S&P downgrades Care New England Health System’s rating to ‘BB-‘

https://www.beckershospitalreview.com/finance/s-p-downgrades-care-new-england-health-system-s-rating-to-bb.html

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S&P Global Ratings downgraded Providence, R.I.-based Care New England Health System’s rating to “BB-” from “BB.”

“The lower rating reflects CNE’s prolonged period of extremely weak financial performance, thin balance sheet metrics, and declining volume trends that portend deeper utilization challenges and competitive threats within its overall service market,” said Jennifer Soule, an S&P Global Ratings credit analyst.

The outlook is negative, reflecting uncertainties regarding CNE’s ability to shore up finances and close Pawtucket, R.I-based Memorial Hospital in a timely manner. In addition, S&P acknowledged CNE’s continued struggle to formalize a partnership with another provider.

Moody’s downgrades Albert Einstein Health Network to ‘Baa3’

https://www.beckershospitalreview.com/finance/moody-s-downgrades-albert-einstein-health-network-to-baa3.html

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Moody’s Investors Service downgraded Philadelphia- based Albert Einstein Health Network’s bond and issuer rating to “Baa3” from “Baa2,” affecting $447 million of outstanding debt.

The downgrade is a result of several factors, including the health system’s negative operating performance in fiscal year 2017, declining liquidity measures and uncertainty in state funding status. Moody’s also acknowledged the health system’s planned improvement strategies to bolster liquidity metrics.

The outlook is revised to negative from stable, reflecting the health system’s severe operating loss and declining liquidity in fiscal year 2017.

HCA’s net income tumbles to $426M in Q3

https://www.beckershospitalreview.com/finance/hca-s-net-income-tumbles-to-426m-in-q3.html

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Nashville, Tenn.-based HCA Healthcare, which operates more than 170 hospitals, saw revenue increase in the third quarter of 2017, but the company’s net income declined year over year.

HCA’s financial results were in line with the third quarter preview the company issued in October. HCA ended the third quarter of this year with net income of $426 million on revenues of $10.7 billion. That’s compared to the same period of 2016, when the company recorded net income of $618 million on revenues of $10.3 billion.

On an earnings call Tuesday, HCA Chairman and CEO R. Milton Johnson said the company took an estimated $140 million hit from hurricanes Irma and Harvey. HCA has a total of 18 hospital campuses, eight freestanding emergency rooms, five surgery centers and one freestanding cancer center in the Houston and Corpus Christi, Texas, markets, which were two areas significantly impacted by Hurricane Harvey. The company has 50 hospital campuses, 32 surgery centers, 17 freestanding ERs and 10 diagnostic imaging centers in Florida, where several facilities felt the impact of Hurricane Irma.

The Texas Medicaid Waiver program also took a toll on HCA finances. The company said it took a $50 million hit related to the program in the third quarter of this year.

Mr. Johnson said the hurricanes and the Texas Medicaid waiver reduction make evaluating the third quarter results more complex. “However, if you look at the broad trends to normalize with the destruction in the hurricane affected markets, we believe many of the trends are comparable with the first half of 2017,” he said.

In addition to releasing its third quarter financial results, HCA announced the board approved a new $2 billion share repurchase program. Including this newly announced program and the company’s share repurchase program announced in November 2016, HCA has approximately $2.15 billion authorized for share repurchases.

The financial impact of the nationwide nursing shortage: Hospitals pay billions to recruit and retain nurses

http://www.fiercehealthcare.com/finance/financial-impact-nationwide-nursing-shortage-hospitals-pay-billions-to-recruit-and-retain

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A new Reuters analysis finds that collectively, hospitals have been paying billions to recruit and retain nurses—offering higher salaries, signing bonuses and even repaying student loans—to address the nationwide nurse shortage.

The problem is only going to get worse. With many Baby Boomer nurses set to retire, and an aging population that will need healthcare services, the Bureau of Labor Statistics projects that there will be more than a million openings for registered nurses by 2024.

Although the industry has faced shortages before, the current shortfall is more difficult to address, according to the Reuters report.

“I’ve been a nurse 40 years, and the shortage is the worst I’ve ever seen it,” Ron Moore, who recently retired as vice president and chief nursing officer for West Virginia’s Charleston Area Medical Center, told the news service. To help attract nurses—and get them to stay—the organization will reimburse their tuition if they agree to work at the hospital for two years.

While some hospitals try to meet staffing needs by employing foreign nurses, the current political climate has caused delays in issuing visas. Healthcare advocates are pushing Congress to pass proposed legislation to open the door for 8,000 international nurses to get the necessary visas to help alleviate the nursing shortage.

In the meantime, Reuters notes that some hospitals have turned to travel nurses to fill the gaps. Staffing Industry Analysts told Reuters that so far healthcare organizations have paid $4.8 billion for travel nurses in 2017.

But the costs are hitting rural hospitals hard. Reuters reports that J.W. Ruby Memorial Hospital in Morganstown, West Virginia, has paid more than $10 million this year to hire and retain nurses. That money is used in part to give $10,000 signing bonuses and free housing for nurses who live more than 60 miles away from the hospital.

And that’s just the beginning. To entice longtime nurses to continue to stay in West Virginia and work at the hospital, next year J.W. Ruby Memorial may begin to pay college tuition for their family members.

Healthcare experts say other hospitals may want to follow J.W. Ruby Memorial Hospital’s lead and prepare in advance for potential shortages.  Among their suggestions: develop a succession plan now, and see if experienced nurses will consider delaying retirement if they can take on new roles in patient navigation or education or decrease their hours.

 

 

Robotic surgery comes with a hefty price tag, but studies show it’s often no more effective

http://www.fiercehealthcare.com/it/robotic-surgery-jama-research-surgical-procedures-innovation-technology-cost?mkt_tok=eyJpIjoiT0dRd016STJNVEE1WWpsaiIsInQiOiJqaWRyYjdBcThaN0VWT1JkdFd6TkdvVXEwcUdiZGFHUmRuT2pISG9aVWtlVTByT2diZXdVOThvRnE5b3pQNXlVNDRNdTBtY2NaOW85Y1ErOXpERDRydUNaZHBQT29idXA2RngwYVdhaEtcLzB1TE5MR3VrTFh5VW8zR2xRRElHcmgifQ%3D%3D&mrkid=959610&utm_medium=nl&utm_source=internal

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Over the past decade, hospitals have invested significant dollars in robotic surgical equipment, often to keep pace with their regional competitors.

But the costs associated with robotic systems don’t always pay off, according to two new studies published in JAMA last week that show robot-assisted surgeries cost more but are just as effective as certain laparoscopic surgeries. The results led one surgeon to question how hospitals should track the value of robotics, particularly as the industry transitions to value-based reimbursement models.

In one study, researchers at Stanford University Medical Center, Brigham and Women’s Hospital and the University of California San Diego reviewed 13 years’ worth of data linked to nearly 24,000 patients that had a kidney surgically removed. Although just over 5,000 of those patients underwent robot-assisted nephrectomies, the use of robot increased dramatically from 1.5% in 2003 to 27% in 2015, surpassing the percentage of laparoscopic surgeries.

But researchers found that robotic surgeries were often longer and more expensive than laparoscopic surgeries. Over the 13-year period, robotic surgeries cost approximately $2,700 more per patient without any notable difference in post-operative complications.

“There is a certain incentive to use very expensive equipment,” Benjamin Chung, M.D., associate professor of urology at Stanford and one of the study’s authors said in a release. “But it is also important to be cognizant as to how our health care dollars are being spent. Although robotic surgery has some advantages, are those advantages relevant enough in this type of case to justify an increase in cost?”

A second study by researchers in the United Kingdom, Germany, Italy and New Zealand found surgeons performing resection for rectal cancer were just as likely to convert to open surgery whether they were using a laparoscopic or robot-assisted technique.

In an accompanying editorial, Jason Wright, M.D. chief of gynecologic oncology at Columbia University Medical Center said the new research highlights the need for hospitals to balance the costs associated with new devices and their potential impact. While hospitals currently absorb most of those costs, that dynamic could change with new reimbursement models.

“The implementation of alternative payment models, particularly those with two-sided risk, may heighten the awareness of surgeons of these costs if reimbursement is more directly affected,” he wrote.

Wright also pointed specifically to the promise of the Food and Drug Administration’s new National Evaluation System for Health Technology (NEST), established by the new Medical Device User Fee agreements authorized in August. The system looks to use real-world data buried in EHRs and health registries to conduct post-market surveillance,  which could offer a more comprehensive look at device functionality after its approved by the agency.

Tenet Healthcare to slash 1,300 positions to cut $150M in expenses

http://www.fiercehealthcare.com/finance/tenet-healthcare-to-slash-1-300-positions-to-cut-150-million-expenses?mkt_tok=eyJpIjoiT0dRd016STJNVEE1WWpsaiIsInQiOiJqaWRyYjdBcThaN0VWT1JkdFd6TkdvVXEwcUdiZGFHUmRuT2pISG9aVWtlVTByT2diZXdVOThvRnE5b3pQNXlVNDRNdTBtY2NaOW85Y1ErOXpERDRydUNaZHBQT29idXA2RngwYVdhaEtcLzB1TE5MR3VrTFh5VW8zR2xRRElHcmgifQ%3D%3D&mrkid=959610&utm_medium=nl&utm_source=internal

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Tenet Healthcare, which recently went through a management shakeup amid financial losses, plans to eliminate 1,300 positions in order to cut expenses by $150 million.

The Dallas-based healthcare system announced Friday it had begun an “enterprise-wide cost-reduction imitative that would primarily involve job cuts and renegotiation of contracts with suppliers and vendors.”

The majority of the savings will be through actions within the company’s hospital operations, including eliminating regional managers and streamlining overhead and centralized support functions. Job cuts will also take place within the company’s ambulatory care and Conifer business segments.

In total, the company intends to eliminate 1,300 positions or about 1% of its workforce, including contractors, by the end of 2018.

The announcement comes in the wake of the sudden departure of longtime CEO Trevor Fetter, who last week stepped down from the top post and left earlier than planned with a severance package worth nearly $23 million. Reuters also reports that the organization has scrapped its sale plans and is continuing to explore ways to reduce its $15 billion debt.

The news about the layoffs also included the company’s preliminary financial results for the third quarter of 2017. Tenet expects a net loss of $366 million in the third quarter.

Ronald A. Rittenmeyer, who was recently appointed CEO while the organization searches for Fetter’s permanent replacement, said in the announcement that the organization is moving quickly to improve the financials and return for shareholders. The cost-reduction plans include structural changes in the way the organization operates to improve agility and speed decision-making, he said.

“We believe these changes will help us drive organic growth, expand margins, and better support our hospitals and other facilities in delivering higher levels of quality and patient satisfaction,” he said.

CFO’s FATAL FLAW

https://cdn2.hubspot.net/hubfs/498900/CFOS’%20Fatal%20Flaw%20-%20Survey%20Finds%209%20of%2010%20Hospital%20Executives%20Don’t%20Know%20Their%20Cost.pdf?t=1509455493610

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SURVEY FINDS
9 OF 10 HOSPITAL
EXECUTIVES DON’T KNOW THEIR COST

CONCLUSION
In the past, cost accounting has been undervalued and underutilized as accuracy and accessibility of information on cost wasn’t seen as a necessity in traditional volume-driven payment models. This is not the case in risk- or value-based medicine. Without
credible and detailed cost data, it will be extraordinarily difficult for healthcare organizations to strategically manage their operations and minimize the impact of declining reimbursement.

With close to 90 percent of healthcare leaders operating in the dark on cost, leveraging data from advanced cost accounting that is comprehensive, accurate and accessible is mission critical. Providers are then able to collaborate and make more informed decisions in order and ultimately deliver more value to the patients and the community that they serve.

Trinity Health’s operating income climbs 76% to $266M

https://www.beckershospitalreview.com/finance/trinity-health-s-operating-income-climbs-76-to-266m.html

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Livonia, Mich.-based Trinity Health’s operating income before other items increased 76 percent year over year to $266.1 million in fiscal year 2017, as the 93-hospital health system benefited from acquisitions, according to bondholder documents.

Trinity Health said revenues increased 7.9 percent year over year to $17.6 billion in the most recent fiscal year. The revenue was largely attributable to the acquisition of health systems in Connecticut, as well as volume growth, revenue cycle initiatives and payment rate increases. The system also benefited from ACO and bundled payment improvement initiatives and premium revenue from the system’s Medicare Advantage plans.

After factoring in expenses, which increased 7.3 percent year over year, as well as restructuring and impairment charges, Trinity ended the fiscal year with net income of $1.3 billion, up from $41.3 million for the year prior. The net income growth was primarily attributable to an increase in nonoperating items.

These Hospital Bonds Are on Life Support

https://www.bloomberg.com/gadfly/articles/2017-10-27/a-49-billion-hospital-emergency-heads-toward-junk-bonds

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Junk-bond buyers appear to have a blind spot when it comes to for-profit health care companies.

They’ve snapped up bonds of Tenet Healthcare Corp. and Community Health Systems Inc. despite the drastically souring outlook for both hospital operators. Some of this may be idiosyncratic or the result of specific investors’ strategies (or unwillingness to sell). Franklin Resources Inc., for example, now owns nearly 20 percent of Community Health’s total debt and more than half of its $1.9 billion of bonds maturing in 2019, according to recent filings compiled by Bloomberg.

In general, however, as credit investors plow into broad indexes of riskier assets, it appears they’re simply turning a blind eye to the ugly balance sheets of hospital operators amid an increasingly difficult backdrop. Federal programs like Medicaid are clamping down on costs. And the Trump administration’s various efforts to weaken the individual insurance market will potentially put hospitals on the hook for more uncompensated care as fewer people sign up for health care coverage.

Meanwhile, Tenet and Community Health made some questionable decisions in recent years to borrow billions of dollars to make acquisitions that now look pricey. These companies don’t generate a ton of cash at the best of times, and much of what they do have now goes to debt service rather than much needed hospital improvements.

CIRCLING THE DRAIN

It’s hard for companies to confront mountainous piles of debt when they don’t generate consistent cash flow.

These hospital operators have a narrowing field of options right now. Tenet recently tried, and failed, to sell itself, which sent its shares plunging on Thursday. Both hospitals report earnings within the next few weeks. If HCA Healthcare is any guide — the company pre-announced worse-than-expected third-quarter earnings last week — they won’t be pretty.

But still, no one in the bond market seems to care. Tenet’s bonds have soared 7.8 percent so far this year, even though its stock has fallen 13.3 percent. Community Health debt has gained 16.5 percent, four times the 4.1 percent gain in its shares.

DIVERGING FATES

Bond investors seem to be turning a blind eye to difficulties recognized by stock investors

This seems sort of ludicrous. One hedge fund manager, Boaz Weinstein of Saba Capital Management, sees this as an opportunity to short some of these companies’ junior bonds. Weinstein pointed out at a conference this month that Community Health’s $14 billion pile of debt is 20 times the value of its equity.

Unless the company’s fortunes turn around, it will be forced to reckon with its debt in painful ways for its business as well as the returns of creditors. It’s hard to see how the business could get better with President Donald Trump’s continuing attempts to torpedo health care insurance subsidies, which is widely expected to hurt hospital profitability.

Credit investors at some point are going to have to come to grips with this. Community Health and Tenet, along with HCA, account for $49 billion of debt in a broad U.S. high-yield bond index. This pile is looking increasingly vulnerable to a day of reckoning.

Professionalism And Choosing Wisely

http://www.healthaffairs.org/do/10.1377/hblog20171024.907844/full/

The US health care system is plagued by the use of services that provide little clinical benefit. Estimates of expenditures on overuse of medical services range from 10–30 percent of total health care spending. These estimates are typically based on analyses of the geographic variation in patterns of care. For example, researchers at the Dartmouth Institute focused on differences in care use between high-spending and low-spending regions with no corresponding reductions in quality or outcomes. An analysis by the Network for Excellence in Health Innovation (formerly known as the New England Healthcare Institute) identified significant geographic variation in the rates of both surgical and non-surgical services such as coronary artery bypass grafting, back surgery, cholecystectomy, hip replacements, diagnostic testing, and hospital admission.

This variance-based approach to estimating overuse has been very useful at highlighting the problem of inefficiency in the health care system but has done little to direct initiatives designed to reduce unnecessary tests and procedures. The aggregate approach does not help clinicians or managers identify exactly how they should change their practice patterns. As a result, it has been hard to reduce overuse. Identifying the significant overuse of medical services in the health care system is only the first step; now we need to develop evidence-based solutions to reduce unnecessary services and improve efficiency.

The History Of Choosing Wisely

The Choosing Wisely initiative, announced in 2012 by the ABIM Foundation and Consumer Reports, was designed to spark conversations among physicians, patients, payers, and purchasers about the overuse of tests and procedures, and to support physician efforts to help patients make smart and effective care choices. Specialty societies identified specific services that were unnecessary in specific situations. With more than 80 participating specialty societies, Choosing Wisely has identified more than 500 commonly overused tests and procedures and published recommendations for their proper use. For example, the American College of Emergency Physicians recommends avoiding computed tomography (CT) scans in low-risk patients with minor head injury.

The Choosing Wisely campaign began in an environment when efforts to reform health care were polarized by discussions of “rationing” and “death panels.” The initiative focused on quality, safety, and doing no harm to counter suspicions of dual agency and cost reductions motivated by profit; this allowed both the public and clinicians to begin to see reducing unnecessary care as in the best interest of the patient.

Choosing Wisely appealed to the professionalism of physicians and other clinicians as articulated in the Physician Charter on Medical Professionalism, which included a commitment to manage health care resources. The campaign was conducted in a way that respected the autonomy of physicians, relying on and enhancing their professional pride and sense of mastery, instead of functioning as yet another quality initiative imposed from above. Specialty societies took a leadership role in partnership with a wide swath of consumer and patient groups, helping physicians and patients accept the message of “more is not always better.”

Through Choosing Wisely, physicians were socialized toward a new norm in the culture of medicine against low-value care, which was reflected in the medical literature. From 2014 to 2015, the number of articles on overuse nearly doubled. The adage that “culture eats strategy every day” became a guiding light. Manya Gupta, MD, from Rush University Medical Center, summed it up as, “Once culture change starts, improvements become expected.”

The unexpected nature of societies taking the lead on this issue, potentially in conflict with their members’ economic self-interest, helped make the campaign stick. Similarly, the simplicity, concreteness, and credibility of the recommendations allowed them to be deployed in a variety of settings at a variety of levels in the organization.

Implementation has been accelerated through the support of the Robert Wood Johnson Foundation (RWJF), which has provided two grants to support putting the Choosing Wisely recommendations into practice.

Choosing Wisely In Action

The front line empowerment fostered by Choosing Wisely was evident when the University of Vermont Medical Center asked faculty and residents to submit ideas for high-value care projects targeting tests and treatments that could be performed less frequently. Interventions on seven projects were completed. Key reported outcomes included:

  1. a 72 percent reduction in the use of blood urea nitrogen and creatinine lab testing in patients with end-stage renal disease who were on hemodialysis and hospitalized;
  2. a 90 percent reduction in dual-energy x-ray absorptiometry (DEXA) screening on women ages 65 and older without clinical risk factors for osteoporosis; and
  3. a 71 percent reduction in the use of portable chest x-rays in mechanically ventilated patients who were not intubated that day and did not have a procedure performed.

Vanderbilt University Medical Center drove cultural change through a “challenge” to all house staff and residents aimed at reducing unnecessary daily lab orders. After educational sessions, teams were sent weekly emails on tracking use in a friendly monthly competition. This resident-originated focus and intervention resulted in significant reported decreases of daily blood counts and basic metabolic panels.

Crystal Run Healthcare, a multispecialty practice with 350 clinicians, also sponsored a contest designed to advance Choosing Wisely recommendations. Eric Barbanel, MD, a practicing physician at the clinic, was the champion for the winning project, which focused on four recommendations from the American Academy of Family Physicians. The interventions included peer education, clinical decision support, and data feedback. Decreases in annual electrocardiograms (EKGs), magnetic resonance imagings (MRIs) for low back pain, and DEXA screening were reported.

The campaign has also relied on regional health collaboratives to help drive local public awareness of the issue of overuse. Two grantees supported by RWJF, HealthInsight Utah and Maine Quality Counts, have used town hall meetings to engage in conversations with patients and the broader public about Choosing Wisely.

The Choosing Wisely campaign has focused first on adaptive change—on “why” there is concern about overuse by clinicians and patients, and on developing a consensus set of common values and purposes. The campaign has emphasized evidence about benefits and harms and the pursuit of enhancing quality, safety, and doing no harm. The aim has been to win both the hearts and minds of physicians so that they would be more engaged in improvement efforts, something often missing in efforts to change behaviors in clinical practice. The rapid introduction of purely technical solutions (that is, clinical decision support through electronic medical records) often alienates clinicians who don’t know the values and motivation behind the need for such solutions.

Remaining Challenges

Choosing Wisely has had some success in raising awareness of overuse and incorporating recommendations into practice. But results from national studies have been mixed, highlighting the need for further formal evaluation of the initiative’s impact.

More importantly, other strategies needed to complement Choosing Wisely must be jumpstarted. Specifically, more needs to be done to address some of the other underlying drivers of overuse in the health care system, notably perverse payment incentives; eliminating unnecessary services will be challenging as long as providers face financial incentives to provide more care and patients have no incentives to avoid care. Choosing Wisely is an attempt to change attitudes and mindset, but changing attitudes is hard when incentives are misaligned.

Payment reform can play a role in changing physician behavior by minimizing rewards for doing unnecessary tests and procedures. In fact, some evidence suggests population payment has disproportionately reduced use of potentially unnecessary tests and procedures. But it is not always easy to design payment reform such that the incentives are fully experienced at the point of care. Moreover, although evidence suggests these payment models lower spending without sacrificing quality, the effects have generally been modest and surely more could be done. And reinforcement works both ways: Just as payment reform can make the task of changing attitudes through Choosing Wisely easier, winning hearts and minds can amplify the effectiveness of any payment reform strategy.

Benefit design can also help reduce use of potentially unnecessary services by increasing patient out-of-pocket spending for those services. However, higher out-of-pocket spending can be a significant financial burden on patients, and in many cases they are not well suited to make nuanced decisions about care. Most evidence suggests that when faced with higher cost sharing, patients reduce use of appropriate and inappropriate care in similar proportions. Value-based insurance design (VBID)—which aims to increase cost-sharing for less effective treatments and decrease cost sharing for more effective treatments—can help encourage patients to specifically reduce overuse of low-value care. However, VBID is not a panacea and must be implemented in a way that avoids adverse selection and excessive complexity. Engaging clinicians in explaining and implementing benefit design changes will be necessary to help patients better navigate the choices they will confront.

Even if Americans were not grappling with high health care spending, avoiding potentially unnecessary services would be important. But with fiscal pressures driving changes by private and public purchasers that often have deleterious consequences, eliminating potentially unnecessary services—and thus delivering cost savings while increasing quality—is more important than ever. Choosing Wisely exemplifies efforts of the professional societies to engage on the issue; by appealing to the professionalism of physicians and other clinicians, it can provide the foundation for promoting delivery of appropriate care.

Professionalism as a force to improve quality has an opportunity to show its value along with the technical approaches and the environmental changes needed (for example, payment reform). The design of Choosing Wisely, which included few rules, much autonomy for engagement and design, and little central control, produced an activated professionalism. Appealing to the intrinsic motivations of physicians offers an underused path to achieve widely shared policy goals such as reducing the cost of our health care system while enhancing its quality. Professionalism can also appeal to patients and give them confidence in their physicians’ counsel that unnecessary care truly is unnecessary. Given the activity that has been unleashed in health systems and clinical practices throughout the United States, professionalism should not be overlooked as part of our broad health care transformation strategy.