Spending money on the social determinants is an investment

https://www.healthcarefinancenews.com/news/spending-money-social-determinants-investment?mkt_tok=eyJpIjoiTmpCbE5tWmtNak5qTkdOayIsInQiOiJjMUJtNEJkTGxjbTNFWHl0Tmg4YUdrSjhQc0RpQWdid1VDQm5KQjBBeXRTaUluTjdwbnFnVEJ1aDhLcTNVdTl0Z2ZNM2RlbHRNRmJheDNsSVwvVU5qdHlFSkxIWHpBVHFQaVFDbnpPYkpGaU5oU1I5U0JvWEI2bFwveGRvRUpwMEZjIn0%3D

Dr. Claire Pomeroy addresses the social determinants at HIMSS19.

Value-based care demands the switch to wellcare to raise outcomes and decrease costs, Claire Pomeroy says.

Claire Pomeroy, CEO and president of the Albert and Mary Lasker Foundation, an expert in infectious diseases and a long-time advocate for patients, drove home the point of the importance of the social determinants of health by relating a story of a young woman who needed asthma medication but was unable to afford it.

She got a prescription for an inhaler she couldn’t afford, Pomeroy told a full room at HIMSS19. She knew the story because she was that woman. She needed a ride, food and money for a few days and had no way to get any of that, let alone buy a drug she couldn’t afford.

The clinicians followed all of the right clinical protocols for her condition. But, she said, “They didn’t have the information they truly needed to make me better.”

What was needed was for her clinicians to pay attention to the social determinants of health, an issue that providers are increasingly realizing need to be addressed if their population of patients is to remain healthy.

Without this attention being paid to housing, food, transportation and other socio-economic needs, costs will never be brought inline, as hospitals see patients returning to be admitted or get care through the emergency room.

“Our cost and our outcomes demand change,” Pomeroy said.

The statistics show the need. Black mothers die at truly unacceptable rates in this country, she said and all blacks in the United States have a life expectancy that is on average, 10 years less than whites.

All people in the United States who have a college degree live longer than those with a high school diploma. Stress on the job plays a part. And the opioid crisis has led to overdose deaths surpassing the odds of dying than from a car accident.

“We must redesign the U.S. healthcare system from one of sick care to wellcare,” Pomeroy said.

Healthcare makes up only 10 percent of what goes into the social determinants of health. The biggest percentage goes to behavioral patterns, genetic predisposition and social circumstances.

“We work all day and are only impacting 10-15 percent of the social determinants of health,” Pomeroy said. “Spending on social determinants make sense. We need to move beyond pilot programs and start scaling some of these things.”

Hospitals that spend money on housing to take care of their homeless population see a a 93 percent reduction in costs. For every $25 increase in delivered meals for older adults, there’s a 1 percent decline in nursing home admissions.

“Addressing the social determinants is an investment,” she said.

The biggest challenge is lack of funds for hospitals struggling to stay in the black, lack of data and siloed proprietary care information.

Information connectivity allowed one health system to learn that 31 percent of the Medicaid moms in its area were not enrolled in WIC, and therefore not getting access to food and supplies for their babies.

Technology is needed, as are more health policies for reimbursement that address risk adjustment. State innovation models help, as does the Centers for Medicare and Medicaid Services accountable health communities model, a five-year pilot looking at the connection between social assistance, health and costs.

EHRs should include information on housing, food, transportation and other needs. Systems must transform their thinking, create a new strategy, empower multidisciplinary teams, educate health professionals, invest in research and “raise our voices to drive change,” Pomeroy said.

 

 

Why Process Is U.S. Health Care’s Biggest Problem

https://hbr.org/2018/03/why-process-is-u-s-health-cares-biggest-problem?autocomplete=true

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A lot of money has been spent on information technology in health care with little to show for it. To understand why we must pay a visit to the hospital.

It only takes 10 minutes of direct observation of a nurse in a hospital to understand care-delivery processes are not standardized and are dependent on individuals, not systems. This lack of reproducibility leads to errors. Since every caregiver does it his or her own way, it’s difficult to improve anything. Stable systems that are reproducible are required to deliver consistently high quality. Industrial companies figured this out 50 years ago. The writings of manufacturing gurus Imai and Shingo provide insight into how quality is built into processes. A process must first be stabilized then standardized before being improved. Because few standardized processes exist in care delivery there are many possibilities for error. That’s why simply making a poor process electronic by implementing an electronic health record (EHR) doesn’t lead to better quality or cost.

When it comes to change, the technology is the easiest part. Most health systems in America have or are implementing the EHR. And the vendor processes for implementation have become very good. The hard part is to get the doctors, nurses, and administrators to agree on what is the best way to deliver the care. Since the doctors control most care decisions, the rest of the provider team follows the doctors’ lead. If the doctor wants to do things a certain way, that’s what is done. The problem is the next doctor wants it his way and so on. Eventually, we end up with a hopeless mess in which no one knows how anything should be done on any given day. And good luck to a new nurse or technician coming into the system who must learn a multitude of work processes and remember the doctor-dependent differences.

Health care technology is very effective when it is used to support a well-designed care process. The design of new standard care processes need to be owned and driven by the people doing the work, not by some outside consulting firm that brings a 100-page playbook as the answer. As the frontline workers create new designs, they need certain systems that can help them deliver the improved care. Examples of these systems include electronic alerts for medication interactions and reminders to ensure all steps in the care process for the pneumonia patient are followed.

There are two types of improvement systems needed to create a well-designed care process. One is an improvement approach that brings members of an existing clinical team members together to improve an existing care process. They use proven improvement methods such as the principles, systems, and tools of the Toyota Production System (TPS). The second is an innovation process aimed at radically redesigning care. It’s associated with TPS and employs design thinking.

In both cases, the initial effort where rapid experimentation occurs might be an ambulatory clinic or an ER. It becomes a place for others in the organization to learn. It is an inch-wide, mile-deep change in practice that incorporates new processes not only for care delivery but also management. It should result in the systems necessary for sustaining improvement over time. As the model line achieves 50% to 80% improvement over baseline performance, the learning should be spread to other parts of the organization. This new way becomes the new best-known way to deliver care.

One example of a radical innovation is the attempt of HealthEast (now part of Fairview Health Services), which serves the Minneapolis-Saint Paul area, to create the clinic of the future. The leaders brought the vendors in their extended supply chain to the table to help in the design process. This included Epic, an EHR company; Herman Miller, an office furniture company; Boldt, a construction company; and HGA, an architectural firm. Together, the team began redesigning the care-delivery model. Each vendor had the opportunity to deeply understand the needs of the HealthEast providers. By the end of the design phase a new process supported by electronic records, architecture, furniture, and building was integrated to create a unique patient experience.

Before HealthEast formed the model clinic, a group of 11 clinicians had over 11 preferred ways for “their” clinic assistant to do just about everything. One key process, screening the patient for health risks such as cancer and hypertension, resulted in over seven places in the EMR for the provider to look for relevant information. Not only is that time-consuming (contributing to physician burnout), but it also greatly increases the chances of missing important information.

The multi-disciplinary team created a single screening process. Now, clinicians have just two places to look in the EMR for information on whether patients have had screens like mammograms and colonoscopies for cancer, staff can remind patients about what screening tests they need, and leaders are able to support the development of standardized clinical processes. The leader’s standard work is to audit the process and monitor the data. If the process stops being followed or the data shows deteriorating results, leaders will know that immediately.

In the first three months after its introduction, the redesigned process reduced provider search time per patient by 23 minutes. The overall screening rate went from 60% compliance to 72% compliance, meaning over 500 more individuals were appropriately screened over baseline. Perhaps more telling are the changes in patient comments. They went from comments such as “I do not feel my medication list was reviewed,” to “My doctor and medical assistant are always timely, thorough, and reassuring.” These results would not have happened unless all parties were working to build a better process.

Technology now exists to support disruptive innovation in health care. It is an important enabler, but the process must precede the technology. For example, Hospital at Home is an innovation that may well cut the cost of care significantly by reducing the need for inpatient beds. It couldn’t happen without the technology, which allows 24-hour monitoring of patients, real-time electronic communication between providers, and complex equipment to be rapidly set up in the patient home. But it still requires a nurse and a doctor.

What that nurse and doctor do and how they do it are still what will determine successful outcomes of care. Building the care process through careful understanding of what each process step delivers is critical. The medical team can then leverage the technology for data and communication and other needs that support the steps in the process.

Again, this requires standardized work. Every nurse and doctor does not get to do it his or her own way. Standards are established about how the work is performed, and those standards are followed by all until a better way is determined collectively by the team. New innovative care models such as Hospital at Home are based on clear and reproducible standards and will obsolete the old ways of the non-standardized care delivered in most hospitals.

***

It takes more design time to create a care model that builds in quality and efficiency, but without that work upfront, the technology doesn’t matter and, in fact, only increases costs. This thinking is not new. Many industries from aviation to automotive to nuclear power have been applying this concept of “process before technology” for a long time. The safety and quality results in those industries is second to none. It’s about time health care catches up. Our lives may depend on it.

 

 

 

Top Six Healthcare Executive Challenges in 2019

http://www.managedhealthcareexecutive.com/executive-express/top-six-healthcare-executive-challenges-2019

The pace of change in healthcare is not slowing down; in fact, it is accelerating. Healthcare organizations that are most successful in 2019 will know what challenges and changes are coming down the pipeline, and they will prepare accordingly.

To help ensure you don’t get left behind, we’ve assembled the top six challenges the industry will face in 2019.

1. Shifting the focus from payment reform to delivery reform. For the past few years, C-suite leaders at healthcare organizations have been focused on navigating healthcare payment reform—attempting to preserve, improve, and maintain revenue. Amidst those efforts, delivery reform has sometimes taken a back seat.

That will need to change in 2019. Organizations that are the most successful will focus more on patient care than revenue, and they will see improved outcomes and reduced costs as a result.

Many organizations are already exploring delivery reform with initiatives that focus on:

  • Remote health monitoring and telemedicine;
  • Population health management;
  • Patient engagement;
  • Social determinants of health; and
  • Primary care.

In 2019, however, they will need to bring all of these initiatives together to implement sustainable improvements in how healthcare is delivered.

An added bonus? Organizations that accomplish this will see enhanced revenue streams as value-based reimbursement accelerates.

2. Wrestling with the evolving healthcare consumer. Healthcare consumers are demanding more convenient and more affordable care options. They expect the same level of customer service they receive from other retailers—from cost-estimation tools and online appointment booking to personalized interactions and fast and easy communication options such as text messaging and live chats.

Organizations that don’t deliver on these expectations will have a difficult time retaining patients and attracting new ones.

That’s not the only consumer-related challenge healthcare organizations will face. In 2019, millennials (between the ages of 23 and 38), will make up nearly a quarter of the U.S. population.

This generation doesn’t value physician-patient relationships as highly as previous generations. In fact, nearly half of them  do not have a personal relationship with their physician, according to a 2015 report by Salesforce.

Finding ways to maintain or increase the level of humanity and interaction with millennials will be a key challenge in 2019. Patient navigator solutions and other engagement tools will be critical to an organization’s success.

3. Clinician shortages. Physician and nurse shortages will continue to intensify in 2019, creating significant operational and financial challenges for healthcare organizations.

The most recent numbers from the Association of American Medical Colleges predict a shortage of up to 120,000 physicians by 2030. On the nursing side, the Bureau of Labor Statistics projects a need for 649,100 replacement nurses by 2024.

The implications of the shortages, combined with the fact that healthcare organizations face a number of new challenges in the coming years, are many. Fewer clinicians can lead to burnout, medical errors, poorer quality, and lower patient satisfaction.

Healthcare organizations that thrive amidst the shortages will find new ways to scale and leverage technology to streamline work flows and improve efficiencies.

4. Living with EHR choices. Despite the hype and hopes surrounding EHRs, many organizations have found that they are failing to deliver on their expectations.

recent Sage Growth Partners survey found that 64 percent of healthcare executives say EHRs have failed to deliver better population health management tools, and a large majority of providers are seeking third-party solutions outside their EHR for value-based care.

The survey of 100 executives also found that less than 25% believe their EHRs can deliver on core KLAS criteria for value.

As we recently told Managed Healthcare Executive, that statistic is striking, considering how important value-based care is and will continue to be to the industry.

Despite the dissatisfaction surrounding EHRs, switching EHRs may be a big mistake for healthcare organizations. A recent Black Book survey found 47% of all health systems who replaced their EHRs are in the red over their replacements. A whopping 95% said they regret the decision to change systems.

Hospitals and physician may not be entirely happy with their EHR choices, but the best course may be to stick with their system. Highly successful hospitals and health systems will find ways to optimize workflow and patient care which may involve additional IT investments and best of breed investment approaches, rather than keeping all of the proverbial eggs in the EHR basket.

5. Dealing with nontraditional entrants and disruptors. In 2018, several new entrants entered and/or broadened their reach into healthcare.

Amazon acquired online pharmacy retailer PillPack, and partnered with JPMorgan Chase and Berkshire Hathaway to create a new healthcare partnership for their employees. Early in 2018, Apple announced it was integrating EHRs onto the iPhone and Apple watch, and recently, Google hired Geisinger Health CEO David Feinberg for a newly created role, head of the company’s many healthcare initiatives.

New partnerships have also arisen between traditional healthcare entities that could result in significant healthcare delivery changes. Cigna and Express Scripts received the go-ahead from the DOJ for their merger in September, and CVS and Aetna formally announced the completion of their $70 billion merger November 28.

Read more about the top two ways the CVS-Aetna merger could change healthcare.

All of these new industry disruptors and mergers will impact healthcare organizations, likely creating new competition, disrupting traditional healthcare delivery mechanisms, creating price transparency and pressures, and fostering higher expectations from consumers in 2019. Keeping an eye on these potential disrupters will be important to ensuring sustained success in the long term.

6. Turning innovation into an opportunity. From new diagnostic tests and machines to new devices and drug therapies—the past few years in healthcare have seen exciting and lifesaving developments for many patients. But these new devices and treatment approaches come with a cost.

One of biggest 2018 developments that best exemplifies the challenge between innovation and cost is CAR T-cell therapy. This new cancer treatment is already saving lives, but it racks up to between $373,000 and $475,000 per treatment. When potential side effects and adverse events are accounted for, costs can reach more than $1 million per patient.

Finding the best way to incorporate new treatments like this one, while balancing outcomes, cost, and healthcare consumer demands, will be a top challenge for healthcare organizations in 2019.

 

 

 

Optum a step ahead in vertical integration frenzy

https://www.healthcaredive.com/news/optum-unitedhealth-vertical-integration-walmart/520410/

Vertical integration is all the rage in healthcare these days, with Aetna, Cigna and Humana making notable plays. 

If the proposed CVS-AetnaCigna-Express Scripts and Humana-Kindred deals are cleared by regulators, the tie-ups will have to immediately face UnitedHealth Group’s Optum, which has been ahead of the curve for years and built out a robust pharmacy benefit manager (PBM) business already along with a care services unit, employing about 30,000 physicians and counting.

UnitedHealth formed Optum by combining existing pharmacy and care delivery services within the company in 2011. Michael Weissel, Group EVP at Optum, told Healthcare Dive the company began by focusing on three core trends in the industry: data analytics, value-based care and consumerism.

Since then, the company has been on an acquisition spree to position itself as a leader in integrated services.

“For the longest time, the market assumed that they were building the Optum business [to spin it out] and what is interesting in the evolution of the industry is that that combination has now set a trend,” Dave Windley, managing director at Jefferies, told Healthcare Dive.

“United has now set the industry standard or trend … to be more vertically integrated and it seems less likely now that United would spin this out … because many of their competitors are now mimicking their strategy by trying to buy into some of the same capabilities,” he said.

Weissel said Optum will continue to push on the three identified trends in the next three to five years, with plans to invest heavily in machine learning, AI and natural language processing.

The question will be whether and how the company can keep its edge.

What Optum is

Optum is a company within UnitedHealth Group, a parent of UnitedHealthcare. Optum’s sister company UnitedHealthcare is perhaps more well known within the industry and with consumers.

However, Optum, a venture that encompasses data analytics, a PBM and doctors, has been gradually building its clout at UnitedHealth Group.

In 2017, the unit accounted for 44% of UnitedHealth Group’s profits.

In 2011, UnitedHealth Group brought together three existing service lines under one master brand. Services are delivered through three main businesses within a business within a business:

  • OptumHealth – the care delivery and ambulatory care capabilities of OptumCare, as well as the care management, behavioral health, and consumer offerings of Optum;
  • OptumInsight – the data and analytics, technology services and health care operations business; and
  • OptumRx – its pharmacy benefit service.

The company focuses on five core capabilities, including data and analytics, pharmacy care services, population health, healthcare delivery and healthcare operations. Services include but are certainly not limited to OptumLabs (research), OptumIQ (data analytics), Optum360 (revenue cycle management), OptumBank (health savings account) and OptumCare (care delivery services).

The Eden Prairie, MN-headquartered company has recently expanded its care delivery services, with much of the growth coming from acquisitions. The past two years have seen Optum expand its footprint into surgical care (Surgical Care Affiliates), urgent care (MedExpress) and primary care (DaVita Medical Group).

It’s a wide pool, but the strategy affords UnitedHealth the opportunity to grab more revenue by expanding its market presence. For example, the DaVita acquisition, which is still pending, allows OptumCare to operate in 35 of 75 local care delivery markets the company has targeted for development, Andrew Hayek, OptumHealth CEO, said on an earnings call in January.

Optum’s strategy of meeting patients where they are and deploying more ambulatory, preventative care services works in concert with its sister company UnitedHealthcare’s goal of reducing high-cost, unnecessary care services, when applicable. If Optum succeeds in creating healthier populations that use lower levels of care more often, that benefits the parent company UnitedHealth Group as UnitedHealthcare spends less money and time on claims processing/payout.

The strategy has been paying off so far.

Three charts that show UnitedHealth’s financial health as it relates to Optum

Optum’s presence has grown as it has steadily increased its percentage of profits for UnitedHealth Group.

Credit: Healthcare Dive / Jeff Byers

In 2011, the first year Optum was configured as it looks today, the company contributed 14.8% of total earnings through operations to UnitedHealth Group with $1.26 billion. That’s about 29 percentage points lower than in 2017, when Optum brought in $6.7 billion in profits on $83.6 billion in revenue.

Broken down, it’s clear that pharmacy services make up the lion’s share of the company’s revenue. In 2017, OptumRx earned $63.8 billion in revenue, fulfilling 1.3 billion prescriptions. OptumRx’s contributions to the company took off in 2015 when Optum acquired pharmacy benefit manager Catamaran.

Credit: Healthcare Dive / Jeff Byers

In recent years, OptumHealth has grown due to expansion in care delivery services, including consumer engagement and behavioral and population health management. The care delivery arm served 91 million people last year, up from 60 million in 2011.

OptumInsight has grown largely due to an increase in revenue cycle management and operations services in recent years.

On Wall Street, UnitedHealth Group is performing well and has seen healthy growth since 2008. The stock peaked in January and took a dive when Amazon, J.P. Morgan and Berkshire Hathaway — industry outsiders yet financial giants — announced they would create a healthcare company.

Credit: Healthcare Dive / Jeff Byers

While these charts suggest a dominant force, the stock activity shows that investors believe there’s still more room for competition, if the new entrants play their cards right.

Where Optum could lock out and rivals could cut in on competition

UnitedHealth started down this strategic path many years ago and the rest of the industry just now seems to be catching up.

“Optum’s been the leader in showing how a managed care organization with an ambulatory care delivery platform and a pharmacy benefit manager all in house can lower or maintain and bend cost trend and then drive better market share gains in their health insurance business,” Ana Gupte, managing director of healthcare services at Leerink, told Healthcare Dive. “I think they have been the impetus in the large space for the Aetna-CVS deal.”

Because the company is multi-dimensional, Optum’s competition will be varied. If all the mergers making news — including the Walmart’s rumored buyout of Humana — close, here’s what competition could look like:

Perhaps oddly, its largest revenue contributor, OptumRx, seems to have the largest vulnerability for competition in the coming years.

Optum’s competitive advantage in the PBM space is driven largely by already realized integration. Merging data across IT systems is no easy task, and Optum has spent years harmonizing pharmacy data across platforms to assist care managers in OptumCare to see medical records for United members.

Anyone with experience implementing EHR systems can tell you such integration doesn’t happen over night.

If the Cigna-Express Scripts deal closes, the equity can compete with OptumRx, but the technology investment needed to harmonize data and embed Cigna’s service and pharmacy information into Express Scripts servers will take time, Windley said. Optum, on the other hand, has invested in the effort and integration for years.

Gupte says the encroaching organizations in the PBM space have the ability to realize the efficiencies and savings and the integrated medical that Optum has been realizing across OptumRx and the managed care organization.

Optum’s leg up in PBM space could last two to three years over the competition, she said.

On the care delivery side, OptumHealth has been purchasing large physician groups for a variety of services. There are only so many large physician groups putting themselves on the market, and Optum has been making bids for them.

There’s still a bit of white space to fill in its 75 target markets, but analysts note Optum may have the competition on lock in this space

Even if CVS-Aetna closes, OptumCare is a $12 billion business with many urgent and surgery care access points. If CVS-Aetna is finalized, the company will have about 1,100 MinuteClinics capable of realizing efficiencies with Aetna, but, as Windley notes, they likely won’t have primary care or surgery care elements.

There’s also a lot of time and capital needed for building out and retrofitting retail space to medical areas.

On the surgical care services, “I don’t see either Cigna, Aetna or Humana getting into that business,” Gupte said. “That will be one element of their footprint on care delivery that will be unique and differentiated for them.”

Urgent care has the potential for outsider competition, she added. However, Optum is using its MedExpress business to treat higher acuity conditions and have an ER doctor on staff in each center. Compared to the typical types of conditions treated in retail clinics or those that would be feasible over time, Gupte believes services that could be seen in CVS or Walmart would be lower acuity, chronic care management services.

“[Optum has] been so proactive and so strategic I don’t think there’s going to be a lot of reactive catchup they have to do,” Gupte said. “I think it’s going to be hard for the other entities to play catch up, outside of the PBM.”

One potential issue will be harmonizing the disparate businesses so patients can be effectively managed across the various organizations, Trevor Price, founder and CEO of Oxean Partners, told Healthcare Dive.

“I think the biggest challenge for Optum is operationalizing the combined platform,” Price said. “The biggest question is do they continue to operate as individual businesses or do they merge into one.”

What’s next?

Optum will continue to explore ground in the three core trends it has identified.

Out of the three, consumerism has the longest path to maturity in healthcare, Weissel said, adding he believes consumerism is going to change healthcare more than any other trend over the next decade.

“There is a wave coming, and this expectation that we will move there,” he said. “Increasingly, this aging of people who become very comfortable in a different modality is going to tip the balance with how people will want to interact with healthcare. I know there’s pent up demand already.”

That means the company is putting bets into the marketplace around consumer building and segmentation models as well as thinking about how to connect data to allow patients to schedule appointments, view health records, sign up for insurance, search for providers or renew prescriptions online.

Consumer-centric projects currently underway include digital weight loss programs — including streaming fitness classes — and maternity programs to track pregnancy. The company is also experimenting with remote patient monitoring to understand the impacts on those with heart disease or asthma and to search for service opportunities.

Optum will pursue investments as well as acquisitions to push into the consumer space.

“When it comes to acquisitions to Optum overall, we’re always in the marketplace looking to extend our capabilities, to extend our reach in the care management space to fill in holes or gaps that we have,” Weissel said. “That’s a constant process in our enterprise.”

 

 

 

 

Cerner, Epic’s analytics tools prove most popular in clinical surveillance market

https://www.beckershospitalreview.com/healthcare-information-technology/cerner-epic-s-analytics-tools-prove-most-popular-in-clinical-surveillance-market.html?origin=cioe&utm_source=cioe

Image result for Cerner, Epic's analytics tools prove most popular in clinical surveillance market

 

Cerner and Epic offer the most frequently adopted clinical surveillance tools in the provider market, according to a KLAS Research report.

KLAS interviewed providers about their experiences with vendors offering popular clinical surveillance tools for its report. These tools review information from data sources such as EMRs to alert clinicians about a range of patient care activities that decrease readmissions and mortality. The most common use case for clinical surveillance tools today is sepsis detection, according to KLAS.

Cerner and Epic were the only vendors KLAS validated as having “extensive adoption” for their clinical surveillance tools. Of the 17 Cerner customers surveyed, most were using the vendor’s clinical surveillance for sepsis detection. The 18 Epic customers KLAS surveyed tended to use the vendor’s functionalities for sepsis detection, orders checking and floorwide alerts, among a few other less-common use cases.

KLAS noted that although Cerner and Epic were the most widely adopted clinical surveillance vendors, customers of these two vendors tended to be “less satisfied than customers of the other charted vendors in this report,” which included companies like Bernoulli and Stanson Health.

Cerner customers told KLAS they felt the system needed to better integrate with physician workflows and lacked customization options. Epic customers said that the vendor’s alerts were difficult to set up, but were pleased with its ease of use after implementation. KLAS noted Epic does not have a dedicated clinical surveillance modality, but customers have adapted its EMR to provide similar features.

 

Hospital Operating Income Falls for Two-Thirds of Health Systems

https://revcycleintelligence.com/news/hospital-operating-income-falls-for-two-thirds-of-health-systems?eid=CXTEL000000093912&elqCampaignId=7597&elqTrackId=e8b767871da64811acdd5707ff64a771&elq=8c464455b5764b358a94a8541d0fc832&elqaid=8029&elqat=1&elqCampaignId=7597

Hospital operating income and health systems

Hospital expenses are rising faster than revenue growth for health systems, resulting in declining operating income.

Health system operating income is deteriorating as hospital expenses continue to grow, according to a recent Navigant analysis.

In the three-year analysis of the financial disclosures for 104 prominent health systems that operate almost one-half of US hospitals, the healthcare consulting firm found that two-thirds of the organization saw operating income fall from FY 2015 to FY 2017. Twenty-two of these health systems had three-year operating income reductions of over $100 million each.

Furthermore, 27 percent of the health systems analyzes lost revenue on operations in at least one of the three years analyzed and 11 percent reported negative margins all three years.

In total, health systems facing operating earnings reductions lost $6.8 billion during the period, representing a 44 percent reduction.

Rapidly growing hospital expenses as the primary driver of declining operating margins, Navigant reported. Hospital expenses increased three percentage points faster hospital revenue from 2015 to 2017. Top-line operating revenue growth decreased from seven percent in 2015 to 5.5 percent by 2017.

Hospital revenue growth slowed during the period because demand went down for key hospital services, like surgery and inpatient admissions, Navigant explained.

Many of the revenue-generating services hospitals rely on are under the microscope. Policymakers and healthcare leaders are particularly looking to decrease the number of hospital admissions and safely shift inpatient surgeries to less expensive outpatient settings.

In exchange, Medicare and other leading payers are reimbursing hospitals for decreasing admissions or readmissions and their performance on other value-based metrics.

The shift to value-based reimbursement, however, is slow and steady, with just over one-third of healthcare payments currently linked to an alternative payment model. Hospitals and health systems are still learning to navigate the new payment landscape while keeping their revenue growing.

Value-based contracts also failed to deliver sufficient patient volume to counteract the discounts given to payers, Navigant added.

According to the firm, other factors contributing to a slowdown in hospital revenue growth included a decline in collection rates for private accounts and reductions in Medicare reimbursement updates because of the Affordable Care Act and the 2012 federal budget sequester.

“Because of reductions in Medicare updates from ACA and the sequester, hospital losses in treating Medicare patients rose from $20.1 billion in 2010 to $48.8 billion in 2016, according to American Hospital Association analyses,” the report stated. “The sharp $7.2 billion deterioration in Medicare margins that occurred from 2015 to 2016 surely contributed to the reduction in hospital operating margins in the same year of this analysis.”

While hospital revenue growth slowed, hospital expenses sharply rose as healthcare organizations invested in new technologies. Value-based reimbursement, federal requirements, and other components of the Affordable Care Act prompted hospitals to make strategic investments in EHRs, physicians, and population health management, causing expenses to increase, Navigant stated.

Key strategic investments made by hospitals and health systems included:

  • Compliance with the 2009 Health Information Technology for Economic and Clinical Health (HITECH) Act, which requires certified EHR implementation in hospitals and affiliated physician practices
  • Compliance with Medicare payment reform initiatives, such as accountable care organizations (ACOs) or pay-for-performance programs
  • Participation in new value-based contracts with payers
  • Establishment of employed physician groups or clinically integrated networks to develop the capabilities needed for compliance with performance- or value-based initiatives

“In addition to these strategic investments, other factors drove up routine patient care expenses, including a nursing shortage that increased nursing wages and agency expenses; specialty drug costs, particularly for chemotherapeutic agents; and, for some systems, recalibration of retirement fund costs,” the report stated.

The shift to value-based reimbursement and all of its accompanying policies will be the “new normal,” and hospitals should expect the low rate of revenue growth to persist, Navigant stated.

But hospitals and health systems can withstand the economic downturn by achieving strategic discipline and operational excellence, the firm advised.

“Systems must be disciplined to invest their growth capital in areas of actual reachable demand; that is, matched to the growth potential in the specific local markets the system serves,” the report stated. For example, creating a Kaiser-like closed panel capitated health offering in markets where there is no employer or health plan interest in buying such a product is a waste of scarce capital and management bandwidth.”

In line with strategic discipline, organizations will need to “prune” their owned assets portfolio by improving the utilization of their clinical capacity and growing patient throughput. Health systems can achieve this by focusing on scheduling and staffing, ensuring adherence to clinical pathways, streamlining discharges and care transitions, and adjusting physical capacity to actual demand.

The tools used to succeed in value-based contracts should also be applied to Medicare lines of business to reduce Medicare operating losses.

Additionally, vertical alignment will be key to weathering falling operating earnings, Navigant explained.

“Revenue growth is more likely to occur around the edges of the hospital’s core services — inpatient care, surgery, and imaging — rather than from those services themselves,” the report stated. “Creatively repackaging services like care management that is presently imbedded in every aspect of clinical operations, and finding retail demand for services presently bundled as part of the hospital’s traditional service offerings, represent such edge opportunities.”

Reducing patient leakage in multi-specialty groups and systems through improved referral patterns, scheduling, or care coordination will help to grow revenue and keep it within the system.

“To achieve better performance, health system management and boards must take a fresh look at their strategy considering local market realities. They need to look closely at the markets they serve, and size and target their offerings to actual market demand,” the report concluded. “They must re-examine and rationalize their portfolio of assets and demand marked improvements in efficiency and effectiveness, and measurable value creation for those who pay for care, particularly their patients. Since much of this should have been done five years ago, time is of the essence.”