Hospital profits in Massachusetts shriveling due to financial pressure

https://www.healthcarefinancenews.com/news/hospital-profits-massachusetts-shriveling-due-financial-pressure?mkt_tok=eyJpIjoiWWpFek9EVm1ZbU5tT0RWaSIsInQiOiI2YVwvTFhvMGpzWkpHSkttMFgrS253RWU5RlNJRE51ZzF0Zkdadjd4MmRKVVwvTUpYZW5qTjF2OU1LQnJcL3hDN1l4aGRnRmo0cWxGZk9CcXBRdm9Ga21iUkNhVG9XVTQ5UFZUbGZpbHRXTUgwcng4M081S3hpQ1dQMCt2N2lCQU5VTyJ9

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Hit especially hard were Massachusetts’ community hospitals, with median operating margins plunging to 0.9 percent.

Acute care hospitals in Massachusetts are turning a profit for the most part, but in many cases those profits are less than robust. The state’s Center for Health Care Information and Analysis found that many are in a financially precarious position.

According to the report, about 65 percent of the commonwealth’s hospitals have operating margins below three percent. Overall, hospitals’ operating margins hovered around 1.6 percent. That’s down from 2.8 percent during the previous fiscal year.

While 49 of 62 hospitals were profitable in the fiscal year ending Sept. 30, many low margins low enough not to be considered financially healthy.

Hit especially hard were Massachusetts’ community hospitals, with median operating margins plunging to 0.9 percent — down two full percentage points from the previous year.

The northeastern part of the state saw the lowest margins geographically, at 1.6 percent, with some facilities operating on negative margins and hemorrhaging cash. North Shore Medical Center in Salem was among the hardest hit, seeing $57.7 million evaporate in fiscal year 2017.

Not all Massachusetts hospitals are feeling those kinds of pressures. Northeast Hospital enjoyed a 9 percent operating margin during the past fiscal year, translating into a $33.1 million surplus.

That the state’s rural hospitals are struggling isn’t surprising, given the national trend. A recent report found that nearly half are operating at negative margins, fueled largely by a high rate of uninsured patients. Eighty rural hospitals closed from 2010 to 2016, and more have shut their doors since.

Aside from the high uninsured rate, a payer mix heavy on Medicare and Medicaid with lower claims reimbursement rates is a contributing factor. More patients are seeking care outside rural areas, which isn’t helping, and many areas see a dearth of employer-sponsored health coverage due to lower employment rates. Many markets are also besieged by a shortage of primary care providers, and tighter payer-negotiated reimbursement rates.

 

 

 

Proposed changes to 340B program would cut DSH eligibility by half

https://www.beckershospitalreview.com/hospital-management-administration/proposed-changes-to-340b-program-would-cut-dsh-eligibility-by-half.html

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A new congressional proposal would raise the minimum disproportionate share hospital adjustment percentage that DSH hospitals must meet to qualify for the 340B drug discount program, eliminating 340B eligibility for over half the participating hospitals, according to a study by 340B Health.

Under the bill, proposed by Rep. Joe Barton, R-Texas, 573 of the 1,115 DSH hospitals enrolled in the 340B program would no longer be eligible for the drug discounts. Under the current rules, DSH hospitals are eligible for the 340B program if their Medicare DSH adjustment percentage is greater than 11.75 percent. The proposal would raise the qualifying rate to 18 percent.

Here are the 10 states with the most DSH hospitals that would lose 340B eligibility under the proposal:

  1. California (39)
  2. Texas (35)
  3. North Carolina (33)
  4. Georgia (31)
  5. Ohio (29)
  6. Michigan (23)
  7. New York (21)
  8. Illinois (19)
  9. Alabama (19)
  10. Pennsylvania (18)

 

 

Vulnerable Rural Hospitals Face Quandaries Over Questionable Billing Schemes

Vulnerable Rural Hospitals Face Quandaries Over Questionable Billing Schemes

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Two rural Missouri hospitals recently handed over their operations to a private company that promised to turn them around with a billing practice it calls “a lab outreach program.”

But the approach that company is using is drawing attention from lawmakers and Missouri’s auditor. It is similar to a tactic underway at 20 rural hospitals in Missouri, Kansas, Oklahoma, Florida and California.

Read KHN’s previous coverage of this topic: “Outsiders Swoop In Vowing To Rescue Rural Hospitals Short On Hope — And Money” by California Healthline senior correspondent Barbara Feder Ostrov.

 

A Long Road to Care for Rural Californians

https://www.chcf.org/blog/long-road-to-care-for-rural-californians/

Cramped rural hospital in Happy Valley California

In the northeast corner of California, nearly kissing Nevada and Oregon, lies Surprise Valley. At approximately 70 miles long, the valley is home to 1,232 people, which works out to about two people per square mile. Services are sparse: The Chamber of Commerce website lists two grocery stores, one insurance agency, and one hospital with an emergency room to provide care to its residents.

Essential CoverageThat hospital, Surprise Valley Community Hospital, is a vital institution, but it is bankrupt. Barbara Feder Ostrov of Kaiser Health News reports that years of mismanagement caught up to the hospital in 2017. By the time state inspectors arrived that June, the hospital was in a state of disarray — crushed by debt, it had only one acute care bed and a chief administrator who was MIA. Residents of Surprise Valley were torn between keeping it open and shuttering it even though the nearest hospital with an emergency room is 25 miles away on the other side of a mountain pass. In the June 5 California election, county voters chose to sell the hospital to an out-of-state entrepreneur rather than risk the hospital’s closure.

Surprise Valley isn’t alone in its lack of access to health care. Since 2010, 83 rural US hospitals have closed, Michael Graff writes in the Guardian. For residents of rural areas, the closure of the local hospital can cut off a lifeline. When Portia Gibbs of Belhaven, North Carolina, had a heart attack in 2014, her husband, Barry, had to choose between driving her 60 miles east to a hospital in Nags Head or 70 miles west to a hospital in the town of Washington. Portia never made it to a hospital.

It’s difficult to attract physicians and hospitals to rural areas, where wages and reimbursement rates tend to be lower. “What happens is if you’re a cardiologist you have a tendency to move to the East Coast where you can get paid more for the same procedure,” said US Senator Jerry Moran (R-Kansas) in a meeting with HHS Secretary Alex Azar, according to Modern Healthcare.

Solving the Rural Hospital Puzzle

There is no easy fix for the decline in the number of rural hospitals, but Moran and other senators have proposed fixing the Medicare wage index. The index, which factors into reimbursement of hospitals serving Medicare patients, is a formula that accounts for geographic differences in wages and the cost of living. Some lawmakers contend that the formula penalizes rural hospitals and exacerbates the hospital shortage. Updating the index to increase payments to Medicare providers in underserved areas could draw more physicians to rural hospitals, which could help prevent hospitals from going under.

Some rural hospitals have tried another solution: joining multihospital systems. In California, where 25% of rural hospitals have closed over the past two decades, 19 rural hospitals have combined forces in systems composed of at least two other hospitals. However, our analysis of six of these hospitals showed mixed results for this strategy: The financial status of one rural hospital improved substantially after joining a system, but two others saw lower net income.

Perhaps a more feasible solution to lack of access to care in rural areas can be found in expanding the health care workforce. A study published in Health Affairsfound a growing presence of nurse practitioners (NPs) among rural practices nationwide. From 2008 to 2016, the number of NPs in rural areas increased 43%. Not surprisingly, “states with restricted scopes of practice had lower NP presence and slower growth.” The authors conclude that “adding nurse practitioners is a useful way for practices to align themselves with contemporary efforts to improve access and performance.”

It seems fitting and bittersweet to end this edition of Essential Coverage with our tribute to the late Herrmann Spetzler, the visionary CEO and the heart of Open Door Community Health Centers in rural Humboldt and Del Norte Counties. To underscore his commitment to providing health care in remote locales, he often described himself in meetings and speeches as “Herrmann Spetzler, RURAL.” Spetzler’s unexpected death in March cut short his life’s work to provide health care to everyone, regardless of income or geography. His passing leaves a huge hole in the community he served.

 

Auditor “shocked” by massive billing schemes at rural hospitals

https://www.cbsnews.com/news/questionable-billing-schemes-rural-hospitals-costing-health-insurance-companies-millions/

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Rural hospitals across the country are closing at the highest rates in decades. Since 2010, 83 have shuttered. Desperate to stay open, some hospitals got caught up in dubious billing schemes. In March, CBS News investigated questionable billing at rural hospitals in Georgia and Florida.

Insurance companies reimburse rural hospitals at higher rates to help keep critical healthcare in those communities. Those higher rates have made rural hospitals attractive targets for schemes that have generated nearly half a billion dollars in allegedly fraudulent billing.

In 2016, Missouri state auditor Nicole Galloway began examining the finances of several rural hospitals in her state. One was Putnam County Memorial, a 15-bed hospital in Unionville, Missouri, struggling to keep its doors open.

“We were shocked….When we started to look at the financial records and notice that tens of millions of dollars were coming through, I remember sitting down at the table with my audit staff and, you know, I just said we gotta dig deeper on this,” Galloway told CBS News’ Jim Axelrod.

Her team discovered a management company called Hospital Partners had swooped in weeks before Putnam was about to close, promising to turn it around. They made deals with labs around the country to funnel billing for blood tests and drug screens through Putnam, which collects higher reimbursement rates as a rural hospital. Putnam kept about 15 percent; most of the money was wired back to the labs and the management company.

“Essentially the hospital appeared to act as a shell company for these questionable lab billings,” Galloway explained. “In a six-month period, the hospital funneled through about $92 million in revenues. To put that in perspective, the previous year their total revenues were $7.5 million.”

And it wasn’t just happening at Putnam. According to court filings reviewed by CBS News, insurance companies are now attempting to claw back nearly a half a billion dollars they paid rural hospitals across the country with similar billing arrangements which they call “fraudulent.” They all declined our requests for an interview so we sat down with Jason Mehta, a former federal prosecutor who specialized in healthcare fraud.

“The question’s gonna be did the laboratories intend to cheat? Did they intend to trick? Did they mislead the insurance companies? Because simply making extra money isn’t a crime in and of itself. It’s the question of, was someone tricked? Was some deceived?” Mehta said.

Insurance companies say one way labs deceived them was paying kickbacks to healthcare providers for specimens they could then bill at the higher reimbursement rates. CBS News obtained a voicemail of a lab representative soliciting samples from a rehab center in California.

“He would send about, as soon as you guys sent 300 samples he would just send you $100,000 right then and there,” the representative is heard saying on the message.

“If I heard that message and we were talking about Medicare money, I would be very, very concerned and I would be opening an investigation immediately,” Mehta said. “In my experience, some of the most sophisticated actors in this space, some of the ones that….get the most amount of money from the healthcare programs, are those that know exactly where the line is, and skirt right up to that line.”

What Mehta told us could cross the line is a key finding of Nicole Galloway’s audit.

“Several months after the questionable lab billings had started, there was no operating lab in the hospital,” she said.

Which begs the question, how could they be billing for lab tests if there was no lab in the hospital?

In March, Blue Cross Blue Shield filed a $60 million lawsuit against Hospital Partners, alleging their arrangement with labs was a “fraudulent scheme.” Hospital Partners is suing Galloway, claiming she had no right to audit Putnam.

“They (Hospital Partners) are pushing back on us but I will tell you that will not stop me from doing my job on behalf of taxpayers,” Galloway said.

In a statement, Hospital Partners said “Putnam County Memorial Hospital is authorized by law to assign and bill for clinical laboratory testing provided at a reference lab.” On Tuesday, the Missouri Attorney General’s office told “CBS This Morning” it is actively investigating this matter.

 

 

340B Drug Program Sees Massive Changes on the Horizon

http://www.healthleadersmedia.com/health-plans/340b-drug-program-sees-massive-changes-horizon?spMailingID=12791316&spUserID=MTY3ODg4NTg1MzQ4S0&spJobID=1321984466&spReportId=MTMyMTk4NDQ2NgS2#

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A proposal in the Senate aims to create savings for health providers while a new report details how to maximize the program’s pharmacy benefits.  

The 340B Drug Pricing Program represents ample healthcare and business opportunities to some, while others see it as a federal program in need of significant reforms to address outstanding cost concerns.

The program, which provides Medicare payments for outpatient drugs to hospitals serving high volumes of low-income patients, has garnered both praise and controversy in recent months. The program is viewed as crucial for rural hospitals attending to high Medicare populations, but also as a lightning rod for perceived governmental mismanagement.

Sage Growth Partners, a healthcare business consultant agency based in Baltimore, released a report Thursday titled, “Realizing the Full Power of 340B Pharmacy Benefits.” The report includes three distinct 340B models health systems can implement: do-it-yourself, contract pharmacy, or global managed services.

Dan D’Orazio, CEO of Sage Growth Partners, said while contract pharmacy models have been the most popular approach, businesses have to assess their own expectations and needs when getting involved with the 340B program.

“This report takes a look at how you decide to manage or operate one of these entities and whether you go it alone, find a commercial partner like a pharmacy or find a managed partner to help you do that,” D’Orazio told HealthLeaders Media. “There are different models to do that and I think they have different ramifications for profitability, patient care, coordination of care, and medication adherence.”

D’Orazio said recent reports have indicated the 340B program is “a little out of control” but said the public should not be scared, adding the program represents a “real opportunity” for health systems dealing with financial pressures. He also said the program’s rules are clear, though hospitals may need to engage with managed partners for experience and assistance with any lingering complexities.

Ire, attention center on 340B

Despite the enthusiasm to maximize 340B benefits, the program has sustained pointed criticism in recent months.

A recent Pacific Research Institute study found numerous cases of abuse and profiteering, ultimately urging Congress to reform the program. A report from the Department of Health and Human Services’ Office of Inspector General last month highlighted $4.4 billion in federal funds misspent on health care programs last year, including 340B.

Those interested in implementing the strategies detailed in the Sage Growth Partners’ report will have to account for legislative corrections, which could be on the way.

Sen. Bill Cassidy, R-La., introduced the HELP Act on Tuesday, which would create a moratorium on registering “new non-rural section 340B hospitals and associated sites.” In a press release, Cassidy stated his support for 340B while highlighting the need for improvement after documented instances of wasteful spending.

“But too often the program’s discounts are used to pad hospitals’ bottom lines instead of helping disadvantaged patients afford their treatments,” Cassidy said. “This bill will increase transparency and accountability and help ensure these discounts reach patients.”

The group 340B Health, which represents hospitals and health systems, issued a statement responding to Cassidy’s legislative proposal.

“We agree the 340B program is an important resource for hospitals and their patients, and support having a thoughtful conversation about transparency in the 340B program,” the statement read. “However, we are concerned by the proposals included in the HELP Act.

“If enacted, these changes would limit the ability of 340B hospitals to fulfill their mission to care for all Americans regardless of their ability to pay. The legislation would make changes to the rules on which hospitals can participate in 340B, which could reduce the number of hospitals that could qualify for the drug discounts. It would also impose significant new reporting requirements that would not shed any light on what hospitals do with their 340B savings to help patients.”

So far, the bill has not even advanced to a committee vote.

Hospital Distress to Grow If Congress Closes Door to Muni Market

https://www.bloomberg.com/news/articles/2017-12-08/hospital-distress-to-grow-if-congress-closes-door-to-muni-market

  • Small, lower-rated facilites could see costs rise 1-2 percent
  • At least 26 non-profit hospitals already in default, distress

As Congress moves to assemble the final version of its tax plan, projects like Spooner, Wisconsin’s 20-bed hospital hang in the balance.

The rural community, about 110 miles (177 kilometers) northeast of Minneapolis, sold tax-exempt bonds to build the $26 million facility it opened last May. The hospital’s chief executive officer said that if its access to such low cost financing had been cut off it would have paid over $6 million more in interest.

That may soon be an expense that other hospitals across the country will have to shoulder. The House’s tax legislation revokes non-profit hospitals’ ability to raise money in the municipal market, where investors are willing to accept lower interest rates because the income is exempt from federal taxes. That’s threatening to saddle health-care providers with higher borrowing costs at a time when their finances are already under pressure.

“Should tax-exempt financing not be available in the future, it may really harm our ability to build affordable senior housing and assisting living facilities,” said Michael Schafer, Spooner Health’s CEO.

For small, rural hospitals across the country, labor, drug, and technology costs are increasing faster than the revenue and patients’ unpaid debts are on the rise. Higher financing costs would be one more challenge.

David Hammer, head of municipal bond portfolio management for Pacific Investment Management Co., said the loss of the tax-exemption could raise borrowing costs by 1 to 2 percentage points at small facilities with a BBB rating or below. That “could have a meaningful impact on their balance sheets,” he said.

At least 26 non-profit hospitals are already either in default or distress, meaning they’ve notified bondholders of financial troubles that make bankruptcy more likely, according to data compiled by Bloomberg. That includes falling short of financial terms set by their debt agreements and having too little cash on hand.

Many of them are based in rural communities where the populations tend to be “older, poorer and sicker,” according to Margaret Elehwany, the vice president of government affairs and policy at the National Rural Health Association. She estimates that about 44 percent of rural hospitals operate at a loss. There have been at least seven municipal bankruptcy filings by hospitals since last year, the most of any municipal sector excluding Puerto Rico.

The risk that Congress will prevent hospitals from accessing the municipal market worries Dennis Reilly, the executive director of the Wisconsin Health & Educational Facilities Authority, an agency that issues debt for non-profits such as Spooner Health.

“All of us in the industry were completely blindsided by the House proposal,” Reilly said in an interview from Washington, where he was meeting with members of Congress about the proposed bill.

“Without tax-exempt financing, not-for-profits across the country will have increased borrowing costs of 25 to 35 percent because they’ll have to access the taxable market,” he said. “For many of the rural providers like Spooner, much of their project they would not have been able to do with the higher cost of capital.”

A Rush to Beat the Clock

Hospitals are among those rushing to issue tax-exempt debt while they still can. Mercy Health, a Catholic health-care system that operates in Ohio and Kentucky, is scheduled to sell $585 million tax-exempt bonds next week. The deal, originally planned for early next year, was moved up after the release of the House proposal.

Spending more on debt would cut into the funds available for facilities, equipment and charitable outreach, like programs for opioid addiction, according to Jerome Judd, Mercy’s senior vice president and treasurer. “Things like that are impacted,” he said.

At least some members of Congress share the hospital executives’ concerns. Last month, some Republican lawmakers sent a letter to leadership pushing for the final plan to preserve the ability of hospitals and other entities, like affordable housing agencies and universities, to issue tax-exempt bonds.

“Private activity bonds finance exactly the sort of private public partnerships of which we need more of, not less,” they wrote. “These changes are incompatible with President Trump’s priority for infrastructure investment in the United States.”

It’s Tough to be Small

Some hospitals already opt to sell their bonds in the taxable municipal market to avoid disclosures and restrictions over how the proceeds are used, though they are typically larger entities that can secure advantageous rates because of the size of their deals. Patrick Luby, a municipal analyst at CreditSights, said smaller clinics with only a few million of bonds to sell would have a hard time accessing that market, which attracts corporate debt investors accustomed to big issues.

“Even what we would consider a large deal in the muni market is almost an odd lot in corporate bonds,” he said. “Very large hospital chains, large household name universities — global investors will buy those names, but they’re not going to buy a $15, $25, $50 million local hospital.”

If the House plan is enacted, hospitals “will have a really difficult time accessing the market,” he said.