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Medicaid Is Great, but Rural Maine Needs Hospitals, Too

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This week Maine voted to become the 32nd state to expand Medicaid despite opposition by Gov. Paul LePage, who had vetoed five previous expansion bills passed by the state legislature and has now threatened to block the results of the ballot initiative. Unless Mr. LePage succeeds, about 80,000 more Mainers will be eligible for coverage, a victory in an unsettling year for health care in America.

With the Affordable Care Act under constant threat from the Trump administration and out-of-pocket costs rising faster than wages, health care topped the list of the most important issues facing Americans this year.

However, Maine and other rural states face a health care crisis that Medicaid expansion can’t fix on its own. It’s not about affordable coverage; it’s about access: For too many rural areas, doctors and hospitals are scarce.

In the postwar era, America made hospital construction and modernization a priority. On Aug. 13, 1946, Harry Truman signed the Hill-Burton Act,giving communities grants and loans for hospital construction. By 1975, almost one-third of American hospitals owed their creation to the law. Financing for Hill-Burton health care construction ended in 1997, but one rule from the original bill still applied: These hospitals had to give free or reduced care to people who couldn’t afford services. As rural areas aged and the population shrank because of manufacturing’s decline and the rise of a technology-driven economy centered on urban areas, hospitals struggled to stay in operation.

Under the Affordable Care Act, hospitals started shutting down at worrisome rates because of an increase in financial penalties for noncompliance with A.C.A. mandates, the cost of tighter reporting standards and smaller reimbursements for certain procedures. Since the A.C.A. became law in 2010, over 80 rural hospitals have closed nationwide. Maine alone has lost three hospitals in that time, about 10 percent of its rural total.

If closings continue at this rate, 25 percent of America’s rural hospitals will have disappeared in the decade after Obamacare’s passage. This does not take into account facility deterioration, doctor departures or department closures.

This is a big problem for Maine, which has the highest percentage of rural residents in the country, according to the most recent census data. Calais Regional Hospital in Down East Maine recently oversaw its last childbirth. The obstetrics department closed in late summer, forcing women in labor to drive 50 minutes to deliver their babies. Despite an opioid crisis that increases the chance of high-risk pregnancies, this same privately owned hospital shut down its pediatrics wing and intensive care unit in recent years, because of financial pressure from the management company halfway across the country in Tennessee.

This was hardly an isolated example in Maine. The town of Jackman closed its 24-hour emergency room in September, and Boothbay lost its only hospital in 2013. Rangeley, where my wife’s family lives, is an hour away from the nearest hospital and has no doctor in town.

Meanwhile, Maine Med in Portland, Maine’s largest city, is about to break ground for a $512 million addition just a few years after it finished a $40 million renovation. While rural Maine’s hospitals and departments are closing because of large losses, Maine Med had, for 2016, a $61 million surplus.

Medicaid expansion is a welcome source of new revenue to rural hospitals in Maine because more insured patients mean fewer uncompensated treatments. Still, it comes nowhere close to fixing the problem or, politically, putting any meaningful points on the Democratic scoreboard.

In 2016, Donald Trump won Maine’s rural congressional district by a 10-point margin and rural counties in America at large by a 26-point marginon a message of repealing and replacing Obamacare. As Maggie Elehwany of the National Rural Health Association said in an NPR interview this year, rural Americans voted for Mr. Trump in part because of health care. “They see their hospitals closing,” she noted. “And one hospital C.E.O. described it as a three-pronged stool. It’s the churches, the hospitals and the schools. If you lose one of those legs of that stool, the whole community collapses.”

Since President Trump hasn’t been able to deliver on any meaningful legislation to support rural voters, it is the Democrats’ time to deliver. One good step is a bill sponsored by the Democratic senators Tim Kaine of Virginia and Michael Bennet of Colorado called Medicare-X. It would give a public option to Americans in rural counties where limited competition has yielded higher-priced health insurance options.

It still doesn’t solve the heart of the rural problem. Democrats can’t just lower premiums and expand Medicaid. We must strengthen rural communities by making access to high-quality health care services a priority of any proposal. In any future legislation, we should demand grants for new hospitals, funds to modernize crumbling ones and financial incentives for top doctors to work in these areas. This will not only make rural communities healthier, but also more welcoming for growth and new business.

No person suffering from a heart attack should die because a hospital is too far. No pregnant mother should have to risk the health of her baby because she can’t make it to a delivery room in time. As Democrats, we believe that health care is a right. It would be a big mistake to expand health care insurance but offer no place to use it.

The Single Greatest Hospital Success Indicator

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http://www.healthleadersmedia.com/leadership/single-greatest-hospital-success-indicator?spMailingID=12324864&spUserID=MTY3ODg4NjY1MzYzS0&spJobID=1280826292&spReportId=MTI4MDgyNjI5MgS2

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Is your hospital part of a health system? A turnaround and consulting firm’s data suggest much of your organization’s success can depend on just that one factor.

But it’s rapidly becoming less so. Since I wrote this column years ago, the pressures on standalones have only increased.

Hospitals that are part of a system do far better financially than their counterparts.

“Over the past two years, we’ve noticed that the single greatest indicator of success for hospitals is whether or not they’re part of a multi-hospital system,” says Scott Phillips, managing director of Healthcare Management Partners, a Nashville-based turnaround and consulting firm that focuses on hospitals that are experiencing financial challenges and is led by experienced former C-level executives such as Phillips.

“Just that one factor provides a bottom-line advantage of four to nine percentage points [in profitability], which is almost insurmountable.”

Means to an End

Not that financial success is the overarching goal of healthcare—especially in nonprofit or government-owned healthcare, which still makes up 78.7% of hospital systems, according to Kaiser Family Foundation. But as I’ve heard countless CEOs say, “no margin, no mission.”

As a standalone hospital, you’re distressed almost by definition, Phillips says.

The firm’s data, based on Healthcare Cost Report Information System (HCRIS) data from more than 200,000 Medicare Cost Reports filed by hospitals, nursing homes, home health agencies, and other providers since 1994, supports this contention overwhelmingly. Standalone hospitals still represent roughly a third of hospitals and 30% of the beds, but they tend to be small, and are disproportionately government- or health district–owned.

When you look at standalones closely, Phillips says, usually they’re not in a position to choose their own market in any way, and single-market nonprofit systems haven’t wanted them as acquisitions for those reasons. This dynamic creates an increasing canyon between the so-called “haves” and “have nots.”

“For the have-nots, life is getting increasingly difficult,” he says. “Will many, or even most of those hospitals continue to operate inpatient beds?”

Maybe they shouldn’t. And maybe they should instead switch to providing ambulatory health services.

Many standalones have such an increasing disadvantage, he says, that they, and healthcare costs generally, would be better off if they could convert. But many can’t afford the investment to do so in either dollar terms—access to capital—or in political will.

“If they can convert to diagnostic and ambulatory centers, they would be very busy,” Phillips says.

To convert into an attractive ambulatory center is a $6 million to $10 million investment, he says, and most of them don’t have that money.

Better Management

Phillips says HMP’s data shows that every year in the system hospitals, particularly the larger hospitals, management keeps getting better. Hospitals in the top two quartiles keep getting more profitable in spite of the uncertainty around the changes in healthcare’s business model from volume to value, he says. They’re getting that principally through greater economies of scale but they are extracting more profitability at the expense of their competitors.

One of the bigger differentiators in terms of profitability is in labor efficiency, he says, the biggest element of cost.

“There’s a pretty dramatic difference in labor costs between hospitals that are in systems than are not in systems,” he says.

Government-owned hospitals are further challenged in this regard in the form of pension costs.

Declining Populations

Secondly, standalone hospitals are in 90% of the counties in the U.S., many, if not most, of which are experiencing loss of population, he says. People are moving into cities, not into the hinterlands.

“Healthcare, whether you’re talking nursing homes or hospitals, is essentially a fixed-cost business,” Phillips says. “If your population is declining, your demand for services will decline. So the best you can hope for is an increasing share in a declining market.”

That leads to declines in inpatient utilization, and for a few years, there’s been a dramatic shift from inpatient to outpatient. Another distinguishing trend is that standalones are well behind the curve in reinvestment, particularly in new clinical technologies and information technology.

Phillips says rural areas could be better served by investing in remaking many hospitals into outpatient centers and taking advantage of telemedicine, where state laws and regulations have not made that impossible or impractical.

“It’s insane that state policymakers have not opened that whole market to telemedicine,” he says. “It could be a tremendous antidote to many of the problems these hospitals have.”

No Limit: Medicare Part D Enrollees Exposed to High Out-of-Pocket Drug Costs Without a Hard Cap on Spending

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No Limit: Medicare Part D Enrollees Exposed to High Out-of-Pocket Drug Costs Without a Hard Cap on Spending – Issue Brief

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Introduction

Prescription drugs play an important role in medical care for 59 million seniors and people with disabilities.  Medicare beneficiaries have access to outpatient prescription drug coverage through the Part D prescription drug benefit, which is administered by private stand-alone prescription drug plans (PDPs) and Medicare Advantage drug plans (MA-PDs). Since the start of the Medicare Part D program in 2006, the drug benefit has helped to lower out-of-pocket drug spending for all enrollees. Beneficiaries in Part D plans with low incomes and modest assets are eligible for additional assistance with plan premiums and cost sharing through the Low-Income Subsidy (LIS) program, reducing out-of-pocket costs even further for this population.

The Centers for Medicare & Medicaid Services (CMS) establishes guidelines that all Part D plans must follow for the design of the drug benefit and the value of coverage that must be offered. Plans are allowed to vary, however, along dimensions that affect beneficiaries’ access to and costs for medications, including which drugs are covered and cost-sharing requirements. The standard Part D benefit in 2017 includes a deductible ($400), followed by 25 percent coinsurance for prescriptions up to an initial coverage limit ($3,700 in total costs), and then a coverage gap where enrollees without low-income subsidies pay a larger share of their drug costs until their out-of-pocket drug spending exceeds a catastrophic coverage threshold ($4,950). The Affordable Care Act (ACA) included a provision to phase out the Part D coverage gap by requiring plans to cover a growing share of total drug costs and providing a manufacturer price discount of 50 percent for brand-name drugs filled in the gap, with the amount of the manufacturer discount counting towards the out-of-pocket threshold that triggers catastrophic coverage. Once enrollees’ drug spending reaches the catastrophic threshold, those without the LIS pay up to 5 percent of their total drug costs; those who qualify for the full low-income subsidy pay nothing for their drugs in this phase of the benefit. Plans typically place drugs that cost over $670 per month on a specialty drug tier, with coinsurance that ranges from 25 percent to 33 percent.

Concern has been rising in recent years about the growing cost burden on Medicare and beneficiaries posed by new, unique, and expensive specialty drugs used to treat a range of diseases. The Medicare Boards of Trusteesand the Medicare Payment Advisory Commission have documented this rising cost burden on the Medicare program, which is reflected in higher Part D program spending overall, as well as higher spending for reinsurance of high-cost Part D enrollees who reach the catastrophic coverage phase of the benefit, where Medicare pays for 80 percent of drug costs. Although Part D provides coverage of catastrophic drug expenses, enrollees who do not receive the LIS are still responsible for up to 5 percent of their drug costs in this phase of the benefit. For very high-priced medications, this relatively small coinsurance rate can translate to a significant amount of out-of-pocket costs for beneficiaries who do not receive low-income subsidies.

This analysis examines the out-of-pocket prescription drug cost burden for Medicare beneficiaries in Part D plans who do not receive low-income subsidies, focusing on those enrollees who have drug costs that exceed the catastrophic coverage threshold. We refer to this group as Part D enrollees with high out-of-pocket drug costs. Although these enrollees do not comprise the entire group of enrollees who have high total drug spending that exceeds the catastrophic coverage threshold, they are exposed to a potentially large cost burden because they do not receive the financial protection of the low-income subsidies. We analyze Medicare prescription drug event claims data for 2015, the most recent year of publicly available Medicare claims data, and trends since 2007, the first full year of the Part D drug benefit. For detail on the data and methods, see the Methodology.

Discussion

In recent years, the high and rising cost of prescription drugs has emerged as a pressing issue for consumers, public programs, and private insurers. As our analysis shows, Medicare beneficiaries who do not receive the additional financial protection provided by low-income subsidies are not insulated from this cost burden and can incur substantial out-of-pocket costs for their medications. We find that one million Medicare beneficiaries in Part D plans who were not receiving low-income subsidies had high out-of-pocket costs in 2015—that is, drug spending above the catastrophic coverage threshold—and their annual out-of-pocket spending averaged over $3,000 in 2015.

Our analysis indicates that out-of-pocket costs above the catastrophic threshold represent a growing concern for people with Medicare, and both MedPAC and Medicare’s actuaries have shown that rising spending for catastrophic coverage has placed greater fiscal pressure on Medicare. Our analysis also shows that the number of Part D enrollees who did not receive low-income subsidies and had out-of-pocket spending above the catastrophic threshold has increased over time. Looking to the future, we would expect to see continued increases in the number of enrollees reaching the catastrophic coverage threshold in 2016 and later years, due in part to the ACA changes to the coverage gap as well as the greater availability and use of high-priced drugs. These trends have cost implications both for beneficiaries and, as the Medicare actuaries have projected, for Medicare.

Part D enrollees with high out-of-pocket costs in 2015 spent an average of $1,215 out of pocket on their prescriptions filled above the catastrophic threshold, or $1.2 billion in the aggregate. In other words, Part D enrollees would have collectively saved $1.2 billion if Part D had a hard cap on out-of-pocket spending, rather than requiring enrollees to pay up to 5 percent coinsurance in the catastrophic coverage phase. Placing a hard cap on out-of-pocket spending under Part D would save money for enrollees, but would increase costs to Medicare and would not address underlying concerns related to high-priced drugs.

While Part D has helped make drugs more affordable for people with Medicare, and the ACA has provided additional relief to enrollees with high drug costs by gradually closing the coverage gap, the absence of an annual out-of-pocket spending limit under Part D exposes enrollees to significant costs—unless their incomes and assets are low enough to qualify for low-income subsidies. Various proposals to reduce drug costs—including allowing the federal government to negotiate prices for Medicare beneficiaries, and allowing Americans to import drugs from Canada and other countries—enjoy broad, bipartisan public support. With a growing number of people on Medicare facing high out-of-pocket drug costs, alleviating this burden remains an issue for federal policymakers to address.

Why Tax Reform Could Be a Serious Threat to Health Care

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http://www.commonwealthfund.org/publications/blog/2017/nov/why-tax-reform-could-be-a-serious-threat-to-health-care

After nine months of unsuccessful efforts to repeal and replace the Affordable Care Act (ACA), Congress has moved on to the challenge of reforming the U.S. tax code. At first glance, it may appear that Congress has shifted priorities: The House tax proposal released last week doesn’t propose to repeal the Affordable Care Act’s individual mandate requiring health insurance, nor does it fund tax reform with cuts to Medicaid.

However, this shift in congressional focus does not mean that Republicans in Washington are done with the ACA. The executive branch continues to undermine the individual health insurance marketplaces. As Sara Collins points out in a recent post on To the Point, two presidential actions last month — the first bypassing ACA consumer protections to allow multistate association health plans, and the second ending payments to insurers for cost-sharing subsidies — are likely to increase premiums on the marketplaces by 2019. Executive branch decisions to cut funding for marketplace outreach are already making it difficult for young, healthy people to explore their insurance options, which could depress enrollment for 2018 and further destabilize the marketplaces.

Moreover, this shift in focus does not mean that the attempts to deeply cut federal health care programs are over, either. Even if congressional leaders lose their appetite for full-scale ACA repeal bills, the futures of tax reform and health care will be intertwined for at least three reasons.

First, some conservatives in the House and Senate remain committed to including ACA repeal provisions in the tax bill. And, while they initially lost in their efforts to attach a repeal of the individual mandate to the current House Bill, conservatives may withhold support unless such a provision is included in the final bill.

Second, the House tax proposal is expensive: the proposed tax cuts total $5 trillion. The budget resolution Congress passed last month allows up to $1.5 trillion of the total cost of the tax cut to be paid for with an increase in the federal deficit. That means the U.S. Treasury will have to borrow money to cover 30 percent of the cost of the House bill — a notable departure from Reagan-era tax cuts that were fully offset. This shortfall will go up over time, because several of the bill’s tax code changes expire in a few years.

While the current House proposal includes $3.5 trillion in revenue-generating provisions to help pay for the remaining 70 percent of the tax cuts, several provisions are unpopular with rank-and-file Republicans. These include a 50 percent cut to the maximum home mortgage deduction and elimination of the current deduction for state and local income taxes. If some Republicans force these provisions out of the bill or modify them to affect fewer taxpayers — changes likely to be sought by Republicans representing districts in large Blue states with high housing costs and high state taxes — then the bill will not raise the revenue required by the budget resolution. Congressional leadership would be forced to pay for tax cuts with other sources of revenue or with cuts in federal spending. Key targets would be cuts to Medicaid and Medicare.

Third, tax reform may ultimately affect access to health care in the not-so-distant future, even if specific health provisions are not included in the bill. Should it pass, the ballooning federal deficit that will follow its implementation will invariably lead to calls to reduce federal spending. Medicaid, Medicare, and ACA coverage will again be in the crosshairs given the portion of federal spending — 28 percent in 2017, growing to 40 percent in 2037 according to the Congressional Budget Office — these health programs represent.

Cedars-Sinai sees operating income decrease 11% as patient revenue dips

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https://www.beckershospitalreview.com/finance/cedars-sinai-sees-operating-income-decrease-11-as-patient-revenue-dips.html

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Los Angeles-based Cedars-Sinai Medical Center saw operating income fall in the first quarter of fiscal year 2018 as patient revenue declined.

The nonprofit medical center recorded revenue of $791 million in the three months ended Sept. 30, down about 2 percent from $810 million reported in the same period last year, according to unaudited financial documents. Cedars-Sinai saw net patient service revenue decline 3.5 percent to $722 million in the first quarter of 2018, after excluding the hospital fee program. The medical center achieved less revenue than budgeted in the most recent quarter due to lower Medicare and commercial insurer payments from decreased patient acuity.

At the same time, Cedars-Sinai saw expenses fall in the first quarter of 2018 to $726 million. That is down 1.5 percent from $737 million in expenses the hospital incurred in the same period last year. The decline reflects lower supplies costs and professional fees.

Including these results, Cedars-Sinai ended the first quarter of 2018 with operating income of $65 million, down nearly 11 percent from $73 million reported in the same period a year prior.