CMS launches voluntary bundled payments model, first since spiking mandatory bundles

http://www.healthcarefinancenews.com/news/cms-launches-voluntary-bundled-payments-model-first-spiking-mandatory-bundles?mkt_tok=eyJpIjoiT1RCaE1tTmtOekZpTldReSIsInQiOiJjMlNuWlpqbDRDblZyMHJ3N3lDRDk3MlFLQWh4dmxUc3hCZjRNVWt3SnhwRUVNQ3pDUURMbUNqcGdHejFhSHU4bjM5M01Fd1VpN3lTT2NLSHpBejQydVYyUlJ0RDRkamNWWCtKLzNMZnJrUms3aSs2bkRTQURZQzRySnByajU3ayJ9

The agency’s Innovation Center said the new Bundled Payments for Care Improvement Advanced model is the first APM that would qualify under MACRA.

The Centers for Medicare and Medicaid Innovation Center has launched a new voluntary bundled payment model called Bundled Payments for Care Improvement Advanced — which CMS Administrator Seema Verma said is the first Advanced APM.

The current Bundled Payments for Care Improvement Initiative, or BPCI, is scheduled to end on Sept. 30. BPCI Advanced starts on Oct. 1 and runs through Dec.  31, 2023.

The BPCI will qualify as an an advanced alternative payment model under the quality payment program for MACRA. With advanced APMs, providers take financial risk, but can also reap an incentive payment reward.

The model gives incentive payments if all expenditures for an episode of care are under a spending target that factors in quality.

“BPCI Advanced builds on the earlier success of bundled payment models and is an important step in the move away from fee-for-service and towards paying for value,” Verma said.

BPCI Advanced participants may receive payment for performance based on 32 different clinical episodes. The clinical episodes in BPCI Advanced add outpatient episodes to the inpatient episodes that were offered in the previous BPCI model, including percutaneous coronary intervention, cardiac defibrillator, and back and neck except spinal fusion.

Last year, the Centers for Medicare and Medicaid Services cancelled or scaled back on mandatory bundled models for joint replacement, hip fractures and cardiac care, but promised to release new voluntary models.

CMS cancelled the episode payment model and the cardiac rehabilitation incentive payment model, which were scheduled to begin on Jan. 1.

The agency also reduced the number of mandatory geographic areas participating in the comprehensive care for joint replacement model, from 67 to 34. Participants in the 33 remaining areas could take part on a voluntary basis.

In BPCI Advanced, participants will be expected to redesign care delivery to keep Medicare expenditures within a defined budget while maintaining or improving performance on specific quality measures. Participant bear financial risk, have payments tied to quality performance, and are required to use certified electronic health record technology.

Like all models tested by CMS, there will be a formal, independent evaluation to assess the quality of care and changes in spending under the model.

Remedy Partners, which works with providers in the current BPCI program, reported in June 2017 that bundles resulted in a $500 million reduction in the cost of unnecessary medical expense over that past year for more than 1,000 providers. In addition, hospital readmissions decreased by 6.1 percent and a patient’s length of stay at a skilled nursing facility decreased by 6.3 percent, Remedy said.

 

12 takeaways from the 2018 JP Morgan Healthcare Conference

https://www.beckershospitalreview.com/hospital-management-administration/12-things-you-need-to-know-from-the-2018-jp-morgan-healthcare-conference-while-the-destination-is-uncertain-the-direction-is-clear.html

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The recent breathtaking flurry of mega-mergers coupled with increasingly challenging market forces and an ever shifting political landscape has cast a cloud of confusion regarding where the U.S. healthcare delivery system is heading.

So, where do you go to find the map?

Every year, the JP Morgan Healthcare Conference provides an incredibly efficient snapshot of the strategies for large healthcare delivery systems, the hub for healthcare in the U.S. Most of these organizations are also the largest employers in their respective states. The conference took place this week in San Francisco with over 20 healthcare systems presenting, including Advocate Health Care, Aurora Health Care, Baylor Scott & White Health, Catholic Health Initiatives, Cleveland Clinic, Geisinger Health System, Hospital for Special Surgery, Intermountain Healthcare, Mercy Health in Ohio, Northwell Health, Northwestern Medicine, Partners HealthCare System, WakeMed Health & Hospitals and many of the other big name brands in the market. Each provided their strategic roadmap in a series of 25-minute presentations from their “C” suite. If you’re looking for the GPS on strategy and a gauge on the health of healthcare, this is it.

How do their strategies differ? What direction are they heading in? There is a great line from Alice in Wonderland that goes, “If you don’t know where you’re going, any road will take you there.” You would think that line applies perfectly to the U.S healthcare system, but the good news is it actually doesn’t.

While the exact destination for everyone is TBD, the direction they are heading in is actually pretty clear and consistent. It turns out that they are all using a very similar compass, which is sending them down a similar path.

So, what are the roadside stops health systems consider absolutely necessary to be part of their journey to creating a more viable and sustainable value-based business model?

Based on the travel plans for over 20 of the largest and most prestigious healthcare delivery systems in the country, here’s your GPS and list of 12 things you “must do” on your journey.

1. You Must Scale

Clearly the headline at #JPM18 was the flurry of major announcements regarding major mergers. With that said, two of the mergers were front and center: teams were there to present from Downers Grove, Ill.-based Advocate and Milwaukee-based Aurora, which will be a $10 billion organization with 70,000 employees, as well as San Francisco-based Dignity Health and Englewood, Colo.-based Catholic Health Initiatives, which will be a $28 billion organization with 160,000 employees. The size and scale of these mergers is pretty stunning. While the announcement of these and the other recent mega-mergers has forced many into their board room to determine what the deals mean to them, the consensus at the conference was this: There are a number of different paths forward to achieve scale. Some, like Baylor Scott & White in Texas, have aggressive regional expansion plans. Others are betting on partnerships to provide the same or even more value. Taking a pulse of the room, two things were clear. The first is there is no definition of scale any more in this market. The second is that, despite this flurry of mergers, “getting really big” is not the only destination.

2. You Must Pursue “Smart Growth” and Find New Revenue Streams

Running counter to the merger narrative in the market, Salt Lake City-based Intermountain provided a good overview of the movement to what is called an “asset light” strategy of “smart growth.” This is a radically contrarian approach to the industry norm, which is the capital intensive bricks and mortar playbook of buying and building. As part of their strategy, Intermountain will open a “virtual hospital” delivering provider consultations and remote patient monitoring via telehealth. The system will also launch a number of healthcare companies every year, leveraging their considerable resources in a manner they believe will produce a higher yield. Other health systems outlined a similar stream of initiatives they have in motion to diversify their revenue streams and expand their business model into higher margin, higher growth businesses. One example is Cincinnati-based Mercy Health, which achieved strong growth and leverage via their investment in a revenue cycle management company. Advocate in Illinois formed a partnership with Walgreens. Together, they now operating 56 retail clinics and Advocate has made a significant impact on driving new patients and downstream revenue to their system. The bottom line is all now recognize that they must think and act differently to be able to continue to fund their clinical mission and serve their community.

3. You Must Measure and Manage Cost and Margins

While some are moving aggressively to get scale, everyone is looking to more effectively use the resources they have and get more operating leverage. Margin compression was a consistent theme, with many systems now moving into consistent, stable operating models around managing margins versus launching reactionary initiatives when they find a budget gap. What is emerging is a new discipline and continuous process around managing cost and margins that is starting to look similar to the level of sophistication we have seen in the past for revenue cycle management. To that end, there has been major movement in the market to implement advanced cost accounting systems, often referred to as financial decision support, which provide accurate and actionable information on cost and help organizations understand their true margins as they take on risk-based, capitated contracts. Some during the conference referred to it as the “killer app” for the financial side of driving value. Regardless of what you call it, all are moving aggressively to understand the denominator of their value equation.

4. You Must Become a Brand

Investing in and better leveraging their brand has become a strategic must for health systems. The level of sophistication is growing here as providers shift their mental model to viewing patients as “consumers.” Aurorain Wisconsin cited their dedicated Consumer Insights Group and outlined their “best people, best brand, best value” approach that has been incredibly effective both internally and externally. At the same time, the bigger investments for many health systems relative to brand are more on brand experience than brand image, with a focus on understanding and radically rethinking the consumer experience. As an example, at Danville, Pa.-based Geisinger, close to 50 percent of ambulatory appointments are scheduled and seen on the same day. And every health system is making meaningful investments in their “digital handshake” with consumer, creating and leveraging it via telehealth as well as mobile applications to enhance the customer experience.

5. You Must Operate as a System, Not Just Call Yourself One

One clear theme at #JPM18 is different organizations were at different points along the continuum of truly operating as a system vs. merely sharing a name and a logo. There are a number of reasons for this, but you are increasingly seeing tough decisions actually being made vs. just kicking the can down the road. There has been a great deal of acquisitions over the last few years coupled with a new wave of thinking relative to integration that is more aggressive and more forward-looking. This mental shift is actually a very big deal and perhaps the most important new trend. Many health systems are heavily investing in leadership development deep into their organization to drive changes much faster.

6. You Must Act Small

The word “agile” is quickly becoming part of everyone’s narrative with health systems looking to adopt the principles and processes leveraged in high tech. Chicago-based Northwestern Medicine is an example of an organization that has grown dramatically in the last five years, now approaching $5 billion in revenue. At the same time, they have still found a way to operate small, leveraging daily huddles across the organization to drive their results. The team at Raleigh, N.C.-based WakeMed has achieved a dramatic financial turnaround over the last few years, applying a similar level of rigor yielding major operational improvements in surgical, pharmacy and emergency services that have translated into better bottom line results.

7. You Must Engage Your Physicians

Employee engagement was a major theme in many of the presentations. With the level of change required both now and in the future, a true focus on culture is now clearly top of mind and a strategic must for high-performing health systems. That said, only a handful articulated a focus on monitoring and measuring physician engagement. This appears to be a major miss, given that physicians make roughly 80 percent of the decisions on care that take place and, therefore, control 80 percent of the spend. One data point that stood out was a 117 percent improvement in physician engagement at Northwestern. Major improvements will require clinical leadership and a true partnership with physicians.

8. You Must Leverage Analytics

Many have reached their initial destination of deploying a single clinical record, only to find that their journey isn’t over. While health systems have made major investments big data, machine learning and artificial intelligence, there was a consistent theme regarding the need to bring clinical and financial data together to truly understand value. Part of this path is the consolidation of systems that is now needed on the financial side of the house with a focus on deploying a single platform for financial planning, analytics and performance. The primary focus is to translate analytics not just into insights, but action.

9. You Must Protect Yourself

As organizations move deeper into data, there is increased recognition that cybersecurity is a major risk. Over 40 percent of all data breaches that occur happen in healthcare. During the keynote, JP Morgan Chase CEO Jamie Dimon shared that his organization will spend $700 million protecting itself and their customers this year. Investments in cybersecurity will continue to ramp up due to both the operational and reputational risk involved. Cybersecurity has become a board room issue and a top-of-mind initiative for executive teams at every health delivery system.

10. You Must Manage Social Determinants of Health in the Communities You Serve

Perhaps the most encouraging theme for healthcare provider organizations was the need to engage the community they serve and focus on social determinants of health. As Intermountain shared: “Zip code is more important than genetic code.” To that end, Geisinger refers to their focus on “ZNA.” They have deployed community health assistants, non-licensed workers who work on social determinants of health and have implemented a “Fresh Food Farmacy,” yielding a 20 percent decrease in hemoglobin A1c levels along with a 78 percent decrease in cost. Organizations like ProMedica Health System in Ohio have seen similar results with their focus on hunger in Toledo. WakeMed has an initiative focused on vulnerable populations in underserved communities that has resulted in a significant decrease in ER visits and admissions and over $6 million in savings.

11. You Must Help Solve the Opioid Epidemic

The opioid issue is one that healthcare professionals take very personally and feel responsible for solving. It came up in virtually in every presentation, and it’s an emotional issue for the leaders of each organization. This is good news, but the better news is that they are taking action. As an example, Geisinger invested in a CleanState Medicaid member pilot that resulted in a 23 percent decrease in ER visits and 35 percent decrease in medical spending, breaking even on their investment in less than 10 months. While many would rightly argue that the economic rationalization isn’t needed for something this important, the fact that it’s there should eliminate any excuse for anyone not taking action.

12. You Must Deliver Value

The Hospital for Special Surgery in New York is the largest orthopedics shop in the U.S. and a great example of how value-based care delivery is taking shape. Perhaps the most revealing stat they shared is that 36 percent of the time, patients receive a non-surgical recommendation when they are referred to one of their providers for a second opinion. This is exactly the type of value-based counseling and decision-making that will help flip the model of healthcare. Some systems are farther along than others. Northwestern currently has 25 percent of its patients in value-based agreements, but other systems have less. As the team from Intermountain re-stated to this audience this year, “You can’t time the market on value, you should always do the right thing, right now.” Well said.

It’s time to get started or get moving even faster.

As the saying goes, “It’s the journey, not the destination.”

Happy trails.

These 6 healthcare leaders say quality improvement is an organizationwide effort and a cultural imperative

https://www.fiercehealthcare.com/healthcare/6-inspiring-quotes-improving-quality-from-6-healthcare-leaders?mkt_tok=eyJpIjoiWVRNeE1HSTFPREkwTmpsbSIsInQiOiJtcHFUTmw4bU5UWE0rbE44Q0ExcUc5cEI5SSt0UVdcL0ZYVDllbUhMN3VNXC9ab2JTTlwvKzVYOXMyTmVmRlwvZjJ2VzNZWmp5Z2VJeERzVytyWUZOdkVyRmdnVWNWSEV6SVhkSWVHSFljSkhRV05rMUt5WFwvemVvM2dsMEpUeW1rYUx2In0%3D&mrkid=959610

Executive looking out window

Despite recent uncertainty about the government’s commitment to value-based care, healthcare organizations remain focused on efforts to improve quality, patient care and employee engagement.

In 2017 the Centers for Medicare & Medicaid Services cancelled mandatory bundled payment models for hip fractures and cardiac care and also asked providers for feedback on other value-based payment models.

But healthcare organizations seem committed to the initiatives they have already put in place to improve quality. Indeed, last year healthcare leaders shared their successes, challenges and lessons learned as they worked to improve quality and patient outcomes. We’ve rounded up the most memorable quotes from these healthcare thought leaders about quality, the importance of physician engagement and how to achieve a culture of patient safety.

Here are six of our favorite quotes from our interviews and industry news and event coverage over the past 12 months:

1. “We had to challenge our old paradigms. Physicians are instrumental in setting the tone, and unless the physicians believe we’re on the right path we don’t have the kind of alignment that will help us move forward.”

Gary Kaplan, M.D., chairman and CEO of Virginia Mason Health System, explained in a webinar this fall how the Seattle system improved patient safety using a patient-centered approach. Virginia Mason’s safety culture transformation began in 2001, Kaplan said, when system leaders realized that a physician-centered approach alone would not improve patient care.

2. “You need to start with the early adopters. You can’t start with folks who will fight you tooth and nail. You want to start with early successes and then evolve from there.”

Felipe Osorno, an executive administrator at Keck Medicine of the University of Southern California, spoke at the Institute for Healthcare Improvement’s annual quality forum about strategies to engage physicians in improvement initiatives. The secret was designing a program in which physicians were respected for their competency and skills, their opinions were valued, they had good relationships with their medical colleagues, they had a broader sense of meaning in their work and they had a voice in clinical operations and processes, he said.

3. “We really want to attract folks who believe at their core, not just intellectually but in their heart, that kindness can heal. … If we do it right the first time and we assess candidates based on the fit of the organization, ideally we will have more engaged employees who deliver care in a way that is patient-centered.”

Wanda Cole-Frieman, vice president of talent acquisition at Dignity Health, talked to FierceHealthcare this summer after the California system was named by an online job platform as the best place to interview in 2017. Among its techniques: It assesses candidates’ behavioral competencies for human kindness, compassion and the human experience.

4. “To create a true culture of safety and reliability we need to engage everyone, and it can only be driven when we have strong alignment. Everyone can play a role in safety.”

Gary Yates, M.D., a partner in strategic consulting at Press Ganey, explained in an interview that building and promoting a culture of safety at healthcare organizations is important to retain current staff members, but is also an especially effective recruiting tool for millennials, who will make up half of the workforce by the year 2020.

“People talk, and people ask about the culture inside different organizations,” Yates said. Putting the spotlight on safety and quality could “tip the scales” for young people.

5. “Our focus is safety, to fundamentally be a safe hospital. If we start there or if any hospital starts there, patient experience will take care of itself, quality metrics will take care of itself as will employee morale.”

FierceHealthcare caught up with Nicholas “Nico” R. Tejeda, CEO of The Hospitals of Providence Transmountain Campus in El Paso, Texas, at an American College of Healthcare Executives event. He talked about opening a new teaching hospital and establishing the culture of the organization from the beginning and with every hire.

There are no acceptable levels of errors, he said. And while it may be nearly impossible to achieve zero incidents, he still wants the organization he leads to strive for perfection.

6. “We don’t see quality as just a clinical goal. It’s an enterprisewide priority that encompasses customer service, compliance and wellness.”

A few years ago, Anthem decided to make a “rigorous” effort to boost the quality of its plans. And it’s demonstrating results, Anthem’s then-CEO Joseph Swedish said during the 2017 AHIP Institute & Expo. Now, more than half of the insurer’s Medicare Advantage enrollees reside in 4-star plans, compared to just 22% the year before.

 

13 healthcare M&A deals that made headlines in 2017

https://www.fiercehealthcare.com/finance/healthcare-mergers-and-acquisitions-hospitals-payers-year-review?mkt_tok=eyJpIjoiTnpreE9HSTFPVFJqWldZMSIsInQiOiJNM0NTa1ZBZW1kU001bkx4SEcwNmtSeEFVNG9oZnpUbEF2UVpMY1lDUWNZYm8zZTFuejJNUGpPOTJuYVlXTlZwWHdXU1hrRm50Z1NFbHJGRjdUMld6U1JoYWo0enNaUlEzNldab2tcL3hxV3NPaTBlK2xKbmVSQmgwMTE2NFZpYzgifQ%3D%3D&mrkid=959610

handshake

Analysts rightly predicted that 2016 would be a big year for healthcare industry mergers, but 2017 is on pace to top it, with a number of blockbuster mergers between big-name health systems headlining the year in M&A.

Kaufman Hall reported that 87 hospital mergers had been recorded through the third quarter of 2017, compared to 102 overall in 2016. By that point, eight transactions had included hospitals with $1 billion or more in revenue, twice as many big-ticket mergers as in all 2016.

“These transactions are driven primarily by strategic imperative and less so by financial drivers,” said Anu Singh, managing director of Kaufman Hall.

M&A activity wasn’t restricted to hospitals and health systems, as a number of deals in the payer sphere could also significantly impact the industry.

However, though the industry’s merger mania continued throughout 2017, a number of major deals were abandoned or put on hold, as the Federal Trade Commission continued to keep a close eye on merger activity.

Here’s a recap of some of the biggest healthcare industry mergers that were announced last year:

Aetna and Humana

These two payer giants announced merger plans in 2015 but abandoned the deal in February after a judge blocked it on antitrust grounds.

The Department of Justice and several states sued to block the merger in the summer of 2016, and a judge ruled that merger would unlawfully weaken competition in the Medicare Advantage market.

Anthem and Cigna

If Aetna and Humana parted ways on what one might consider good terms, the same was not true for Anthem and Cigna. This insurance megamerger was also blocked by a federal judge on antitrust grounds, but what followed was a protracted legal dispute between Anthem and Cigna over ending the deal. Anthem finally agreed to end the deal in May after a judge ruled Cigna was free to walk away.

NorthShore University HealthSystem and Advocate Health Care

A potential deal between NorthShore and Advocate was first announced in 2014, but a federal judge blocked it in early March. The two Illinois systems then agreed to abandon the merger in response.

PinnacleHealth and UPMC

PinnacleHealth revealed in March that it would merge with UPMC, the largest integrated health system in Pennsylvania, and would acquire four new hospitals in an effort to expand its reach in the central part of the state. Pinnacle previously pursued a merger with Penn State Hershey.

Partners HealthCare and Care New England Health System

Care New England had been aligned with Partners since 2009, but Partners announced in April that it would acquire the system, which is the second largest in Rhode Island.

Steward Health Care System and IASIS Healthcare LLC

Steward’s purchase of IASIS, which was finalized in October after being announced in May, established the system as the largest private hospital operator in the U.S. With the purchase, Steward now operates 36 hospitals across 10 states and is projected to have revenue in excess of $8 billion in 2018.

Ascension and Presence Health

Ascension, the largest Catholic health system in the U.S., announced plans to purchase Illinois’ largest Catholic system, Presence Health.

If the deal is finalized, Presence will operate under Ascension’s AMITA Health venture.

UNC Health Care and Carolinas HealthCare System

A final deal between UNC and Carolinas would create one of the largest nonprofit health systems in the U.S. The two providers said the alignment would increase rural access to healthcare, allow each to negotiate better with payers and potentially save millions of dollars in healthcare costs.

Centene and Fidelis Care

Centene spent much of 2017 expanding its reach in the Affordable Care Act’s marketplaces, but it announced in September that it would acquire New York-based Fidelis Care for $3.75 billion. Centene said purchasing the 1.6 million-member insurer would benefit shareholders and allow it to continue to reach underserved areas.

CVS and Aetna

Though Aetna’s merger with Humana failed earlier in 2017, it was snapped up later in the year by pharmacy giant CVS in a deal worth $69 billion.

The purchase had been rumored since October and could impact hospitals or health systems that operate urgent clinics, as gaining Aetna’s 22 million members would be a significant boon to CVS’ MinuteClinics.

Dignity Health and Catholic Health Initiatives

These two massive Catholic systems signed a deal to create a new nonprofit system, the name of which has yet to be announced. The merger would unite 139 hospitals and 700 care sites across 28 states under the same umbrella. Dignity and CHI had a combined $28.4 billion in revenue in 2017.

Providence St. Joseph Health and Ascension

A deal between these two systems has not officially been announced, but sources told The Wall Street Journal that Providence and Ascension were deep in merger talks. If these two systems were to align, it would create the largest hospital operator in the U.S., with 191 hospitals across 27 states and a combined annual revenue of $44.8 billion.

Humana and Kindred Healthcare

Following its failed merger with Aetna, Humana seemed a ripe target for acquisition by another insurer. Instead, it was revealed in mid-December that it, alongside two private equity firms, would purchase Kindred in a deal worth $4.1 billion. The Kindred deal won’t kill talk that Humana could be acquired, however.

 

From premiums to politics: 5 predictions for the health insurance industry in 2018

https://www.fiercehealthcare.com/payer/year-preview-predictions-politics-aca-mergers?mkt_tok=eyJpIjoiTnpreE9HSTFPVFJqWldZMSIsInQiOiJNM0NTa1ZBZW1kU001bkx4SEcwNmtSeEFVNG9oZnpUbEF2UVpMY1lDUWNZYm8zZTFuejJNUGpPOTJuYVlXTlZwWHdXU1hrRm50Z1NFbHJGRjdUMld6U1JoYWo0enNaUlEzNldab2tcL3hxV3NPaTBlK2xKbmVSQmgwMTE2NFZpYzgifQ%3D%3D&mrkid=959610

Businessman uses a crystal ball

After the demise of two major insurer mergers and multiple Affordable Care Act repeal attempts, few could argue that 2017 wasn’t an eventful year for the health insurance industry.

But 2018 is shaping up to be just as interesting—complete with more political wrangling, M&A intrigue and evidence that, despite all this uncertainty, insurers are pushing ahead and embracing innovation.

Read on for our predictions about what’s in store for the industry in the coming months.

1. The CVS-Aetna deal will have a domino effect in the healthcare industry

While the lines between payer, provider and pharmacy benefits manager have been blurring for a while now, CVS’ $69 billion deal to purchase Aetna is undoubtedly a game-changer.

The move was likely motivated by a desire to compete with UnitedHealth’s thriving Optum subsidiary, which has its own PBM and an increasing presence in care delivery. So it stands to reason that other major insurers will try to strike deals of their own that mimic that scale and level of diversification.

Already, Humana has made a bid to purchase part of hospice- and home-health giant Kindred Healthcare. There’s also been speculation that it is preparing to be acquired—possibly by Cigna, or in a deal that would mimic CVS-Aetna, Walmart or Walgreens.

Other insurers may also seek to build PBM capabilities, following in the footsteps of UnitedHealth, a combined CVS-Aetna and Anthem, which announced in October that it would team up with CVS to create an in-house PBM called IngenioRx.

It’s certainly possible, however, that CVS’ purchase of Aetna will not pass regulatory muster. While it would require less divestment than the ill-fated Anthem-Cigna and Aetna-Humana deals, the DOJ’s decision to block another vertical deal—between AT&T and Time Warner—doesn’t bode well for its chances.

2. Republicans and Democrats will be forced to work together on ACA fixes

With one less Republican senator—thanks to Alabama’s election of Democrat Doug Jones—the GOP likely won’t have the votes to pass a repeal bill without bipartisan support. Senate Majority Leader Mitch McConnell acknowledged as much before Congress’ holiday recess, though he clarified the next day that he would be happy to pass an ACA repeal bill if there are enough votes for it.

McConnell also owes Sen. Susan Collins, R-Maine, as he had promised her he’d pass her reinsurance bill and a bill that would fund cost-sharing reduction payments this year. While Collins held up her end of the bargain—voting for the GOP tax bill—the ACA fixes didn’t make it into the stopgap spending bill Congress passed on Dec. 21.

Democrats, meanwhile, will also be motivated to reach across the aisle. The repeal of the individual mandate will likely put the ACA on more unstable footing, lending more urgency than ever to the task of shoring up the exchanges.

Both parties will also likely face pressure from the healthcare industry’s biggest lobbying groups to get some sort of ACA fix passed. The push to do so, however, will be complicated by the full slate of legislative priorities Congress is facing in the new year, including reauthorizing funding for the Children’s Health Insurance Program.

3. There will be more premium hikes and insurer exits in the individual market

The individual mandate is now gone, and arguments about its effectiveness aside, that was one of the mechanisms that encouraged healthy people to buy insurance and stay covered. Even if the effect on coverage levels is minimal, the move is probably going to be enough to push risk-averse insurers to raise rates and even exit more rating areas in 2019.

There is also little indication that large insurers that have exited will come back anytime soon. After all, why invest resources in an unstable market when there are far more steady and lucrative markets like Medicare Advantage?

Adding to the policy uncertainty for the remaining insurers, there is no guarantee that Congress will authorize short-term funding for cost-sharing reduction payments. Many insurers raised their 2018 rates to account for the possibility of them disappearing—which turned out to be a wise move—so it stands to reason they’d have to do the same for 2019.

Perhaps the best harbinger of what’s to come came from a study conducted in November, which noted that the actions insurers and state regulators took to fill in “bare counties” on the ACA exchanges are “temporary and unsustainable without long-term federal action.” And with Republicans in charge, federal action to patch up the exchanges is unlikely.

4. Federal agencies will start to carry out Trump’s executive order—and states will push back

Although it was overshadowed by all the repeal-and-replace drama, Trump’s healthcare-focused executive order has huge implications for the industry. Put simply, it paves the way for expanded use of association health plans, short-term health plans and employer-based health reimbursement arrangements.

In 2018, we’re likely to see the relevant agencies start issuing rules to implement the order, which could dramatically change the individual market as we know it—and not for the better. Such rulemaking would also set the stage for a power struggle between the federal government and left-leaning states.

In fact, a coalition of healthcare organizations have urged state insurance commissioners to take steps to override any rules resulting from the executive order. For example, states could restore the three-month limit on short-term health plans if agencies unwind that Obama-era rule on the federal level.

Since only certain states are likely to heed these suggestions, the upshot of Trump’s executive order will be to create a patchwork of individual market rules across the country. If that sounds strangely like what the individual insurance markets were like before the ACA, well, that’s precisely the point.

5. Payers’ move to value-based payment models will continue, with or without the feds leading the way

On the one hand, the Trump administration clearly wants to scale back the federal government’s role in pushing payers and providers away from fee-for-service payment models. The surest sign was CMS’ announcement late last year that it would endmandatory bundled payment models for hip fractures and cardiac care.

Some have worried that moving away from those mandatory programs would be a setback for the move to value-based payments, given that the feds play a powerful role in galvanizing the industry to change. In addition, the administration wants to take the Center for Medicare and Medicaid Innovation in a “new direction”—one that CMS Administrator Seema Verma said would “move away from the assumption that Washington can engineer a more efficient healthcare system from afar.”

But even if the federal government will take a lighter touch in the move from volume to value, it’s not likely that the private sector will take that as a cue to reverse course. On the payer side, especially, too many industry-leading companies have invested heavily in alternative payment models to turn back now. And they have compelling business reasons to keep investing in those models, given their potential to lower costs and improve care quality.

 

3 political issues for hospitals to watch in 2018

https://www.statnews.com/2017/12/28/hospitals-value-medicaid-fda/

Hospitals and health providers suffered minimal damage in this year’s political collision over Obamacare. But 2018 will bring a series of equally high-stakes debates that will affect the financial viability of hospitals and the future of how care is measured and delivered.

And by the way, the war over Obamacare is hardly over — it’ll start up again next year with proposals to stabilize insurance markets and renewed GOP repeal efforts.

Here are some additional issues to watch:

Redefining value

The Trump administration is promising to set a new course for medicine’s value movement. Seema Verma, the chief of Medicare and Medicaid, is evaluating proposals for ways to link government reimbursement to patient outcomes. She is moving away from the mandatory payment programs created under President Obama — in which hospitals received lump sum payments for repairing fractured hips and other services — in favor of voluntary models with more flexible arrangements created by doctors and hospitals.

Greater leeway from the federal government might make it easier for hospitals to experiment with novel ideas, like pushing for new payment arrangements in specialty areas such as gastroenterology, behavioral health, and cancer care. But the additional flexibility could also take the teeth out of reforms and fatten providers’ margins without delivering corresponding cost and quality benefits.

It is unclear when the Trump administration will unveil its plans for new payment programs, but keep an eye out for news in the first half of 2018.

Medicaid, Medicaid, Medicaid

The federal program that provides care for the poor and disabled will remain a Republican target next year. The prospects of sweeping federal legislation appear dim, with strong Democratic opposition against a razor-thin GOP majority in the Senate. But the Trump administration may cut the program anyway, by giving states more flexibility to reshape their programs. That could mean swift approvals of popular GOP reforms, such as work requirements and premium-like payments by beneficiaries.

The implications couldn’t be bigger for providers, or their low-income patients. The underlying goal of these efforts is to reduce enrollments in the $500 billion program, an outcome that would increase uncompensated care and financial instability for struggling hospitals and households. But Republicans argue that cuts are necessary to keep federal spending in check and free states from mandates that are crowding out other budget priorities. That clash of interests will generate skirmishes across the country in 2018.

FDA regulation of medical technology

The Food and Drug Administration is redefining what it means to be a medical device in the digital age — a process that will have implications for the health care facilities that are the primary purchasers of such devices.

The FDA recently proposed streamlining the regulation of many health software products. The move will broaden providers’ arsenal of digital tools, such as decision support programs that helps doctors detect and respond to infections or diagnose rare diseases.

However the agency did not take a firm position on machines that rely on artificial intelligence, an area poised to generate plenty of debate in coming months. Products like Watson, IBM’s supercomputer, still fall in a regulatory gray area, as do others that rely on algorithms whose inner workings are shielded from users.

The key question is this: Should the FDA require companies to prove their products deliver safe and effective advice, or can they unleash these machines in health care with minimal oversight?

 

10 things for healthcare executives to note as they head into 2018

https://www.beckershospitalreview.com/hospital-management-administration/2017-the-year-that-was-10-things-for-healthcare-executives-to-note-as-they-head-into-2018.html

Disruption got real. Hospital-insurer negotiations heated up. Activist shareholders shook up legacy hospital operators. Healthcare and the government failed to effectively communicate. These and six other trends that shaped the year in healthcare — and the lessons executives can take from them into 2018.

1. Disruption got real. After years of speculation about who or what would become the “Uber of healthcare,” the tectonic plates of the industry shifted substantially in the past year — and there’s reason to believe this will only continue in 2018. A number of mergers illustrate the blurring line between healthcare and other industries, such as retail and insurance. Consider the combinations of CVS and Aetna or Optum and DaVita and Surgical Care Affiliates. As for what’s to come, Apple and Amazon have both shown interest in expanding their healthcare footprint. In fact, just last month, we reported Amazon was in talks to move into the EHR space.

Executive’s takeaway: Executives grew skeptical of the term ‘disruptor’ when it was used as generously as it was circa 2011-2016. But now disruption is actually unfolding at a rapid clip, and executives are paying close attention to who/what poses the greatest threat to their business models.

2. Hospital-insurer negotiations heated up. Previously, a health system and a commercial insurer occasionally hit a snag in the contract negotiation process, resulting in a dispute palpable enough to consumers that it warranted headlines. These impasses generally lasted a matter of weeks before outside pressure drove the parties to compromise. The nature of these conflicts has since changed. This past year brought regular coverage of strained provider-payer talks. In fact, we now do a weekly compilation of payer-provider disputes and resolutions to stay abreast of these conflicts as they occur and subside. In 2017, we saw lawmakers intervene in payer-provider disputes, a health system executive’s meant-to-be-private email about an insurance company go public, and a children’s hospital go out of network with a commercial insurer — affecting 10,000 kids.

Executive’s takeaway: Health system executives are growing increasingly vocal with their thoughts about commercial insurers. In the past, executives took great lengths to observe discretion in these relationships. Now the gloves are off — or at least one is. We’re sure we haven’t seen the worst of a payer-provider dispute yet, but the number we see on a weekly basis, and their tone, indicates that disputes are both more frequent and more serious than in years past.

3. Investments in value-based care, once a somewhat safe bet, became debatable. In a final rule issued in November, CMS officially canceled the hip fracture and cardiac bundled payment programs and rolled back some mandatory requirements in the Comprehensive Care for Joint Replacement Model. This will continue to have a ripple effect on payers, providers and health system strategy. For hospitals and health systems that made significant investments to support excellence under the program, this news is difficult to take — especially since no investment is made lightly amid thin margins. Although CMS says it is still committed to value-based care as a concept, the mandatory nature of the bundles program acted as a pedal-to-the-metal force that made hospitals act. Since commercial payers follow Medicare, the fate of the program will likely influence the adoption of bundles among private insurers, too. 

Executive’s takeaway: Most all executives tell us they want to be on the leading edge, not bleeding edge, of value-based care. Without a “do it or lose it” approach to bundles, the industry lost a major impetus toward value-based care, in which many health systems and physicians would take the plunge together. Providers have never had a clearly paved path for their “journey toward value-based care.” At best, it was a dirt trail. Now it could be compared to a dirt trail covered in snow. This leaves executives questioning the value of their current and future investments in value-based care.

4. Big systems want bigger. Just when you thought you had a handle on what a “big” health system looked like in the United States, a few major players rewrote (or are attemping to rewrite) the playbook. After more than a year of talks, Catholic Health Initiatives and Dignity Health signed a definitive agreement in December to create a 139-hospital, $28.4 billion health system. Soon after came reports of St. Louis-based Ascension and Renton, Wash.-based Providence St. Joseph discussing a merger, which would result in a 191-hospital, $44.8 billion operation. Although both of these deals trail Oakland, Calif.-based Kaiser Permanente and its nearly $65 billion in revenue, they illustrate how the composition of nonprofit American health systems is continuing to change from local and regional entities to corporate national networks. For example, if Ascension and Providence combine, they will outsize the largest for-profit health system today — Nashville, Tenn.-based HCA Healthcare — which includes 177 hospitals in 20 states and Britain.

Executive’s takeaway: Executives may want to reevaluate the oft-spoken phrase “all healthcare is local” in light of 2017’s M&A activity. Hospitals will continue to serve as economic engines in their respective communities, but the organization of health systems is moving in a direction where they are viewed as ubiquitous brands as opposed to regional hubs for health. For example, San Francisco-based Dignity and Englewood, Colo.-based CHI are basing the corporate headquarters for their new enterprise in Chicago. Ascension and Providence would have footprints in 27 states if they merge.

5. Many health systems that were new players in the health plan business got out of it. Provider-sponsored health plans always carried a great amount of risk. Of the 37 health plans launched by hospitals and health systems since 2010, only four were found profitable in 2015, according to research published this past year by the Robert Wood Johnson Foundation. As major health insurers reduced their individual coverage options and rolled back from the public exchanges this year, we also saw several health systems decide to scale back or shut down their health plans. New Hyde Park, N.Y.-based Northwell Health shared plans in August to wind down its health insurance business, CareConnect, over the next year. Dayton, Ohio-based Premier Health is selling its health plan to Evolent Health, a Washington, D.C.-based value-based care platform. Louisville, Ky.-based Baptist Health plans to shut down its health plan operation in 2018. Late last year, Dallas-based Tenet Healthcare revealed plans to scale back its insurance business in 2017 after officials attributed lukewarm earnings to its health plan business.

Executive’s takeaway: When even the big five health insurers — so well-equipped with analytic tools, data, infrastructure, utilization management experience and risk analysis talent — have a difficult time accounting for risk, it is not surprising many green health systems made their move for the door this past year. This is not an opportune time for health systems with little experience managing risk to build or buy a health plan. 

6. Activist shareholders shook up legacy hospital operators. Board room issues within the major for-profit hospital operators are typically opaque, but 2017 brought a rash of investor-prompted activity that resulted in ousted CEOs, overhauled boards of directors, poison pills and new governance rules. Tenet Healthcare underwent significant change in 2017 under intense pressure from its largest shareholder, Glenview Capital Management. When two Tenet board members, both employed by Glenview, resigned over what they described as “irreconcilable differences,” they made it known that Glenview would possibly “evaluate other avenues” to be a constructive owner of Tenet on or after Sept. 1. By Aug. 31, Tenet announced it would replace CEO Trevor Fetter, “refresh” the composition of its board of directors and implement a short-term shareholder rights plan. Mr. Fetter resigned in October, before a successor was named, after 14 years with the system. In August, an investor in Franklin, Tenn.-based Community Health Systems called for the resignationof CEO Wayne Smith, who has led the 127-hospital system since 1997, over what the investor described as missteps in strategy resulting in financial trouble for the system. At this time, Mr. Smith still holds his job, but CHS may be bracing for more investor activity. Chinese billionaire Tianqiao Chen has gradually been ramping up his stock in the hospital operator since 2016. At time of publication, he holds nearly 23 percent of CHS stock. Finally, directors of HCA Healthcare made a change in late 2017 to allow established investors to participate in the board seat nomination process, a move made in response to an activist investor.

Executive’s takeaway: The fact that two of the largest U.S. for-profit hospital operators faced calls for CEO resignations in 2017 is part of a sweeping trend across industries in which activist investors start campaigns for change by targeting top management. Between January and May 2017, activist shareholders were responsible for ousting CEOs at three high-profile S&P 500 companies — American International Group, CSX and Arconic, according to The Wall Street Journal. Investors were attempting to oust six other CEOs in the same time frame. It’s worth noting that CEOs feel the heat at the launch of campaigns versus as a last resort. The WSJ characterized this trend as “a new level of aggressiveness for a group already known for its bold actions.” 

7. As the average health system C-suite grew, a few systems reduced administrative roles. While the number of practicing physicians in the U.S. grew 150 percent between 1975 and 2010, the number of healthcare administrators increased 3,200 percent in the same period. Yet in 2017, we saw a few major health systems go against the grain and not only lay off administrators, but eliminate their roles completely. In June, Houston-based MD Anderson Cancer Center eliminated executive vice president roles and gave senior vice presidents more focused areas of responsibility. Valley Medical Center, part of Seattle-based UW Medicine, got rid of the COO position in May, and Charleston, S.C.-based Roper St. Francis did the same in August. In December, San Diego-based Scripps Health shared plans to eliminate the CEO position in its four hospitals in favor of a regional CEO model. 

Executive’s takeaway: This past year contained several isolated incidents in which executive or administrative jobs were not immune from the financial pressures mounting on hospitals and health systems. There is reason to believe “right-sizing” (or at least reducing) administrative staffing at health systems will continue throughout 2018. Chris Van Gorder, president and CEO of Scripps Health, recently shared that layoffs at the system will likely include administrative and leadership roles while the system continues to hire caregivers. His reasoning, an excerpt of which follows, is applicable to many health systems today: “Healthcare is changing rapidly with huge growth in ambulatory care and reduced utilization of inpatient hospitals — and given the elimination of the individual mandate under the Affordable Care Act, the uninsured will once again be growing nationally. … We’ve got to shift our organizational structures around to be able to deal with the new world of healthcare delivery, find ways of lowering our costs significantly. If we don’t, we will not be able to compete.”

8. Healthcare and the government failed to effectively communicate. In 2017, the opportunities for the Trump administration, Congress and healthcare leaders to convene about healthcare legislation and policy came and went. CEOs from the five largest nonprofit health systems in the country took pen to paper, urging President Donald Trump and Congress to meet with them and exchange ideas. In the end, the closest thing we saw to healthcare reform in 2017 were bills — the American Health Care Act, Better Care Reconciliation Act of 2017 (or Skinny Repeal package), the Graham-Cassidy healthcare bill — that received significant opposition from major healthcare stakeholders, which are not historically liberal. Yet even an avalanche of nays from the American Medical Association, American Hospital Association, Federation of American Hospitals, American Psychiatric Association, Association of American Medical Colleges and several other groups did not sway Congress. All but three Republican Senators voted to pass the Skinny Repeal package, illustrating how the bipartisan nature of our political process is overriding expertise and informed lawmaking. 

Executive’s takeaway: A bipartisan approach is the most effective way when attempting to redesign a $3 trillion industry that influences life-or-death decisions. These efforts also require input from a variety of seasoned healthcare experts who can challenge ideas, anticipate repercussions and identify blind spots. This holds true no matter which party holds control of the White House, Congress or both. Although healthcare stakeholders and government officials did not productively connect in 2017, health system leaders must persist in their attempts to influence public policy and exercise greater creativity in their advocacy efforts. Strategies that worked in the past can no longer be counted on in 2018 and beyond. 

9. Fed up, nurses walked off the job. While nurses’ strikes are not a novel event, there is a reason many demanded wider attention and transcended local business news to become national headlines. The most noteworthy strike of the year took place July 12, when approximately 1,200 nurses at Boston-based Tufts Medical Center began a 24-hour strike — the first nursing strike Boston saw in 31 years. Roughly 120 miles from Boston, approximately 800 nurses at Berkshire Medical Center in Pittsfield, Mass., participated in a one-day strike in October. Across the country in California, nurses organized rallies and protests at more than 20 Kaiser Permanente sites to protest what they called inadequate staffing levels. In September, nurses and other hospital personnel unionized with SEIU walked off their jobs at Riverside University Health System – Medical Center in Moreno Valley, Calif., for three days. The county footed the $1.5 million bill for temporary replacement nurses for those 72 hours. Speaking of a bill, Minneapolis-based Allina Health tallied the costs of two 2016 strikes — one lasting six weeks — called by the Minnesota Nurses Association. The system put the figure in the ballpark of $149 million, which anchored Allina’s operating loss of $30 million for fiscal year 2016. 

Executive’s takeaway:  Although it is tempting to reduce labor strikes to events fueled by local market forces and politics, hospital and health system executives should pause and consider that striking nurses’ arguments — that they are expected to work demanding jobs with too few staff, resulting in unsafe conditions, high stress and burnout — is a description that applies to many, if not most, U.S. hospitals. Gender dynamics may also yield greater influence on administrator-nurse affairs in the coming year. As the nation comes to terms with troubling events that went unaddressed after women’s claims and voices were not met with the attention they deserved, health system executive teams are wise to change the approach taken in years past and pay closer attention to the female-dominated field of nursing. As one representative with the MNA told The Nation“[Management is] a male institution thinking they can snub 1,200 women and pretend their opinions about healthcare don’t count.”

10. The year healthcare became very, extremely, incredibly difficult. Was any component of healthcare ever easy? Those who have spent years in the industry would say no. Yet 2017 was the year in which officials and lawmakers reminded the American public that healthcare is complicated. While true, this narrative functioned as a sound bite to normalize Congressional dysfunction. 

Executive’s takeaway: What’s concerning here is whether this throwaway statement will make its way from Capitol Hill to hospital board rooms, executive offices, clinician lounges and medical school lecture halls and, over time, nurture a climate that fosters and condones inaction. It is unproductive to constantly point out the complicated nature of healthcare and/or bask in this acknowledgement. To do so is not the behavior of an effective leader. It goes without saying that healthcare is complicated. Healthcare is also necessary, expensive, life-saving, honorable, slow, inaccessible, urgent, flawed, and never going away. What are you doing to make it better?