If you're leading a part of or an entire health system, life is about to get a little tougher—at least in the short-to-medium term. Health care reform has galvanized the president and lawmakers, and while most have no idea how health care reform will ultimately shake out, there are strategic changes you can make right now to prepare, despite the uncertainty of how the law will ultimately look.
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Standard & Poor's said median operating margins and other key financial measures for not-for-profit hospitals and health systems dropped in fiscal 2008. Hospitals' median operating margin dropped to 1.8% in fiscal 2008 compared with 2.5% in 2007. The New York ratings agency said medians were calculated using data from 532 hospitals and health systems for fiscal 2008. The report noted that 70% closed their books on Sept. 30, 2008, before the economy's slide accelerated.
The median net margin, which also includes investment and other nonoperating income, fell to 3% in fiscal 2008 from 5.6% in fiscal 2007. The median cash cushion, or the number of days an organization can operate on cash reserves, declined to 146 days from 167 days. Among hospitals and health systems with fiscal years that ended Dec. 31, net margin and the cash cushion further eroded to 1.2% and 134 days, respectively.
The ratings agency's activity underscored the weaker financials. Standard & Poor's downgraded 60 hospitals and health systems in 2008 and upgraded 15. That's compared with 35 downgrades in 2007 and 18 upgrades. The unfavorable trend has continued in 2009. For the first five months, Standard & Poor's has downgraded 23 hospitals and health systems and upgraded four.
[ via Melanie Evans, Modern Healthcare's Daily Dose ]
Uncompensated care costs have not jumped nearly as high as was expected at investor-owned hospitals, considering we are in a deep recession with double digit unemployment in some states. Is it simply due to a longer than expected lag between late 2008 and now, or are hospitals doing a better job at front end collections?
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In a roundtable discussion, CMOs explain why the traditional physician staffing model no longer works and what hospitals can do about it.
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What can providers expect from health care reform? Seven questions, touching on insurance coverage, primary and specialty physicians, and comparative effectiveness, can inform plans for the coming years.
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Health care has been largely shielded from the economic downturn. Still, as federal reform policies emerge, hospitals should continue to protect themselves by embracing aggressive cost management.
Learn more here.
In his most recent blog post, Robert Wachter, MD, questions the Centers for Medicare & Medicaid Services' (CMS) policy of withholding payment for a specified list of "never events" that it considers preventable on his blog, Wachter's World. Since October 2008, hospitals have been grappling with how to prevent this set of events from occurring—or else they will fail to be reimbursed by CMS.
The Centers for Medicare & Medicaid Services (CMS) on July 1 released the outpatient prospective payment system (OPPS) and the ambulatory surgical center (ASC) payment system proposed rule for calendar year (CY) 2010. On the same day, CMS also issued the Medicare physician fee schedule (PFS) proposed rule for CY 2010. Highlights of the rules follow.
Highlights of the OPPS proposed rule:
Update: The rule includes a 2.1 percent market basket update for OPPS services, with hospitals projected to receive a total of $31.5 billion for outpatient services in 2010.
Quality Reporting:
• 2010: Hospitals must continue to report on the 11 outpatient quality measures finalized in last year's final rule. The 11 existing measures include five heart attack care measures for transfer patients, two surgical care measures and four imaging efficiency measures. Hospitals that fail to meet the outpatient reporting requirements would receive a 2 percent reduction in their payment update.
• 2011: CMS does not propose to add any new quality measures for the 2011 annual payment update.
The rule outlines a proposed data validation process for 2011; while hospitals would be required to participate in the validation process to receive their full annual payment update, the results of their data validation would not affect their payment. For 2011, CMS proposes to randomly select up to 20 patient cases from each hospital and validate those data. The agency will provide feedback to hospitals on their data validation results, but the results will not affect hospital payment.
The rule also discusses a different data validation process that would begin in 2012 and is similar to the process outlined in last year's proposed rule. Under this proposal, CMS would review approximately 50 medical charts from 800 randomly selected hospitals each year. The review would assess the accuracy of a hospital's standard measure rate, as opposed to the accuracy of individual data elements.
Healthcare-associated Conditions: CMS discusses some of the comments received to date on whether and how it should expand its healthcare-associated conditions policy to the hospital outpatient setting, but it offers no new proposed policy on this topic.
Physician Supervision: In response to concerns raised by the American Hospital Association and other hospital and physician groups, CMS proposes to revise several policies for the physician supervision of outpatient services, beginning in 2010. However, CMS does not rescind its physician supervision policy "clarification" laid out in its 2009 OPPS final regulation, which resulted in confusion and concern on the part of large numbers of hospitals and physicians who viewed the statements in the 2009 preamble discussion as a change in policy. The AHA will continue to press for rescission in our comment letter on the proposed rule.
Starting in 2010, CMS proposes that certain non-physician practitioners (physician assistants, nurse practitioners, certified nurse specialists and certified nurse-midwives) may directly supervise hospital outpatient therapeutic services (other than cardiac rehabilitation, intensive cardiac rehabilitation and pulmonary rehabilitation) that they are able to personally perform within their State's scope of practice and hospital-granted privileges. CMS has asserted that its current policy only allows physicians and clinical psychologists to provide the direct supervision of these services.
In addition, for outpatient services provided in the hospital or in an on-campus provider-based department of the hospital, CMS will no longer require the supervising physician to be physically present in the department when services are furnished. Instead, CMS proposes to loosen the definition of "direct supervision" in these on-campus settings to mean that the physician or non-physician practitioner must be present in the hospital or in an on-campus provider-based department of the hospital and immediately available to furnish assistance and direction throughout the performance of the procedure. For services furnished in an off-campus provider-based department, "direct supervision" would continue to mean that the physician or non-physician practitioner must be present in the off-campus provider-based department at all times services are furnished.
Emergency Department Services: In 2010, CMS proposes to pay for all five emergency department (ED) levels of service provided in "Type B" EDs - those that offer emergency-level services but are not open 24/7 - using their median costs, similar to how "Type A" EDs' (those EDs open 24/7) payments are calculated. In order to accomplish this, CMS proposes to create a new APC for a Level 5 Type B Emergency Visit.
Hold-harmless Payments and Adjustment for Rural Sole Community Hospitals: As required by law, the agency would no longer provide hold-harmless outpatient payments to rural hospitals and sole community hospitals (SCHs) with 100 or fewer beds. CMS will continue, however, to apply a 7.1 percent payment increase for most rural SCH services and procedures paid under the OPPS.
Drugs: CMS proposes to raise the drug packaging threshold from $60 to $65 for 2010. That is, drugs that cost more than $65 per day are paid separately under their own APC, while drugs with per day cost below this threshold amount are packaged into the procedural APC with which they are billed.
CMS also proposes to pay for separately payable drugs and biologicals at the rate of average sales price (ASP) plus 4 percent. This rate is intended to include drugs' acquisition and pharmacy overhead costs. In its calculation of this proposed payment rate, CMS starts with the cost of separately payable drugs derived from hospital claims data and cost reports (ASP minus 2 percent), and then makes an adjustment that redistributes pharmacy overhead costs, in the amount of $150 million, from packaged drugs to separately payable drugs.
Outliers: CMS proposes to raise the fixed-dollar threshold for outliers to $2,225, which is $425 more than in 2009, which, when combined with the multiple threshold of 1.75 times the APC payment rate, ensures that outlier spending estimates do not exceed the 1.0 percent of aggregated total OPPS payments that are allocated to outlier payments.
Partial Hospitalization Program Services: CMS proposes to continue using two APCs to pay partial hospitalization program (PHP) services, one APC for days with three services ($148 in 2010, which is $9 less than the 2009 rate) and one APC for days with four or more services ($211 in 2010, which is $11 more than the 2009 rate). In addition, consistent with recommendations from the AHA, CMS proposes to continue to use only hospital-based PHP data to develop the two PHP APC payments.
Cardiac and Pulmonary Rehabilitation: In accordance with the Medicare Improvements for Patients and Providers Act of 2008 (MIPPA), CMS proposes to establish a new benefit and OPPS payments for pulmonary and intensive cardiac rehabilitation services for beneficiaries with chronic obstructive pulmonary disease, cardiovascular disease and related conditions, effective January 1, 2010. CMS will require direct physician supervision for these services, but unlike other outpatient therapeutic services, CMS does not propose to allow non-physician practitioners to provide this supervision.
Highlights of ASC proposed rule:
CMS continues the transition to the OPPS-based payment system for ASCs. In 2010, the third year of a four-year transition, CMS proposes to pay for most ASC services at a rate that is based on a blend of 25 percent of the 2007 ASC payment amount and 75 percent of the 2010 fully implemented ASC amount. For new ASC services that are predominantly furnished in physicians' offices, the ASC payment is capped at the Medicare physician fee schedule practice expense rate the physician would be paid for the same service had it been provided in the office setting.
2010 is the first year that CMS is permitted by law to provide an inflation update under the revised ASC payment system. CMS proposes to update ASC payments in 2010 by 0.6 percent, the percentage increase in the Consumer Price Index for All Urban Consumers.
The proposed rule also adds 28 surgical procedures to the list of allowed ASC procedures and updates the list of device-intensive procedures and covered ancillary services and their rates, consistent with proposals in the outpatient PPS.
Highlights of PFS proposed rule:
CMS proposes to cut Medicare payment rates for physicians by 21.5 percent in CY 2010. However, in anticipation of similar action by Congress, CMS proposes to remove physician-administered drugs from the annual payment update formula, which the agency projects will raise the payment update in future years.
CMS also proposes reducing physician fee schedule payments for advanced imaging services in order to promote reduced utilization, and requiring certain providers of the technical component of advanced imaging services to be accredited by 2012, as stipulated in MIPPA. These providers include physician offices, mobile units and independent diagnostic testing facilities.
The OPPS/ASC rule will be published in the July 20 Federal Register. Comments are due to CMS by August 31 with a final rule expected this fall. The final rule will take effect January 1, 2010.
The PFS proposed rule will be published in the July 13 Federal Register, with comments accepted through August 31.
If you are an MHA member and would like to receive a copy of AHA's Special Bulletin on the OPPS proposed rule, contact Shawn Lea at (800) 289-8884, (601) 368-3237 or slea@mhanet.org.
