HEALTHLEADERS TOP 10 FINANCE STORIES OF 2018

https://www.healthleadersmedia.com/finance/healthleaders-top-10-finance-stories-2018

Here’s a roundup of our most popular finance stories of the year.


KEY TAKEAWAYS

M&A activity among health systems and payers were a dominant narrative throughout 2018.

Policy changes affecting payment models also drew widespread attention from health leaders across the country.

The entrance of corporate disruptors stirred discussion and speculation among traditional healthcare industry players.

This year was marked by changing dynamics relating to healthcare finance, most notably from outside corporate disruptors like Amazon eyeing entry into the industry and widespread M&A activity across most sectors.

HealthLeaders has been on the front line covering the news and policy changes coming out of Washington, D.C., Wall Street, Nashville, and how it is going impact healthcare organizations as they shape their business strategies.

Below are the top 10 healthcare finance stories of 2018:

10. 4 TAKEAWAYS AS ATHENAHEALTH SELLS FOR LESS, BOARD INVESTIGATED

“Months of public negotiations and tribulations have resulted in a $5.7 billion acquisition of athenahealth set to close in Q1 2019, but it’s not a done deal yet.”

9. CMS DELAYS E/M PAYMENT CHANGES TO 2021 IN PHYSICIAN FEE SCHEDULE FINAL RULE

“A plan to simplify the way physicians bill Medicare for evaluation and management (E/M) visits has been finalized and will begin to take effect next year, but the controversial payment component of the plan will be delayed until 2021, giving stakeholders more time to influence policymaking, the Centers for Medicare & Medicaid Services announced.”

8. FIDELIS-CENTENE DEAL CLOSES, CATHOLIC CHURCH CREATES $3.2B HEALTH FOUNDATION

“The sale of the nonprofit health plan came after months of review from state regulators and final approval from interim Attorney General Barbara Underwood. ‘We are pleased to have completed our transaction with Fidelis Care on schedule and to enter the New York market by joining with a company with which we are closely aligned on many levels,’ Michael F. Neidorff, CEO of Centene, said in a statement.”

7. MEMORIAL HERMANN CFO BRIAN DEAN TALKS INNOVATION AND GROWTH

“Since joining Memorial Hermann Health System in 2013, Brian Dean served as both CFO and CEO of Memorial Hermann-Texas Medical Center, before his promotion last month to CFO of the entire system effective this August. Dean spoke to HealthLeaders about ascending to the new role, the lessons he’s learned in his years at the system, and the strategies he’s pursuing to further strengthen the organization’s finances.”

6. NATIONAL PENSION CRISIS COMING STORM FOR HOSPITALS

“Healthcare organizations are feeling the effects of the national shortfall of $645 billion in pension liabilities and are pursuing the ‘least bad option’ for handling the problem. The nationwide pension crisis has organizations scrambling to properly fund employee’ retirement packages and represents a self-inflicted dilemma that will have a dramatic impact on the healthcare industry without a clear solution.”

5. ‘SITE-NEUTRAL’ PAYMENTS? HOSPITALS UNHAPPY WITH OPPS 2019

“One observer praised CMS for ‘picking a fight with powerful hospitals’ in the agency’s annual update to payment proposals for outpatient services. Under OPPS 2019, reimbursement for clinic visits in outpatient hospital settings would be capped at the rate paid for clinic visits in physician offices.”

4. HOW DATA WILL DRIVE THE CVS-AETNA MERGER

“Through a vertical integration without significant precedence in healthcare, CVS and Aetna have the opportunity to use their increased scale to pursue several innovative business strategies going forward. Many industry players are interested in what the newly merged company could accomplish to further assist consumers at multiple points along the healthcare experience.”

3. WALMART-HUMANA ‘SIGNIFIES THE BEGINNING OF THE AVALANCHE’ IN HEALTHCARE

“PBMs, retailers, and providers are getting together to integrate health plans, with Walmart-Humana taking mergers to another level of complexity and transformation, says one healthcare consultant. The Walmart merger with Humana is another strong sign that the healthcare industry is rapidly merging with disparate parts of the retail world, intermingling so much and so quickly that some traditional parts of healthcare may be absorbed and cease to exist as we now know them.”

2. HEALTHCARE RIDESHARING MAKES INROADS IN LOST REVENUE

“Health systems are recouping lost patient revenues by removing barriers to access treatment, and reducing operational costs by coordinating with ridesharing services.Nearly 4 million patients per year miss out on care due to lack of available transportation options related to cost or geographic barriers, according to the 2017 American Hospital Association study, ‘Transportation and the Role of Hospitals.'”

1. TRUMP ADMINISTRATION RELEASES FINAL ACA RULE FOR 2019

“After attempts to repeal the Obama administration’s signature healthcare law faltered, the Trump administration set an agenda for the Affordable Care Act’s implementation next year.In signing a major tax reform bill into law late last year, President Donald Trump claimed to have “essentially repealed Obamacare” by neutralizing the legislation’s individual mandate penalty.”

 

 

 

What to expect after whirlwind ACA ruling

https://www.healthcaredive.com/news/what-to-expect-after-whirlwind-aca-ruling/544527/

Judge Reed O’Connor’s unexpectedly sweeping ruling calling the Affordable Care Act unconsitutional late Friday sent shock waves rippling through the healthcare landscape.

The ruling, which will almost certainly be appealed (likely up to the U.S. Supreme Court), would effectively wipe out Medicaid expansion, pre-existing condition protections and could affect a number of hospital payment reforms.

But the decision faces a lengthy appellate process, along with attacks from the left and right alike.

What happens immediately?

The ruling doesn’t have much immediate impact, as it was a declaratory judgment and not an injunction to stop the ACA. The Trump administration confirmed Friday night that the law would stay in place during appeals.

Still, President Donald Trump himself celebrated on Twitter in the early hours of Monday morning.

Not all of the administration officials echoed the tone, however, as CMS Administrator Seema Verma tweeted a message of reassurance Friday night, confirming that the exchanges would stay open through Saturday as previously planned.

A day later, however, Verma returned to script, tweeting “Obamacare has been struck down by a highly respected judge.”

Critics decried the timing of the ruling, which dropped on the penultimate day of an already-lagging open enrollment season for 2019. Kaiser Family Foundation put enrollment in the individual market at 17 million in 2016, 15.2 million in 2017 and 14.2 million as of Q1 2018.

Saturday dawned with potential confusion for tens of thousands of Americans looking to enroll at the last minute. The Justice Department had asked O’Connor to hold off on the ruling so that it didn’t affect 2019 enrollment on Healthcare.gov until after enrollment ended Saturday.

He issued his decision one day before. But it’s unclear what effect the ruling will have, if any, on 2019 insurance.

Republicans were in a bind with the timing as well, along with the mounting popularity of the ACA.

In 2018, as protections for pre-existing conditions took center stage in the midterms, Republicans changed tack and hedged their language around the ACA, promising to protect Americans’ coverage despite dozens of attempts at repealing the entire law. 

Which players will see the biggest impact?

The decision Friday evening sent ripples through Wall Street with major dips for hospitals and insurers. HCA stock dropped more than 5%, Cigna and Humana each fell 4%, Centene took a 7.5% hit and Molina dropped as much as 13%. Some stocks recovered later Monday morning.

Leerink analysts called Monday a buying opportunity for managed care organizations, along with WellCare and HCA.

While the law touches nearly every aspect of American healthcare, some players will take bigger hits than others.

Hospitals, especially those who serve a disproportionate number of ACA-insured patients, don’t need the further stress on their bottom lines.

America’s Essential Hospitals president and CEO Bruce Siegel called the ruling a “profoundly troubling development,” adding that “the crushing rise in the number of uninsured patients likely to follow this decision, absent a higher court’s reversal, will push [hospitals] to the breaking point.”

Health systems are “deeply disappointed” with O’Connor’s decision, said Rick Pollack, CEO of the American Hospital Association. “The ruling puts health coverage at risk for tens of millions of Americans, including those with chronic and pre-existing conditions, while also making it more difficult for hospitals and health systems to provide access to high-quality care.”

Multiple provider groups urged a stay in the decision until it moves through the appeals process.

 

 

 

 

Financial updates from Banner, Kaiser, Mayo + 3 other health systems

https://www.beckershospitalreview.com/finance/financial-updates-from-banner-kaiser-mayo-3-other-health-systems.html?origin=cfoe&utm_source=cfoe

The following six health systems recently released their financial statements for the nine-month period ended Sept. 30:

1. Phoenix-based Banner Health’s revenue climbed 7.2 percent year over year to $6.3 billion in the first nine months of 2018. The system ended the first nine months of this year with operating income of $122.1 million, down 37 percent from $192.9 million in the same period a year earlier.

2. Oakland, Calif.-based Kaiser Permanente’s revenue climbed to $59.7 billion in the first nine months of 2018, up 9.6 percent from revenue of $54.5 billion in the same period of 2017. Kaiser ended the first nine months of this year with operating income of $2.03 billion, compared to $2.33 billion in the same period of 2017.

3. Rochester, Minn.-based Mayo Clinic ended the first nine months of 2018 with revenue of $9.5 billion, compared to $8.8 billion in the same period of 2017. The system reported operating income of $601 million in the nine months ended Sept. 30, up 32 percent from the same period of 2017.

4. Bronx, N.Y.-based Montefiore Health System recorded revenue of $4.4 billion in the nine months ended Sept. 30, up from $4.1 billion in the same period a year earlier. The system ended the first nine months of this year with operating income of $59.6 million, up from $37.7 million in the same period of the year prior.

5. Arlington-based Texas Health Resources recorded revenue of $3.5 billion in the first nine months of 2018, up from $3.4 billion in the same period a year earlier. The system ended the first nine months of this year with operating income of $168.7 million, down from $174.5 million in the same period of 2017.

6. Pittsburgh-based UPMC reported revenue of $13.9 billion in the first nine months of this year, up from $11.4 billion in the same period of 2017. The system ended the first nine months of 2018 with operating income of $190 million, down from $196 million in the same period of 2017.

 

CMS updates hospital price transparency requirement — again

https://www.beckershospitalreview.com/finance/cms-updates-hospital-price-transparency-requirement-again.html?origin=cfoe&utm_source=cfoe

Image result for CMS updates hospital price transparency requirement — again

CMS published an additional FAQ document that provides guidance for hospitals required to post their standard charges online.

In August, CMS finalized a rule requiring hospitals to publish a list of their standard charges online in a machine-readable format and to update this information at least annually. Over the past few months, CMS has attempted to answer questions about the new requirement before it kicks in Jan. 1.

CMS posted a document in September that provided the definition of “machine readable” and answered five other frequently asked questions about the price transparency rule.

CMS recently published an additional document that expanded on the rule. The agency answered seven questions about the new requirement, including one about whether hospitals are required to post information online that isn’t included in their chargemasters. CMS clarified that even if a hospital’s chargemaster does not include standard charges for drugs, biologicals, or other items and services it provides, those charges must be posted online.

 

 

 

Hospital Revenue Unstable Despite Outpatient Volume Growth

https://revcycleintelligence.com/news/hospital-revenue-unstable-despite-outpatient-volume-growth?eid=CXTEL000000093912

Image result for hospital revenue

Payer mix shifts, increases in self-pay, and lower Medicaid revenue per case are troubling hospital revenue despite a 2.4 percent boost in outpatient volume.

Hospitals recently saw increases in national inpatient and outpatient volumes. However, net hospital revenue continues to be unstable for non-profit organizations, according to a new analysis from the public accounting, consulting, and technology firm Crowe.

“As many health systems expand their portfolio of services (more outpatient facilities, entrees into insurance products, and other ancillary investments), stability of hospital-based net revenue becomes more important to financial decisions,” the analysis stated. “Unfortunately, instability appears to be the current trend, forcing many CFOs of not-for-profit healthcare systems to study operations and budget them on a monthly or quarterly financial performance basis, in the same manner that their peers in for-profit organizations do.”

The consulting firm analyzed data from its revenue cycle analytics solution for 622 hospitals in Medicaid expansion states and 389 hospitals in non-expansion states. The analysis of data from January through September of 2017 and 2018 revealed some positive results for 2018.

Inpatient volume is up 0.6 percent in 2018, and gross revenue per case also increased 5.3 percent during the period.

At the same time, outpatient volume rose 2.4 percent and gross revenue per case increased 7.1 percent on the outpatient side.

Hospitals may be reaping the benefits of higher volumes. However, net revenue per case demonstrated greater volatility on the inpatient and outpatient sides, the firm pointed out. Net revenue per inpatient case only increased 1.6 percent between 2017 and 2018 and net revenue per outpatient case rose 5.5 percent during the same period.

“It is important to consider that these trends do not hold true across all payers. As a result, some hospitals may be more exposed to diminishing growth in net revenue per case,” the analysis stated. “Although an increase in net revenue appears to be good news for hospitals, the manner in which revenue is increasing follows some troublesome trends.”

The “troublesome trends” identified by Crower researchers included a significant shift in payer mix. Medicare managed care, self-pay, and other payers (i.e., third-party liability and worker’s compensation) increased by 1.6 percent for inpatient and 1.1 percent for outpatient overall, the firm reported.

“In addition to these payer classes having a lower net realization overall, they also challenge finance leadership’s ability to forecast net revenue, as seasonality and patient engagement vary by facility,” the analysis explained.

Increases in self-pay accounts particularly contributed to hospital revenue instability, Crowe added. Self-pay increased 16.1 percent by 2018, representing six percent of the average hospital’s payer mix. Self-pay accounts continue to be the most difficult to collect, suggesting a growing obstacle for hospital revenue.

Medicaid net revenue also fell from 2017 to 2018, the analysis showed. Net revenue per case for both traditional and managed care Medicaid decreased 6.9 percent for inpatient and 1.1 percent for outpatient.

Hospitals that treated a greater number of Medicaid beneficiaries will continue to see their Medicaid revenue drop under new regulatory changes, researchers predicted.

For example, CMS finalized a new policy that will change the methodology for determining Medicaid Disproportionate Share Hospital (DSH) payments. Medicaid offers DSH payments to hospitals that treat a greater proportion of low-income and vulnerable patients and bases the payment amount on the hospital’s uncompensated care costs.

The new policy will clarify that uncompensated care costs include only the costs for Medicaid-eligible patients with payments remaining after accounting for the reimbursement to the hospital by or on behalf of Medicaid-eligible individuals, including Medicare and third-party payments.

A federal judge vacated the new policy’s implementation on a national level in March 2018, arguing that changing the policy exceeded CMS’ authority because the Medicaid Act specifically identifies what constitutes uncompensated care costs. Several states have also challenged the policy in court.

CMS is currently challenging the rulings.

New rules for the 340B Drug Pricing Program could also further decrease Medicaid revenue for hospitals, the analysis stated. CMS recently finalized $1.6 billion in hospital payment reductions for 340B covered drugs.

The American Hospital Association (AHA) and several other groups sued CMS over the payment cuts. But a federal judge ruled that CMS can enforce the billions of dollars in payment reductions.

Additionally, the Crowe analysis uncovered a decrease in final denial write-offs, or patient bills that were not paid by payers. Final denial write-offs for outpatient services fell by almost 15 percent from 2017 to 2018, the data showed.

While a drop in final denial write-offs indicates business office improvements, researchers noted that recent changes in managed care contracting may challenge denial rates going forward. Contracts for outpatient diagnostic imaging are likely to see the greatest challenge to denial rates, they reported.

26% of Hospitals Without Effective Revenue Cycle Management System

https://revcycleintelligence.com/news/26-of-hospitals-without-effective-revenue-cycle-management-system?eid=CXTEL000000093912

Healthcare revenue cycle management

 

Without a workable revenue cycle management system, 82 percent of the hospitals plan to go blind with value-based reimbursement and 85 percent may seek consulting services.

Approximately one-quarter of US hospitals (26 percent) do not have an effective healthcare revenue cycle management solution in place, according to a new Black Book survey.

Black Book surveyed over 4,640 individuals from 522 hospitals and healthcare delivery networks on their use of 165 revenue cycle management technology services and solutions. The survey showed that revenue cycle management improvement is happening, but a significant portion of hospitals still do not have workable solutions.

While 26 percent of hospitals do not have a plan to optimize or replace legacy revenue cycle management systems, the proportion of hospitals without a transition plan is down compared to six years ago. In 2012, 35 percent of all hospitals did not have a revenue cycle management strategy in place to improve or replace their solutions.

The most recent survey results show that about 400 hospitals implemented a viable, effective revenue cycle management optimization or replacement plans over the past six years.

However, the opportunity to improve healthcare revenue cycle management remains. Of the 1,600 hospitals without a revenue cycle management optimization plan, about 82 percent expect to make value-based reimbursement decisions in 2019 without the use of an advanced software or outsourced partner, the survey showed.

Value-based reimbursement is overtaking the traditional fee-for-service system. The proportion of healthcare payments tied to an alternative payment model is rising, reaching 29 percent of healthcare payments by 2016, the Health Care Payment Learning and Action Network (LAN) recently reported.

The number of payments linked to value-based reimbursement is only going to increase as private and public payers implement alternative payment models to lower costs and improve care quality. And hospitals will be expected to take on the clinical and financial risks associated with the models.

Effective revenue cycle management solutions can help hospitals make the transition to value-based reimbursement.

“What providers absolutely must have are really powerful analytics that are able to take clinical and outcomes data, a lot of which resides in clinical systems, and combine it with financial data to accurately measure where we improve quality based on outcomes results,” Deanna Kasim, Research Director of Payer Health IT at IDC Health Insights, told RevCycleIntelligence.com.

“There is an absolute need that if this is going to be successful in terms of changing reimbursements and care delivery models, payers need to get providers and the consumers to the table and there has to be the next generation of analytics applications to support these efforts.”

Without a viable, effective revenue cycle management solution, hospitals could lose revenue during the transition to value-based reimbursement.

In light of the challenge, 85 percent of Black Book respondents said they would partner with a revenue cycle management consultant or advisory company for short-term direction.

For the long-term, however, hospitals will need to partner with a third-party vendor to implement an optimized revenue cycle management solution that can deliver value-based reimbursement results.

Black Book explained that hospitals can invest in core, platform, and/or point solutions, which cover enterprise-wide functions. Or hospitals can implement bolt-on solutions that automate specific components of the healthcare revenue cycle.

At this stage in the market, hospitals are currently turning to bolt-on solutions to complement their legacy financial and clinical systems. About 45 percent of large and community hospitals in a recent Black Book survey plan to use multiple bolt-on solutions for revenue cycle management in 2019.

Few hospitals expect to use one core legacy vendor for a software solution. Only 23 percent of small hospital staff, 15 percent of community hospital staff, and 17 percent of large hospital staff stated that relying on a core solution was their organization’s revenue cycle management strategy for 2019.

Hospitals are investing in more bolt-on solutions versus core software because of staffing concerns, Black Book reported in the most recent survey. The five-month polling process revealed that staffing concerns were the top challenge hospitals faced with implementing new revenue cycle management solutions or improving legacy software.

Finding skilled revenue cycle management human resources for new solutions was a major obstacle to optimizing or replacing legacy systems. Therefore, outsourcing core functions or implementing bolt-on services was a short-term alternative, hospitals leaders said.

“If hospitals are to maximize revenue and reduce claims take-backs, it is imperative that those still behind the curve find a way to dedicate appropriate resources toward implementing an effective RCM system,” the market research firm concluded.

 

12 health systems with strong finances

https://www.beckershospitalreview.com/finance/12-health-systems-with-strong-finances-120618.html?origin=rcme&utm_source=rcme

Here are 12 health systems with strong operational metrics and solid financial positions, according to recent reports from Moody’s Investors Service, Fitch Ratings and S&P Global Ratings.

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

1. St. Louis-based Ascension has an “Aa2” senior debt rating and stable outlook with Moody’s. The health system has a large diversified portfolio of sizable hospitals and strong liquidity. Moody’s expects Ascension’s margins to improve in fiscal year 2019.

2. Wausau, Wis.-based Aspirus has an “AA-” rating and stable outlook with S&P. The health system has solid debt and liquidity metrics, according to S&P.

3. Morristown, N.J.-based Atlantic Health System has an “Aa3” rating and stable outlook with Moody’s. The system has a strong market position, favorable balance sheet ratios and strong operating performance, according to Moody’s.

4. Charlotte, N.C.-based Atrium Health has an “AA-” rating and stable outlook with S&P. The health system has a strong operating profile, favorable payer mix, healthy financial performance and sustained volume growth, according to S&P.

5. Durham, N.C.-based Duke University Health System has an “Aa2” rating and stable outlook with Moody’s. The health system is a leading provider of tertiary and quaternary services and has solid margins and cash levels, according to Moody’s.

6. Inova Health System has an “Aa2” rating and stable outlook with Moody’s. The Falls Church, Va.-based health system has consistently strong cash-flow margins, a leading market position and a good investment position, according to Moody’s.

7. Baltimore-based Johns Hopkins Health System has an “Aa2” rating and stable outlook with Moody’s. The health system has favorable liquidity metrics, strong fundraising capabilities, a healthy market position and regional brand recognition, according to Moody’s.

8. St. Louis-based Mercy Health has an “Aa3” rating and stable outlook with Moody’s. The health system has favorable cash-flow metrics, a solid strategic growth plan, a broad service area and improving operating margins, according to Moody’s.

9. Traverse City, Mich.-based Munson Healthcare has an “AA-” rating and positive outlook with Fitch. The health system has a leading market share in a favorable demographic area and a healthy net leverage position, according to Fitch.

10. Vancouver, Wash.-based PeaceHealth has an “AA-” rating and stable outlook with Fitch. The health system has a leading market position, robust reserves and strong cash flow, according to Fitch.

11. St. Louis-based SSM Health Care has an “AA-” rating and stable outlook with Fitch. SSM has a strong financial profile, and Fitch expects the system to continue growing unrestricted liquidity and to maintain improved operational performance.

12. Appleton, Wis.-based ThedaCare has an “AA-” rating and stable outlook with Fitch. The health system has a leading market share in a stable service area and strong operating performance, according to Fitch.