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Hospital groups, health systems sue HHS to halt $1.6B in payment cuts
Three hospital groups and three provider organizations sued HHS Monday in an attempt to stop payment cuts for drugs purchased through the 340B Drug Pricing Program.
The lawsuit, which was filed in U.S. District Court for the District of Columbia, was filed by the following hospital groups: the American Hospital Association, America’s Essential Hospitals and the Association of American Medical Colleges. The groups were joined in the lawsuit by three health systems: Brewer, Maine-based Eastern Maine Healthcare Systems; Detroit-based Henry Ford Health System; and Hendersonville, N.C.-based Park Ridge Health.
Earlier this month, CMS released its 2018 Medicare Outpatient Prospective Payment System rule, which finalizes a proposal to pay hospitals 22.5 percent less than the average sales price for drugs purchased through the 340B program. That’s compared to the current payment rate of average sales price plus 6 percent. This change would reduce Medicare payments to hospitals by $1.6 billion.
The lawsuit argues the 340B provisions of the OPPS final rule violate the Social Security Act and should be set aside. The lawsuit further alleges the 340B provisions are outside of the HHS secretary’s statutory authority.
The hospital groups and health systems are seeking an injunction that would prohibit HHS from implementing the 340B provisions of the OPPS final rule pending resolution of the lawsuit.
“From its beginning, the 340B Drug Pricing Program has been critical in helping hospitals stretch scarce federal resources to enhance comprehensive patient services and access to care,” said Rick Pollack, president and CEO of the AHA. “CMS’s decision to cut Medicare payments for so many hospitals for drugs covered under the 340B program will dramatically threaten access to healthcare for many patients, including uninsured and other vulnerable populations. This lawsuit will prevent these significant cuts from moving forward.”
House GOP tax plan eliminates tax-exempt bonds that finance hospitals
House Republicans recently unveiled a tax reform plan that calls for the elimination of private activity bond issuance, which is likely to significantly impact the entire nonprofit hospital sector.
Nonprofit hospitals issue tax-exempt bonds to finance capital projects. Under the tax plan, interest on newly issued private activity bonds would no longer be tax-exempt. This change would reduce financing options for lower-rated healthcare organizations by raising the cost of capital, according to S&P Global Ratings.
“From a credit perspective, higher borrowing rates can lead to budget imbalances, a challenge for all, and a hallmark of struggling credits,” said S&P. “We believe operating margin pressure is likely to be exacerbated by the House tax proposal, as it will pressure costs and hurt margins for a considerable portion of our rated healthcare providers.”
The American Hospital Association also noted how the tax plan could negatively impact healthcare providers. “For many communities, tax-exempt financing, such as private activity bonds, has been a key to maintaining vital hospital services,” said Tom Nickels, executive vice president of the AHA. “If hospital access to tax-exempt financing is limited or eliminated, hospitals’ ability to make investments in new technologies and renovations in the future will be challenged.”
Senate Finance Committee Chair Orrin Hatch, R-Utah, released a draft of Senate Republicans’ tax plan on Thursday. Unlike the House tax proposal, the Senate’s tax plan would not eliminate hospitals’ ability to access low-cost capital financing through tax-exempt bonds.
Advocate Health Care’s net income falls 27%
https://www.beckershospitalreview.com/finance/advocate-health-care-s-net-income-falls-27.html
Downers Grove, Ill.-based Advocate Health Care saw net income fall as expenses climbed in the third quarter of fiscal year 2017.
The nonprofit health system reported net income of $169.6 million in the third quarter ended Sept. 30, according to unaudited financial documents. That is down 26.8 percent compared to $231.8 million in the third quarter of 2016. Advocate Health Care attributed the decrease to lower return on investment in the most recent quarter compared to the same period last year.
At the same time, the system reported a 13.8 percent increase in expenses. Advocate Health Care recorded expenses of $1.5 billion in the third quarter of 2017, up from $1.3 billion reported in the same quarter of 2016. The uptick in expenses reflected inflation increases and labor costs, with Advocate Health Care posting a one-time expense of $10 million for employees accepting early retirement plans.
Advocate Health Care also saw revenue increase 13.8 percent to $1.6 billion in the third quarter of this year compared to the same period in 2016. When excluding the elimination of revenue under contracts with the system’s physician arm, Advocate Physician Partners, total revenue reflected higher admissions and medical group visits, among other factors.
Advocate Health Care ended the third quarter of 2017 with operating income of $56.2 million, up $7.2 million from the same period in 2016. The system attributed the change to higher inpatient volumes and payment rates. Advocate Health Care achieved the same operating margin for the third quarter of this year as the third quarter of 2016: 3.6 percent.
The evolving CFO role, in quotes
https://www.beckershospitalreview.com/finance/the-evolving-cfo-role-in-quotes.html
As healthcare evolves, so too are the roles of hospital and health system CFOs.
The CFO role is becoming more strategic as organizations face additional financial pressures and navigate the shift to value-based care. CFOs today generally play a greater role in operations and are seen as business partners by CEOs.
Four panelists provided thoughts on this evolving role during a session at the Becker’s Hospital Review 6th Annual CEO + CFO Roundtable in Chicago. Here are quotes from the panelists.
Jim McNey, senior vice president and CFO of North Kansas City (Mo.) Hospital, addressed the development of Centrus Health, a physician-led clinically integrated network including City, Mo.-area physicians across NKCH, the University of Kansas Health System, Merriam, Mo.-based Shawnee Mission Health and Kansas City Metropolitan Physician Association. In these types of scenarios, he said the CFO almost acts like a “salesman.”
“You have to sell these ideas to people who may not be receptive. … You’ve got to go out. You’ve got to get educated. You’ve got to stay current on what’s going on. …You can’t ever quit learning.”
Britt Tabor, executive vice president and CFO/treasurer of Chattanooga, Tenn.-based Erlanger Health System, noted the move away from the traditional CFO role.
“What I’ve seen … is there’s [now] dramatic input of the CFO from a strategic and operation standpoint. I’m meeting with two or three physicians a week talking about the business model of the health system.
“As pressures have come, we’ve hired a lot of doctors. I do think physicians are getting the idea that we’ve got to balance the quality, the patient care and the business scene,” he added.
Angela Lalas, senior vice president of finance for Loma Linda (Calif.) University Health, talked about the skills necessary for today’s CFO.
“We’ve [previously] looked at finance professionals as number crunchers and more focused on historical. Now it’s more communication and interpersonal skills [are the] top needs for finance professionals to become impactful and effective.”
Brad Fetters, COO of Prism Healthcare Partners, a healthcare consulting firm, described the finance discipline as “becoming more sophisticated.”
“What I mean by that is the leadership used to be kind of the scorecard — they were in the room to make sure the numbers jived up — then somebody else was working with physicians and influencing. What you’re seeing now … in other industries … [is] when CEOs abruptly leave … they promote the CFO because they’ve gotten more strategic, there [are]softer skills around influencing and changing behaviors. That’s what you’ve got to do with this information so those successful CFOs are in the room kind of influencing everybody.”
Mayo Clinic’s operating income more than doubles
https://www.beckershospitalreview.com/finance/mayo-clinic-s-operating-income-more-than-doubles.html
Rochester, Minn.-based Mayo Clinic recorded operating income of $182 million in the third quarter of 2017, more than double its operating income of $86 million in the same period last year, according to recently released bondholder documents.
Mayo saw revenues climb 9.3 percent year over year to $2.97 billion in the third quarter of 2017. The financial boost included an increase in patient service revenue and premium revenue.
The system kept its expenses in check in the most recent quarter. Mayo said expenses rose to $2.79 billion in the third quarter of this year, up 5.9 percent from the same period of the year prior.
Mayo’s operating margin in the most recent quarter was 6.1 percent, compared to the third quarter of 2016, when the organization recorded a 3.2 percent margin.
New healthcare fraud trends managed care organizations need to watch
Even traditional fraud schemes can be difficult to detect, and new methods will only make things more difficult for security teams watching healthcare dollars, says Shimon R. Richmond, special agent in charge at the Miami Regional Office in the Office of Investigations for the Office of the Attorney General.
Richmond gave a presentation on healthcare fraud trends on November 16 at the annual National Healthcare Anti-Fraud Association conference in Orlando, and says hypervigilance is key because obvious red flags are rare.
Where fraud is most prevalent
Richmond says these methods are often based in home health care, personal services, community-based services, and hospice care.
“We see a lot of unnecessary services and billing for services not provided. In the personal care services arena there are a lot of incestuous relationships in terms of who’s providing the care, who’s receiving the care, and who’s billing,” Richmond says. “One really kind of significant theme is pervasive and that’s the overwhelming influence of kickbacks in every area of fraud that we’re seeing.”
Kickbacks can be difficult to detect because this type of fraud often occurs outside of medical systems, he says. Data analytics systems can help, particularly if a system can recognize spikes in billing patterns or from certain providers.
“That’s a red flag. There are those anomalies that we can identify in a proactive manner. But the outside financial arrangements are really something that law enforcement is really only able to get into once we delve into an investigation,” Richmond says.
New fraud trends
Emerging fraud trends are another challenge when counteracting fraud. It’s difficult to get in front of a new problem that hasn’t been seen before, and the game is always changing, Richmond says.
Recently, Richmond says he has seen an uptick in inappropriate prescriptions for SUBSYS (fentanyl sublingual spray), which is meant to be prescribed to treat breakthrough pain in cancer patients.
“We’ve seen a huge issue lately where it is being marketed and prescribed to noncancer patients,” Richmond says. “Huge amounts of this drug are being prescribed, but the prescriber is not an oncologist.”
Pharmacies can also be involved in fraudulent activities by searching patient insurance plans to find high-cost prescriptions that can be filled and paid for. The pharmacies then target those consumers to push medications they don’t need, or bill for prescriptions that are never filled.
“A lot of times it’s a bait-and-switch type situation where they’ll do some kind of advertising for a knee brace or some other kind of thing just to get patients to call a number,” Richmond says. Once patients call, they are told the product they were interested in is not available but are offered a more expensive substitute. “There are a lot of marketing companies out there that are acting as lead generators where they are essentially selling to patients the idea of trying out these pains creams or scar creams.”
Hospitals and provider groups in financial distress are also becoming involved in fraud schemes, setting up in-house labs or working with outside labs to generate claims, often for fraudulent genetic testing or urine/drug screens. They may bill for unneeded tests with a kickback, or collect samples that never get tested but are still billed, he says.
Cyber threats and identity theft also continue to be a problem, Richmond says, with a huge spike in the area of telemedicine.
New fraudsters enter the arena
“We are seeing bulk cash transfers, weapons caches, and drug organizations migrating in as they develop their technological abilities and acumen in how to exploit electronic health records,” Richmond says. “This is kind of an evolving threat, and unfortunately, so much of the information is obtainable either online or through an employee that compromises the organization and practice.”
Security teams have to focus on trending information from data on encounters and billing practices, and analyze patterns just to try and keep up.
“I can’t emphasize enough the value of the investments in the analytics and proactive monitoring. That is crucial. Being in the law enforcement arena, a lot of our proactive efforts involve a combination of those analytics and looking for those outliers, or those parts that don’t make sense,” Richmond says. “At the end of the day, it’s all about hypervigilance.
Top waste, fraud, and abuse red flags, and how to identify them
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In some cases of healthcare fraud, it’s easy to spot red flags. But in large healthcare organizations, or on the payer end, fraud and waste can be more difficult to detect through layers and layers of data.
During his presentation, “Using Analytics to Drive Payment Integrity and Reduce Fraud,” on November 16 at the annual National Health Care Anti-Fraud Association Annual Conference in Orlando, Ben Wright, AHFI, senior payment integrity solutions architect at SAS Fraud & Security Intelligence Global Practice, discussed how health systems and payers can meet these challenges.
“In larger healthcare organization, you want to make sure you are protecting from larger loss,” Wright said. “Waste and abuse are clearly much more expensive in most cases than intentional fraud.”
Managed care has not reduced fraud, waste, and abuse in the way it was hoped at inception, Wright he said, and the need to coordinate efforts and create enterprise-wide solutions has never been greater.
How technology can help
Analytics platforms can help identify subtle changes in behavior and practice that can be indicative of fraud, waste or abuse, Wright said. This can include identifying errors and duplicates in the billing system, and fraud and wasteful or abusive practices.
He noted three types of analytics that can help:
1. Behavior analytics is the closest approximation of true fraud detection, he said. It can help systems identify behaviors that are most likely to indicate fraud. For example, a provider who prescribes outside of the norm for their specialty, or a practice that documents more patient encounters than makes sense.
2. Claim analytics uses customized product or policy data to sift through abuses of rule sets, coding designations, prescription rates, and more.
3. Clinical targeting reviews level of care issues.
They key to using these analytics, Wright said, is to view them as enterprise-wide and to coordinate efforts across platforms and services, not within silos.
A hybrid of the above analytics methods is most effective, he said, using behavioral analytics, payment policy and coding guidelines, and clinical targeting together.
Examples of big red flags
Wright shared with Managed Healthcare Executive several examples of service line issues or red flags to watch out for.
· Provider specialty mismatch. A provider who has general medical training but a specialty in neurology might warrant closer investigation if he is prescribing outside his specialty’s norm. Say a neurologist is prescribing a lot of opioid medications, Wright said. Investigators may want to review what tests are being ordered and why. It may become clear that the tests ordered and the level of evaluation of the patients for which those medications were ordered does not match what you might expect from a neurologist. “If you find that the tests don’t match, that would be a behavior that would be atypical for a community of neurologists,” Wright said. “That provider might get additional scrutiny. It’s a combination of their behavior versus behavior that might be expected.”
· Locum tenens physician rates. These physicians fill in for absent physicians, but sometimes can be used to increase patient volume and revenue. In one case, Wright said, a physician was seeing patients in an emergency department while a locum tenens provider saw the physician’s other patients in the office. All of patient visits were paid at the provider’s rate, but the locum tenens should have been paid at a lower rate. This is a violation of locum tenens rules, but also indicates oan inappropriate agreement between the provider and the hospital, as well as an exploitation of the locum tenens physician.
There is so much data at a plan or health system’s fingertips now, the key is managing it to get the information you need. Increased specificity of coding, for example, provides a lot of data on disease management, but not a lot toward improving payment integrity.
“Intentional fraud is a very small percentage of the community, but it’ a huge amount of dollars,” Wright said. “Meanwhile, waste and abuse can happen on many levels.”
HENRY KOTULA 