholder documents. The hospital said the financial boost was primarily attributable to higher net patient service revenue, which climbed 5 percent year over year.

2. The hospital’s operating expenses increased 9 percent year over year to nearly $3 billion in the first nine months of the current fiscal year. The hospital’s expenses related to salaries, wages and benefits, as well as drug and supplies costs, increased year over year.

3. “The increase in salaries, wages and benefits is primarily due to increased staffing to meet additional demand associated with higher net patient service revenue, research contracts, and training costs for staff related to our EMR system implementation,” VUMC said. Higher consulting and management fees related to the Epic EMR implementation also caused the hospital’s expenses to rise.

4. VUMC ended the first nine months of fiscal year 2018 with operating income of $44.4 million, down 60 percent from $110 million in the same period a year earlier. The decline was largely attributable to higher expenses related to the rollout of the new EMR system. The hospital said it planned for future operating income reductions due to the implementation.

“We successfully completed our EMR implementation in November and we anticipate the new system will yield future efficiencies,” VUMC said. “However, in the year of implementation, increased operating expenses related to implementation caused a reduction in operating income. The EMR implementation put pressure on clinical volumes in the post-live period. Although we have achieved net patient services revenue in excess of our budget, the implementation has muted volumes.”