Dallas-based Tenet Healthcare divested a Chicago-area hospital and sold its minority interest in four Texas hospitals.
Tenet completed the sale of MacNeal Hospital in Berwyn, Ill., and its local physician practices to Chicago-based Loyola Medicine, which is part of Livonia, Mich.-based Trinity Health. MacNeal Hospital includes 374 acute care beds, a 12-bed rehabilitation unit, a 25-bed inpatient skilled nursing facility and a 68-bed behavioral health program.
“We look forward to serving a greater number of patients through our expanded delivery network, thanks to the resources, providers and value-added care made possible by adding MacNeal Hospital and its physicians to our system,” Larry M. Goldberg, president and CEO of Loyola Medicine and Trinity Health’s Illinois region, said in a statement.
Tenet also announced the completion of several other deals on Feb. 2. The company sold its minority interest in Baylor Scott & White-Centennial in Frisco, Texas, and Baylor Scott & White-Lake Pointe in Rowlett, Texas, to Dallas-based Baylor Scott & White Health. The company transferred its minority interest in Baylor Scott & White-Sunnyvale (Texas) to Texas Health Ventures Group, which is a joint venture between Tenet’s United Surgical Partners International subsidiary and Baylor Scott & White Health. Tenet also sold its minority interest in Baylor Scott & White Medical Center-White Rock in Dallas to Pipeline Health, a hospital management company based in Manhattan Beach, Calif.
Tenet ended the fourth quarter of 2017 with a net loss of $230 million, compared to a net loss of $79 million in the same period of the year prior. To improve its financial position, Tenet launched a $250 million cost reduction initiative last year, which involves divesting hospitals in non-core markets and cutting 2,000 jobs, or about 2 percent of the company’s workforce.
Tenet’s hospital divestiture plan is expected to yield more than $1 billion of proceeds. In the first quarter of 2018, Tenet received $550 million of cash proceeds from the divestiture of MacNeal Hospital, the sale of its minority interest in the Texas hospitals and the sale of two hospitals in Philadelphia.
A survey of 100 healthcare executives found that most of them are seeing ROI on value-based contracts, but investments in EHRs are not sufficient to manage those contracts.
The Sage Growth Partners study found most respondents were not satisfied with their EHRs’ “ability to help them manage core functions necessary to succeed in (value-based care) — such as care coordination, risk stratification, decision support and patient engagement.”
About two-thirds of respondents said EHRs are not delivering promises concerning lower costs, better population health management and improved patient and physician satisfaction.
Dive Insight:
Healthcare providers are increasingly looking to EHRs and third-party population health management solutions to help them with value-based care.
A recent Healthcare Financial Management Association (HFMA) survey found that value-based payment programs doubled since 2015. Nearly three-quarters of executives in the HFMA survey said their organizations achieved positive financial results, including return on investment, from value-based payment programs.
Although providers expect value-based programs to continue to increase, the new Sage Growth Partners survey found dissatisfaction with EHRs and concern they are not helping enough in value-based care. The report found 64% of respondents said EHRs haven’t delivered many critical value-based tools. At least 60% of respondents said they are looking for value-based solutions beyond EHRs.
The survey included a finding that will likely get the attention of EHR and population health management vendors — half of respondents said they are somewhat or highly likely to switch population health management vendors over the next three years.
Nearly three-quarters of survey respondents have had an EHR for at least three years. About half also have third-party population health management solutions. These findings offer a glimpse into the dissatisfaction as well as opportunity in population health management.
The executives surveyed said there are issues with interoperability, addressing social determinants of health, patient engagement, stakeholder coordination and risk analytics. They also spoke of health systems having trouble aggregating and using data from numerous EHR systems and other data sources.
These issues have led half to two-thirds of healthcare executives turning to population health management or do-it-yourself solutions beyond EHRs “to compensate for the lack of these capabilities within their EHRs.” Many of those executives said population health management solutions enabled their value-based success. Those successes are also coming at a lower cost than the investments in EHRs.
The study authors predicted more healthcare executives will look beyond EHRs in the coming years to help with value-based contracting. They said “suboptimal tools” that manage care and costs for populations won’t be enough in coming years.
“As (value-based care) reaches the tipping point, and as they take on programs with greater risk and greater complexity, they will need to continue looking beyond their EHRs to get the functionality they need,” the authors wrote.
Atrium Health, formerly known as Carolinas HealthCare System, announced Friday that its planned merger with UNC Health has been suspended because of disagreements between the two systems on which would control the combined company, The Charlotte Observer first reported. The now-stalled deal would have created a system with more than 50 hospitals and 100,000 employees.
Although consolidation among hospital systems has ramped up over the past year, the failure of the two groups to come to terms shows it’s not always a smooth path.
Dive Insight:
The merger plan was announced in September, but the deal now appears to be going nowhere.
“In our letter sent to UNC Health Care today, we informed them that while we have not been able to reach an agreement, our respect for UNC Health Care, its team and UNC Health Care’s accomplishments has grown through this process,” said an Atrium Health statement also obtained by Healthcare Dive.
Merger mania is still clearly evident in the industry, however.
Advocate Health Care and Aurora Health Care recently moved closer to merging to form the 10th largest nonprofit healthcare system in the U.S. after receiving regulatory approval from both the Federal Trade Commission and Illinois.
The mergers are evidence that health systems continue to search for ways to capture economies of scale and cut costs as hospitals face lower reimbursements and patient volumes. But despite the trend, combining massive health systems can be difficult with regulatory and other challenges.
In a new financial report, Geisinger Health System reported a gain of nearly $200 million in net income to $324.9 million for the first half of fiscal year 2018 compared to the previous year, for an excess margin of 9%.
Operating income for the first six months was up from $51.9 million a year ago to $61.2 million in the current fiscal year and net revenue increased 8.1% to $3.3 billion. However, Geisinger’s operating margin dropped from 3% for the first three months of the fiscal year to 1.8% through half the year.
One area of concern for the integrated healthcare system was its Affordable Care Act (ACA) health plan. Geisinger Health Plan (GHP) struggled after the company didn’t get $11 million in cost-sharing reduction (CSR) payments following President Donald Trump’s decision to stop payments in October.
Dive Insight:
Geisinger’s net revenue growth is connected to an increase in net patient service revenue after the provision for bad debts of nearly 5% and an increase in premium revenue of 11%.
“Net patient service revenue benefited from the realization of growth plans centered on market share growth and the opportunistic capture of high-acuity, clinical service volumes. Premium revenue benefited primarily from rate increases,” Geisinger said in the report.
ACA marketplace volatility, namely the end of CSR payments, as well as higher utilization affected GHP. The company believes the higher utilization is connected to GHP members concerned they would lose coverage if Congress repealed the ACA. Despite Congress’ and the president’s threats and a few close votes, the repeal didn’t happen. But before that effort stalled, Geisinger said many members got healthcare services just in case.
“Similarly, provider tiering in benefit plan changes for self-insured employees were announced in the fall of 2017. These benefit changes caused certain employees to accelerate medical services through providers that fall under higher out-of-pocket tiers beginning Jan. 1, 2018. These one-time impacts, while negatively affecting second-quarter results, are expected to improve operating profits beginning in the third fiscal quarter,” Geisinger said in the report.
Geisinger expects to resolve the CSR non-payment issue this year after raising the average premium rate by 31% to help offset the loss of payments. GHP also gained more than 20,000 members in its exchange plans, a 39% increase, for 2018, which should help offset losses.
GHP had 559,643 members in its health plans through the first half, which was a 0.4% increase compared to a year ago.
Concerning utilization, Geisinger had an increase of 3.5% in discharges and 2.6% in discharges and observations/23-hour stays compared to a year ago. “This growth was attributable to success in expanding clinical programs. Based solely upon hospitals controlled for two years or more, Geisinger experienced a 2.9% increase in discharges when compared to the year-earlier period,” the report states.
However, percent of occupancy based on physically available beds dipped from 60.2% to 59.9%.
Meanwhile, outpatient visits were on the rise. Outpatient emergency room visits increased from nearly 174,000 the previous year to almost 181,000 in fiscal 2018. Clinic outpatient visits increased from 1.65 million to 1.77 million.
Geisinger is the latest nonprofit to offer updates about finances. Over the past week, other major nonprofits have released financial information, including:
All had positive notes in their reports. Cleveland Clinic and Mayo Clinic said operating income and revenue bounced back in 2017 after rough numbers in the previous year. UPMC said its clinical and insurance sides had strong performances as net income hit $1.3 billion. Profits for these companies have been scrutinized as critics question whether they are giving enough back to their communities as nonprofit organizations.
CEO Wayne Smith says the company’s turnaround is making progress, even as shareholders take it on the chin, losing nearly $18 per share in the fourth quarter of 2017.
Community Health Systems, Inc. lost more than $2 billion in the fourth quarter of 2017, nearly $18 per share, owing to converging challenges that include plummeting revenues and lower hospital volumes, the company reported.
Franklin, Tennessee–based CHS said net operating revenues for the three months ended December 31, 2017, totaled $3 billion, a 31.6% decrease, compared with $4.4 billion for the same period in 2016.
Net operating revenues for all of 2017 totaled $15.3 billion, a 16.7% decrease, compared with $18.4 billion for the same period in 2016.
Despite the sea of red ink, CHS CEO Wayne T. Smith was upbeat, and said the company’s turnaround effort is making headway.
“We are pleased with our progress in the fourth quarter and expect to carry that momentum through 2018, as we execute strategies that we believe will strengthen our core business and drive improved results,” Smith said in prepared remarks.
“During the fourth quarter, we completed our 2017 announced divestiture plan and we intend to continue to optimize our portfolio in 2018 to help pay down debt and refine our portfolio to stronger markets,” Smith said.
Smith said that for 2018, CHS remains “committed to growth initiatives to advance our competitive position, including expanding our transfer and access program across our networks, launching Accountable Care Organizations, and strategically expanding outpatient services.”
According to a filing from CHS:
Net operating revenues totaled more than $3 billion in the fourth quarter and were adversely impacted by a $591 million increase in contractual allowances and provision for bad debts.
Net loss attributable to CHS stockholders was $2 billion, or nearly $18 per share, compared with net loss of $220 million, or nearly $2 per share (diluted) for the same period in 2016.
Adjusted EBITDA was $409 million.
Cash flow from operations was $156 million, compared with $327 million for the same period in 2016.
Operating results for the fourth quarter reflect a 19.2% decrease in total admissions, compared with the fourth quarter of 2016. Same-hospital admissions fell 1.7% and adjusted admissions decreased .9% over the same period.
Operating results for all of 2017, reflect a 14% decrease in total admissions when compared with 2016.
Hurricanes Harvey and Irma resulted in a $40 million loss of net operating revenues, owing to evacuations and population disruptions before the storms, and recovery efforts afterward.
As part of its efforts to pay down outstanding debts, CHS sold 30 hospitals in 2017, and continues to negotiate other divestitures in 2018.
CHS recorded non-cash impairment expense totaling $1.7 billion in the fourth quarter, from an impairment charge of $1.4 billion on the value of goodwill for the CHS’s hospital reporting unit and impairment charges of $341 million to reduce the value of assets at hospitals that CHS has sold, plans to sell, and at underperforming hospitals.
After spending most of 2017 defending the Affordable Care Act from GOP attacks, a growing number of Democrats believe the law’s reliance on private insurance markets won’t be enough and the party should focus instead on expanding popular government programs like Medicare and Medicaid.
The emerging strategy — which is gaining traction among liberal policy experts, activists and Democratic politicians — is less sweeping than the “single-payer” government-run system that Sen. Bernie Sanders (I-Vt.) made a cornerstone of his 2016 presidential campaign.
Many Democrats still fear such a dramatic change would disrupt coverage for too many Americans, but they have also concluded that the current law’s middle-ground approach to build on the private insurance market — originally a Republican idea — isn’t providing enough Americans with adequate, affordable health coverage.
These Democrats see the expansion of existing public programs as a more pragmatic and politically viable way to help Americans struggling with rising costs and correct the shortcomings of the 2010 law, often called Obamacare.
“What is clear is that the Democratic Party as a whole is coming to the conclusion that stand-alone private market solutions to healthcare do not achieve affordability and coverage for all,” said Chris Jennings, an influential Washington health policy advisor who worked for Presidents Clinton and Obama.
“But there is a recognition that you can’t just snap your fingers and have political consensus. … And one of the lessons learned from 2017 is that you better do your homework.”
Democrats are eager to avoid mistakes made by Republicans, who proved unprepared last year as they struggled unsuccessfully to fulfill their years-long promise to repeal the current health law.
Developing a new healthcare agenda doesn’t promise to be easy, as liberal activists and others in the progressive wing of the Democratic Party remain committed to the single-payer solution championed by Sanders and may resist more incremental steps.
At the same time, even more modest moves to build on Medicare or Medicaid will face opposition from hospitals, drugmakers and others in the industry who fear that government health plans would pressure them to accept lower prices.
And no one expects any Democratic plan to go anywhere as long as Congress remains in Republicans’ hands and Trump holds a veto pen.
But in the wake of widespread public rejection of GOP healthcare proposals last year, Democrats see an opportunity to seize the initiative and advance the party’s long-held dream of universal health coverage.
“We’re on offense on healthcare,” said Brad Woodhouse, campaign director for Protect Our Care, an advocacy group formed last year to fight the GOP effort to roll back the 2010 health law. “We need to make healthcare the No. 1 issue.”
Speaking to a recent conference organized by Families USA, a leading national patients’ rights group, Woodhouse cautioned, however, that Democrats must offer voters more than just a defense of the current law.
In recent months, Democratic lawmakers on Capitol Hill have filed a growing number of bills that would expand eligibility for Medicare or Medicaid, which currently limit coverage to qualifying elderly, disabled or poor Americans. The two mammoth government programs are much cheaper than commercial insurance, in large part because they pay hospitals and other medical providers less.
In January, a group of influential liberal health policy experts gathered in Washington to explore these proposals, which typically would allow younger, wealthier consumers to “buy into” one of the two programs.
At the same time, Democratic leaders in several states, including California, New York and New Mexico are exploring state-based initiatives to expand government health plans.
And last week, the Center for American Progress, a leading liberal think tank, released a plan to open up Medicare to all Americans, while still giving workers the option to stick with coverage offered through an employer.
“Democrats have mostly been trying to keep Republicans from repealing the current law,” said Sen. Tim Kaine (D-Va.). “Now we need to come up with the next set of ideas about how to improve coverage and affordability.”
Kaine and Sen. Michael Bennet (D-Colo.) are cosponsoring yet another proposal — which they call Medicare X — for a new government program based on Medicare, particularly for consumers in parts of the country with limited commercial options.
The renewed interest among Democrats in government health insurance has buoyed the hopes of those who support a more ambitious push to create a single public health plan for everyone.
“What has been happening in the last few years is that millions of working people and young people are getting involved in the party … and the grassroots movement is overwhelmingly clear about what it wants from healthcare,” Sanders said in an interview.
“That means that the debate over Medicare-for-all changes, and I think that is what is happening now.”
Indeed, Sanders’ Medicare-for-all bill, which would create a new government plan like Medicare for everyone, has drawn support from nearly every major Democrat in the Senate who is expected to seek the 2020 presidential nomination.
But many Democrats who aspire to something like Sanders’ proposal still worry about the cost and disruptions that would likely be necessary to create a large new government plan for everyone.
“I share the desire for universal coverage,” said Bennet. “The question is what approach is more practical to achieving that objective.”
Nearly a decade ago,Democratic leaders, concerned about the politics of expanding government health plans too aggressively, created the Obamacare insurance marketplaces, which rely on private insurers to provide coverage for Americans who don’t get health benefits through an employer or through a government program.
Democrats even rejected a proposal for a limited government plan to be sold on the marketplaces as a “public option.”
But the ceaseless GOP attacks on the marketplaces, which had been a conservative idea, and the failure of private health insurers to make more affordable plans available — even before Trump took office — has caused more Democrats to back a bigger role for government.
“That is a huge shift,” said Jacob Hacker, a Yale political scientist who helped develop the public option proposal.
Further emboldening Democrats is growing evidence that the public overwhelmingly supports existing government health plans, especially in the face of GOP threats to scale them back.
By contrast, the GOP proposals to roll back the 2010 health law and slash funding for Medicaid were overwhelmingly unpopular, drawing support from just one in five Americans in several nationwide polls.
Even supporters of this emerging Democratic healthcare agenda acknowledge it will take years to develop and may not be fully debated until the campaign for the 2020 Democratic presidential nomination gets underway next year.
But many say it is not too early to begin planning.
“We saw support for Medicaid [during the 2017 GOP repeal push] that took even many longtime Medicaid advocates by surprise,” said Rep. Ben Ray Lujan (D-N.M.), who is sponsoring a proposal with Sen. Brian Schatz (D-Hawaii) to allow people to buy into the Medicaid program.
“There is an opportunity now to build on that momentum,” Lujan said.
How well are doctors, nurses and other workers at your local hospital vaccinated against the flu?
That depends on the hospital.
According to data from the California Department of Public Health, flu vaccination rates among health care staffers at the state’s acute care hospitals range from a low of 37 percent to 100 percent.
Overall, flu vaccination rates among hospital workers climbed significantly in the past several years — from an average of 63 percent during the 2010-11 influenza season to 83 percent during the 2016-17 season, according to the California Department of Public Health. Vaccination rates for the current season won’t be determined until later this year.
But that general increase masks some big variations. Monrovia Memorial Hospital in Los Angeles, Los Robles Hospital and Medical Center, East Campus and Thousand Oaks Surgical Center in Ventura each reported that fewer than 40 percent of their health care workers received the flu vaccine last year. Representatives from those hospitals did not return repeated calls for comment.
On the other end of the spectrum, Rady Children’s Hospital in San Diego reported that every single person working there got the vaccine.
LOOK UP YOUR HOSPITAL
See flu vaccination rates among health care personnel at general acute care hospitals in California.
California’s flu vaccination policies for hospital workers, and those of many other states, are far from uniform or ironclad. In various states, health care workers have legally challenged hospital requirements for vaccination on religious and seculargrounds. And some unions in California and elsewhere oppose a legal mandate, partly for civil rights reasons.
Public health officials themselves have different takes on the legal requirements for hospital workers. The Centers for Disease Control and Prevention lists California and Massachusetts among the handful of states where the flu vaccination is mandated for health care workers. But the states’ laws allow health care workers to opt out by signing a form declining the vaccine. For that reason, officials from those two states said they do not actually consider the vaccine mandatory.
Colorado law requires hospital health care workers to provide proof of immunization or a doctor’s note providing for a medical exemption, and requires that non-immunized workers wear masks. Hospitals that achieve a 90 percent or higher flu vaccination rate are exempt from these rules, however.
In California, state law requires that hospitals offer the vaccine free of charge. Many hospitals offer vaccines to personnel in the cafeteria, and during day and night shifts. “The key to getting more people vaccinated is to make it more easily accessible for people,” said Lynn Janssen, chief of the California Department of Public Health’s associated infections branch.
She also said many California counties and hospitals have required health care workers to either get the flu vaccine or wear a mask, which can help prevent spreading illness to others.
Partly as a result, nearly a third of the state’s hospitals now have flu vaccination rates above 90 percent.
Vaccination rates vary significantly among different categories of hospital workers, however. Hospital employees had an average vaccination rate of 87 percent statewide in 2016-17, while licensed independent practitioners — including some physicians, advance practice nurses and physician assistants who do not receive paychecks from the hospital — had a rate of just 67 percent.
The CDC recommends that health workers get one dose of influenza vaccine annually, and cites data showing the vaccine in recent years has been to up 60 percent effective — though it was far less so this year. Dr. Bill Schaffner, an infectious diseases professor at Vanderbilt University School of Medicine in Nashville, Tenn., says there are three principal reasons to get vaccinated: to prevent workers from infecting patients, to keep them healthy in order to care for patients and to spare them a bout with the flu.
A 2017 Canadian study, however, suggests that the benefits of health care worker vaccinations have been overstated.
In any case, just because experts say health care personnel should get the vaccine doesn’t mean they will choose to do so.
“In the studies, and also in our experience, it turns out — to everyone’s great surprise — that health care workers are human beings,” Schaffner said. “Some are too busy, some don’t think the flu vaccine is worth it, some don’t like shots. Some are not convinced they can’t get flu from the flu vaccine.” (Experts say they can’t.)
Because of this, Schaffner said, it’s up to hospital leadership to push staffers to get vaccinated. At Vanderbilt University Medical Center, vaccination rates increased from 70 percent to 90 percent once leaders there effectively made the flu vaccine “mandatory,” he said, requiring noncompliant hospital personnel to present vaccine exemption requests to a hospital committee.
Health officials also encourage patients to ask whether their caregivers are vaccinated.
Jan Emerson-Shea, spokeswoman for the California Hospital Association, said her organization would like the flu vaccine to be mandatory for all health care personnel. Independent physicians have proven an especially challenging group to motivate, she said, since hospitals hold little sway over them.
“I, for the life of me, can’t imagine why a physician wouldn’t want to be vaccinated,” she said. “But they make that choice.”
Yet the California Nurses Association strongly opposes making flu vaccines mandatory, said Gerard Brogan, a registered nurse and spokesman for the union.
He said the union does recommend that providers get the vaccine, but it objects to making vaccination a condition of employment. He said some employees have religious issues or safety concerns about the vaccines and “we think that should be respected as a civil rights issue,” he said.
He also called rules requiring unvaccinated providers to wear a face mask “punitive.”
“It’s almost like the scarlet letter to shame you,” he said.
He said the masks can frighten patients — a contention made by a New York union as well. In any case, he said, wearing the masks is not especially effective in stopping the spread of flu (although some researchers say otherwise). Instead, he said, employees should be encouraged to wash hands and to stay home when they are sick.
Too often, he said, nurses are asked to come in to work when they are ill. He said he was not able to find any nurses willing to discuss their decision not to get the flu shot.
Hospitals are disappearing. While they may never completely go away, they will continue to shrink in number and importance. That is inevitable and good.
The reputation of hospitals has had its ups and downs. Benjamin Rush, a surgeon general of the Continental Army, called the hospitals of his day the “sinks of human life.” Through the 19th century, most Americans were treated in their homes. Hospitals were a last resort, places only the very poor or those with no family went. And they went mainly to die.
Then several innovations made hospitals more attractive. Anesthesia and sterile techniques made surgery less risky and traumatic, while the discovery of X-rays in 1895 enhanced the diagnostic powers of physicians. And the understanding of germ theory reduced the spread of infectious diseases.
Middle- and upper-class Americans increasingly turned to hospitals for treatment. Americans also strongly supported the expansion of hospitals through philanthropy and legislation.
Today, hospitals house M.R.I.s, surgical robots and other technological wonders, and at $1.1 trillion they account for about a third of all medical spending. That’s nearly the size of the Spanish economy.
And yet this enormous sector of the economy has actually been in decline for some time.
Consider this: What year saw the maximum number of hospitalizations in the United States? The answer is 1981.
That might surprise you. That year, there were over 39 million hospitalizations — 171 admissions per 1,000 Americans. Thirty-five years later, the population has increased by 40 percent, but hospitalizations have decreased by more than 10 percent. There is now a lower rate of hospitalizations than in 1946. As a result, the number of hospitals has declined to 5,534 this year from 6,933 in 1981.
This is because, in a throwback to the 19th century, hospitals now seem less therapeutic and more life-threatening. In 2002, researchers from the Centers for Disease Control and Prevention estimated that there were 1.7 million cases of hospital-acquired infections that caused nearly 100,000 deaths. Other problems — from falls to medical errors — seem too frequent. It is clear that a hospital admission is not a rejuvenating stay at a spa, but a trial to be endured. And those beeping machines and middle-of-the-night interruptions are not conducive to recovery.
The number of hospitals is also declining because more complex care can safely and effectively be provided elsewhere, and that’s good news.
When I was training to become an oncologist, most chemotherapy was administered in the hospital. Now much better anti-nausea medications and more tolerable oral instead of intravenous treatments have made a hospital admission for chemotherapy unusual. Similarly, hip and knee replacements once required days in the hospital; many can now be done overnight in ambulatory surgical centers. Births outside of hospitals are also increasing, as more women have babies at home or at birthing centers.
Studies have shown that patients with heart failure, pneumonia and some serious infections can be given intravenous antibiotics and other hospital-level treatments at home by visiting nurses. These “hospital at home” programs usually lead to more rapid recoveries, at a lower cost.
As these trends accelerate, many of today’s hospitals will downsize, merge or close. Others will convert to doctors’ offices or outpatient clinics. Those that remain will be devoted to emergency rooms, high-tech services for premature babies, patients requiring brain surgery and organ transplants, and the like. Meanwhile, the nearly one billion annual visits to physicians’ offices, imaging facilities, surgical centers, urgent-care centers and “doc in the box” clinics will grow.
Special interests in the hospital business aren’t going to like this. They will lobby for higher hospital payments from the government and insurers and for other preferential treatment, often arguing that we need to retain the “good” jobs hospitals offer. But this is disingenuous; the shift of medical services out of hospitals will create other good jobs — for home nurses, community health care workers and staff at outpatient centers.
Hospitals will also continue consolidating into huge, multihospital systems. They say that this will generate cost savings that can be passed along to patients, but in fact, the opposite happens. The mergers create local monopolies that raise prices to counter the decreased revenue from fewer occupied beds. Federal antitrust regulators must be more vigorous in opposing such mergers.
Instead of trying to forestall the inevitable, we should welcome the advances that are making hospitals less important. Any change in the health care system that saves money and makes patients healthier deserves to be celebrated.
Dallas-based Tenet Healthcare, which operates 74 hospitals, saw its net loss widen in the fourth quarter of 2017.
The for-profit hospital operator ended the fourth quarter of 2017 with revenues of $5 billion, up from $4.9 billion in the same period of the year prior. On a same-facility basis, patient revenue was up 6.1 percent year over year in the fourth quarter of 2017, with adjusted admissions up 1.3 percent.
After factoring in operating expenses, a $252 million write-down of the company’s deferred tax assets due to the Tax Cuts and Jobs Act, and a $22 million year-over-year increase in noncontrolling interest expense, Tenet reported a net loss of $230 million in the fourth quarter of 2017. That’s compared to the fourth quarter of 2016, when the company posted a $79 million net loss.
To improve its financial position, Tenet launched a $250 million cost reduction initiative last year, which involves divesting hospitals in non-core markets and cutting 2,000 jobs, or about 2 percent of the company’s workforce.
Tenet’s hospital divestiture plan is expected to yield more than $1 billion of proceeds. A presentation published with the company’s fourth-quarter financial results said the hospital divestiture plan is on track. Tenet sold its last two Philadelphia hospitals in January, and the company said it expects to complete the divestiture of 368-bed MacNeal Hospital in Berwyn, Ill., in March.
Tenet is also exploring the sale of Conifer Health Solutions, its healthcare business services subsidiary. The company said in December it expects to decide whether to sell Conifer during the first half of 2018.
Issue: It is widely recognized that social factors, such as unstable housing and lack of healthy food, have a substantial impact on health outcomes and spending, particularly with respect to lower-income populations. For Medicaid, now dominated by managed care, this raises the question of how states can establish managed care rates to sustain investments in social supports.
Goal: To explore practical strategies that states can deploy to support Medicaid managed care plans and their network providers in addressing social issues.
Methods: Literature review, interviews with stakeholders, and analysis of federal regulations.
Findings and Conclusions: We identify the following options: 1) classify certain social services as covered benefits under the state’s Medicaid plan; 2) explore the additional flexibility afforded states through Section 1115 waivers; 3) use value-based payments to support provider investment in social interventions; 4) use incentives and withholds to encourage plan investment in social interventions; 5) integrate efforts to address social issues into quality improvement activities; and 6) reward plans through higher rates for effective investments in social interventions. More needs to be done, however, to assist interested states in using these options and identifying pathways to braid Medicaid dollars with other social services funding.
Introduction
Exhibit 1
State Options and Considerations
1. Classify certain social services as covered benefits under the state’s Medicaid plan
2. Explore the additional flexibility afforded states through Section 1115 waivers
3. Use value-based payment to support investment in social interventions
4. Use incentives and withholds to encourage plan investment in social interventions
5. Integrate efforts to address social issues into quality improvement activities
6. Reward plans with effective investments in social interventions with higher rates
It is now widely recognized that social factors, such as unstable housing, lack of healthy food, unsafe neighborhoods, and unemployment, have a substantial impact on health care outcomes and spending, particularly with respect to lower-income populations.1 Moreover, there is an emerging body of research on which interventions are most likely to result in better outcomes and reductions in spending.2 As the nation’s largest payer for health care services for low-income populations, many of whom have substantial social service needs, Medicaid is front and center when it comes to these issues. State Medicaid agencies are increasingly focusing on how the program can cover and reimburse for nonclinical interventions, particularly in managed care, now the dominant service delivery model in Medicaid.
This report identifies practical strategies that states can deploy to support Medicaid managed care plans and their network providers in addressing social issues. Based on a literature review and on interviews with state officials, health plan leaders, actuarial experts, and other stakeholders, we identify options for states to consider if they are interested in incorporating the cost of social interventions into Medicaid managed care rates (Exhibit 1). While the strategies do not represent a comprehensive solution to the issue of Medicaid’s role in addressing social issues, they are an essential building block.
Background
States face several questions about what role they want Medicaid to play in addressing social issues that directly affect the health of Medicaid beneficiaries and the cost of serving them. Do they want to move their Medicaid programs beyond paying for medical services to tackling affordable housing, economic insecurity, unsafe neighborhoods, and access to adequate and healthy food? In some states, the priority is finding more effective ways to deliver traditional medical care. Other states, particularly those that have implemented an expansion of coverage to low-income adults or are adopting a population health approach to their Medicaid programs, look to their managed care plans and providers to address such issues (Exhibit 2). In all cases, states must evaluate the extent to which federal Medicaid rules permit coverage and payment for discrete nonclinical services.
Exhibit 2
Medicaid Expansion: Implications for the Importance of Addressing Social Determinants of Health
In the states that expanded their Medicaid programs to all adults with incomes below 138 percent of the federal poverty level (31, plus the District of Columbia), newly eligible adults often have extensive social needs. According to research from the Medicaid and Children’s Health Insurance Program Payment and Access Commission, 70 percent are below the federal poverty level, but, even so, only about half receive benefits from the Supplemental Nutrition Assistance Program.a In our interviews with Medicaid directors in expansion states, they reported that gaining these new enrollees has reinforced the importance of Medicaid addressing social issues: first, because of the relatively high prevalence of mental illness and substance abuse among the population,b and second, because of Medicaid’s increasingly important role in the coverage and care of low-income families. Finally, interviewees noted that, as Medicaid coverage became more stable and states and managed care plans began to implement value-based payment policies, plans and providers were better positioned to address the social needs of their enrollees and patients.
Rate-Setting Tools in Context
A Medicaid managed care financing and payment strategy is an essential element, but far from the only required element, of any approach to use Medicaid as a vehicle for addressing social determinants of health. During our interviews, we consistently heard that while there is strong interest in innovative rate-setting options, states have many other challenges they need to tackle for Medicaid to play a role in addressing social issues. These other challenges include the need for more staff with different skills, such as social service experience or actuarial proficiency; a data infrastructure to identify and address social factors; and sufficient time and resources for plans and providers to prepare to address social issues (see Appendix D). While these are important issues, they are not the focus of this report, which addresses options available to states for creating a payment and managed care contracting strategy that supports investments in social interventions.
Medicaid Managed Care Rate-Setting: Rules, Policies, and Procedures
The question at the center of this analysis is how states can support plan investment in social services that improve health outcomes and are cost-effective. In states with Medicaid managed care, this translates into a question of how to set Medicaid managed care capitation rates in such a way that plans are incentivized or required — and, even more importantly, have the resources — to address social issues that directly affect the health outcomes of their members.
The starting point for answering this question is the federal Medicaid managed care rules that require states to ensure that capitation rates are actuarially sound. This means that rates must be sufficient to cover the costs that plans incur to provide covered benefits to their enrollees, as well as related administrative and operational expenses. Notably, capitation rates must be based only on services covered under the state plan and services necessary to achieve mental health parity requirements.3 In other words, states cannot directly build the cost of social support services not covered under the state plan into their capitation rates (Exhibit 3).4
HENRY KOTULA 