iProtean—Study Finds Modest Increase in Employer-Sponsored Insurance Premiums

Employer-sponsored health insurance premiums rose a modest four percent for family coverage and five percent for individual coverage, according to a recent report from the Kaiser Family Foundation and Health Research & Educational Trust (HRET).  Kaiser and HRET conduct an annual survey of non-federal public and private employers with three or more workers—the report shows results for employer-sponsored health benefits in 2013.

 

Kaiser Family Foundation President Drew Altman said the report was good news and noted that the Affordable Care Act (ACA) “has not caused employers to raise premiums or drop coverage.” But Altman added that “probably the biggest factor has just been the slowdown in the economy.” (“Study Reveals Insurance Premiums Rise Slowly For Second Year In A Row,” AHLA Health and Life Sciences Law Daily, August 21, 2013)

 

Premiums have been held in check partly by increasing out-of-pocket costs that workers pay through co-payments and deductibles. “It’s part of what I see as a quiet revolution in health insurance, from more comprehensive to less comprehensive, with higher deductibles,” said Altman. (“Health Care Costs Climb Moderately, Survey Says,” New York Times, August 20, 2013)

 

There is a debate about whether the Affordable Care Act (ACA) is contributing to the moderation. It has not gone into effect fully yet, but some health care providers might already be cutting costs in anticipation.  At the same time, employers have been asking workers to pay higher deductibles and be more selective, the New York Times noted.

 

The slower rate of growth means employers – who typically pay the bulk of employee health costs – are less likely to try to cut worker benefits in order to contain costs. “We’re not seeing that,” said Altman. “It’s not an environment where they should be looking to dramatically cut workers’ health benefits.” (“Job-based health insurance costs rise in 2013,” McClatchy, August 20, 2013)

 

Some of the key findings noted in the report include:

 

  • The share of employers providing health insurance is statistically unchanged from 2012
  • An average of 77% of workers are eligible for employee health coverage; of these workers, about 80% are enrolled in job-based coverage
  • 62% of workers at companies that offer coverage have insurance through their employers.
  • 93% of businesses with 50 or more employees offer health benefits this year
  • 57% of firms with at least three employees offer health benefits
  • The average annual premium for a family is $16,351
  • 77% of firms offer at least one wellness program
  • 78% of workers face an annual deductible, up from 72% last year
  • 38% of all covered workers face a large deductible of at least $1,000 or more
  • Premiums have climbed 80% since 2003

 

To read the report summary, please click here.

 

 

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iProtean Symposium & Workshop

Mark the Date!! October 2 – 4, 2013 at The Lodge at Torrey Pines, La Jolla, CA. Faculty: Michael Irwin (Citigroup), Todd Sagin, M.D., J.D. (Sagin Healthcare Consulting), Dan Grauman (DGA Partners), Pam Knecht (ACCORD LIMITED), Brian Wong, M.D. (The Bedside Trust), Doug Mancino, Esq. (Hutton & Williams, LLC)  For more information,  click here.

 

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iProtean—OIG Pushes to Limit Critical Access Hospital Designations

The Office of Inspector General (OIG) released a report last week that urged CMS to tighten access to critical access hospital (CAH) designation.

 

Based on its study of CAHs, the OIG reported that nearly two-thirds of CAHs would not meet the location requirements if required to re-enroll, and the vast majority of these CAHs would not meet the distance requirement.

 

CAH designation requires that a hospital be located at least a certain driving distance from other hospitals (including CAHs)—the “distance requirement”—and be located in rural areas—the “rural requirement.” Taken together the two requirements are known as the “location requirement.”

 

In addition, until 2006, state governors were given discretion to waive the distance requirement. This allowed hospitals more closely concentrated in an area to be awarded “necessary provider” (NP) status. Today, NP status hospitals represent three-quarters of the 1,328 CAHs.

 

In its report, the OIG noted that if CMS were authorized to reassess whether all CAHs should maintain their certifications and concluded that some should be decertified, Medicare and beneficiaries could realize substantial savings. “If CMS had decertified CAHs that were 15 or fewer miles from their nearest hospitals in 2011, Medicare and beneficiaries would have saved $449 million.” However, CMS does not have the authority to decertify most of these CAHs because they are NP CAHs. (“Most Critical Access Hospitals Would Not Meet the Location Requirements If Required to Re-Enroll in Medicare,” Department of Health and Human Services Office of Inspector General, August 2013)

 

Background

The CAH program was established in 1997 in response to a surge in rural hospital closures resulting from the Balanced Budget Act of that year. The program reimburses hospitals for 101 percent of their “reasonable inpatient and outpatient costs.” Hospitals could qualify only if they were rural and located 1) more than a 35-mile drive from a hospital or another CAH or 2) more than a 15-mile drive from a hospital or another CAH in areas of mountainous terrain or areas where only secondary roads are available.

 

State governors had the discretion to waive the distance requirement and award NP status. This state discretion was discontinued in 2006 as a result of the Medicare Prescription Drug, Improvement, and Modernization Act (MMA). However, MMA allowed existing NP CAHs to retain their NP designations indefinitely, as long as they continue to meet all other CAH requirements.

 

OIG Findings and Recommendations

The OIG report found that 849, or two thirds, of the nation’s CAHs do not meet both the distance and rural requirements. Of the 846 CAHs that do not meet the distance requirement, 306 were located a drive of 15 or fewer miles from their nearest hospitals or other CAHs.

 

OIG offered four specific recommendations to CMS:

  1. Seek legislative authority to remove necessary provider CAH’s permanent exemption from the distance requirement, thus allowing CMS to reassess these CAHs.
  2. Seek legislative authority to revise the CAH Conditions of Participation to include alternative location-related requirements.
  3. Ensure that it periodically reassesses CAH’s compliance with all location-related Conditions of Participation
  4. Ensure that it applies its uniform definition of “mountainous terrain” to all CAHs

 

CMS concurred with all but the second recommendation, and the OIG report includes the CMS response as well as its discussion of that response. To read the OIG report, click here.

 

In 2011, the Obama administration proposed eliminating CAH designations for hospitals within 10 miles of each other and cutting payments to 100 percent of costs (estimated savings of $1.4 billion over 10 years). The OIG recommendations offer a different approach to reducing costs in the Medicare program. Both likely will be considered as Congress debates budget and deficit issues over the next several weeks. However, whether either approach will be adopted as part of the overall reduction package is unknown.

 

Earlier this year, Medicare officials quietly directed state inspectors to begin recertifying all CAHs to make sure they meet the distance requirements. However, without statutory authority from Congress, inspectors cannot investigate that issue for NP hospitals because, as noted above, individual state governments awarded NP status. (“Proposal to strip critical-access status from two-thirds of those hospitals called a death knell for many,” Modern Healthcare.com, August 17, 2013)

 

Impact on Hospitals

The impact of losing CAH designation for most hospitals would be significant and could even result in closures, some analysts say. In addition to losing cost plus reimbursement and transferring to prospective payment, decertified CAHs would see other hits to their top-line revenue:

  • Medicare outpatient copayments, based on charges for care at CAHs, would decline
  • Many would cease to be eligible for the 340B program, which gives smaller hospitals the ability to get discounts of up to 50 percent on prescription drug prices.

(“Proposal to strip critical-access status from two-thirds of those hospitals called a death knell for many,” Modern Healthcare.com, August 17, 2013)

 

The financial impact, on top of existing reductions for hospitals—the 2 percent Medicare payment reduction, changes to Medicaid payments and the impending lost of DSH payments—would be the tipping point for many small hospitals.

 

Industry Response

Reaction to the OIG report has been swift and intense, from the National Rural Hospital Association, the American Hospital Association, the Healthcare Financial Management Association, lawmakers in both chambers of Congress, analysts and rural and CAH providers.

 

HFMA’s director of thought leadership noted in an announcement to HMFA members: “The OIG’s focus on the distance requirement does not take into account the reasons why many CAHs were designated as necessary providers by the states, or the extent to which these reasons continue to justify CAH status. Before any action is taken that may limit CAH designation, policymakers will need a better understanding of the extent to which necessary provider CAHs do in fact continue to provide needed access to care, regardless of their distance from another hospital.”

 

The American Hospital Association (AHA) criticized the report’s recommendations in a statement from its vice president of payment and policy: “The OIG’s recommendation that CMS seek legislative authority to remove and reevaluate certain CAHs’ special Medicare status is completely inappropriate and demonstrates an unfortunate lack of understanding of how health care is delivered in rural America. If the recommendation were implemented, many of these facilities may be forced to close and patients could lose their access to essential medical services.” (“Medicare Decertifying Some CAHs That Could Not Meet Location Requirements If Required To Re-Enroll In Medicare Could Save Millions, OIG Says,” Health Lawyers Weekly, AHLA, August 16, 2013)

 

The National Rural Health Association (NRHA) said the OIG changes could endanger the viability of many of the facilities that provide care to 64 million Americans. Noting that the OIG’s recommendations would “kill rural health care,” NRHA’s CEO said, If the full report were implemented, it would result in shutting down up to 70 percent of a state’s rural hospitals.” (“OIG: Limit Critical Access Hospital Designations,” HFMA Weekly News, HFMA, August 16, 2013)

 

Think tank/policy makers, however, noted that even though changes to CAH designation could close hospitals, the loss of hospitals located relatively close to other healthcare facilities would not impact care. (“OIG: Limit Critical Access Hospital Designations,” HFMA Weekly News, HFMA, August 16, 2013)

 

 

iProtean subscribers, watch for two upcoming advanced Finance courses on a portfolio approach to making difficult decisions about programs and services. These courses feature Marian Jennings, Lisa Goldstein and Nate Kaufman and will be released later this year.

 

For a complete list of iProtean courses, click here.

 

 

iProtean Symposium & Workshop

Mark the Date!! October 2 – 4, 2013 at The Lodge at Torrey Pines, La Jolla, CA. Faculty: Michael Irwin (Citigroup), Todd Sagin, M.D., J.D. (Sagin Healthcare Consulting), Dan Grauman (DGA Partners), Pam Knecht (ACCORD LIMITED), Barry Bader (Bader & Associates), Ed Kazemek (ACCORD LIMITED).  For more information, click here.

 

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iProtean—CMS Payments to Hospitals Will Increase $1.2 Billion in FY 2014

Medicare inpatient operating payment rates for general acute care hospitals that successfully participate in the Hospital Inpatient Quality Reporting (IQR) Program will increase by 0.7 percent in FY 2014. For the 3,400 hospitals that participate in the inpatient prospective payment system (IPPS), this represents an approximate increase of $1.2 billion in 2014. CMS confirmed the increase in a final rule released August 2. (“CMS Issues FY 2014 IPPS Rule,” Health Lawyers Weekly, August 09, 2013)

 

The IPPS payment update is based on a 2.5 percent market basket update adjusted downward due to a number of factors:

  • A 0.5 percentage point productivity adjustment reduction
  • A 0.3 percentage point cut mandated by the Affordable Care Act (ACA)
  • A 0.8 percentage point reduction required by the American Taxpayer Relief Act of 2012 (this statute requires CMS to recoup $11 billion over the next four years)
  • A 0.2 percentage point cut to offset projected increases from changes to admission and medical review criteria for inpatient services.

(“Final Rule Increases IPPS Payments, But Does Not Address Key Hospital Concerns,” HFMA, August 5, 2013)

 

The rule finalizes a proposal that hospital inpatient admissions spanning at least two midnights would presumptively qualify as appropriate for payment under Medicare Part A. Hospital inpatient admissions spanning less than two midnights (that is, less than one Medicare utilization day) would presumptively be inappropriate for payment under Part A.

 

Specifically, surgical procedures, diagnostic tests, and other treatments generally are appropriate for inpatient hospital admission and Medicare Part A payment when the physician (1) expects the beneficiary to require a stay that crosses two midnights and (2) admits the beneficiary to the hospital based on that expectation, according to the CMS fact sheet. The timeframe to determine the expectation of a stay spanning two midnights begins when the beneficiary starts receiving services in the hospital, including outpatient observation services or services in an emergency department, operating room or other treatment area. (“CMS Issues FY 2014 IPPS Rule,” Health Lawyers Weekly, August 09, 2013)

 

The time a patient spends as an outpatient before the formal inpatient admission order is not inpatient time, but the physician and Medicare review contractor “may consider this period when determining if it is reasonable and generally appropriate to expect the patient to stay in the hospital at least two midnights as part of an admission decision,” the fact sheet noted.

 

The final rule also emphasizes the importance of documentation in the medical record to support a reasonable expectation of the medically necessity of a stay lasting at least two midnights.

 

Other parts of the final rule include:

  • Allowing additional Medicare Part B payment when a Part A claim is denied because the patient should have been treated as an outpatient rather than admitted to the hospital as an inpatient.
  • Implementation of Section 3133 of the ACA, reducing the Medicare disproportionate share hospital (DSH) adjustment to reflect the expected reduction in uncompensated care as more individuals gain insurance coverage
  • Changes to quality programs mandated by the ACA, including the Hospital-Acquired Conditions (HAC) Reduction Program; the Hospital Value-Based Purchasing and Readmissions Reduction programs; the IQR program; the Inpatient Psychiatric Facility Quality Reporting and LTCH Quality Reporting programs; and the PPS-Exempt Cancer Hospital Quality Reporting Program.

 

To view the CMS fact sheet on the final rule, click here.

 

For the CMS fact sheet on the quality provisions specifically, click here.

 

 

iProtean subscribers, watch for two upcoming advanced Finance courses on a portfolio approach to making difficult decisions about programs and services. These courses feature Marian Jennings, Lisa Goldstein and Nate Kaufman and will be released later this year.

 

For a complete list of iProtean courses, click here.

 

 

iProtean Symposium & Workshop

Mark the Date!! October 2 – 4, 2013 at The Lodge at Torrey Pines, La Jolla, CA. Faculty: Michael Irwin (Citigroup), Todd Sagin, M.D., J.D. (Sagin Healthcare Consulting), Dan Grauman (DGA Partners), Pam Knecht (ACCORD LIMITED), Barry Bader (Bader & Associates), Ed Kazemek (ACCORD LIMITED).  For more information, click here.

 

For more information about iProtean, click here.

iProtean—Many Hospitals Fined for Excess Readmissions

Medicare has announced that this October more than 2,000 hospitals will have payments reduced because of high readmission rates. The program that began last October had up to a one percent penalty during its first year; year two beginning October 1 will have a maximum penalty of two percent. Medicare estimates the fines will amount to $227 million over the year and will affect hospitals in every state but one.

 

Last October CMS began its readmission rate program whereby it took up to one percent from Medicare payments to hospitals with high rates of readmission within 30 days of discharge for patients with heart attacks, heart failure and pneumonia.  Penalties will gradually rise to three percent of Medicare payments and additional treatments/conditions will be added. (“Two Pay-for-Performance Programs Now in Effect,” iProtean Newsletter, October 3, 2012)

 

The readmission rate penalty program is viewed by many as one of the “toughest of Medicare’s efforts” to pay hospitals for the quality of their performance rather than only volume of activity. “Unlike other new programs created by the federal health law, the readmissions program offers hospitals no rewards for improvements or the opportunity to opt out.” (Rau, “Armed With Bigger Fines, Medicare To Punish 2,225 Hospitals For Excess Readmissions,” Kaiser Health News, August 2, 2013.)

 

In the past, patients returning to the hospital within 30 days of discharge had minimal, if any, adverse consequences for the hospital; in fact, hospitals actually earned more money because of the second visit. However, in general, readmissions are not viewed as “quality” patient care and they rack up additional expenses for Medicare. The Medicare Payment Advisory Commission estimates that eliminating one out of every 10 readmissions could save Medicare $1 billion annually.

 

Federal records released last week and a Kaiser Health News analysis showed the following:

 

  • 2,225 hospitals will have payments reduced for a year starting October 1.
  • 18 hospitals will lose two percent, the maximum possible and double the current top penalty.
  • 154 will lose one percent or more of every payment for a patient stay.
  • Hospitals that treated large numbers of low-income patients were more likely to be penalized than those treating the fewest low-income people.
  • 1,371 hospitals are receiving a lower fine than last year.
  • Penalties are increasing for 1,074 hospitals.
  • 283 hospitals not fined in the current year, including Stanford Hospital in California and Johns Hopkins’ Sibley Memorial Hospital in Washington, D.C., will be penalized in the new round.
  • October penalties will be applied on at least four out of five hospitals in Alabama, Arkansas, Florida, Kentucky, Illinois, Massachusetts, New York, New Jersey, Tennessee, West Virginia and the District of Columbia.
  • Nationally, the average fine decreased from 0.42 percent in the first year of the program to 0.38 percent.
  • Medicare determined that 1,154 hospitals kept their readmissions numbers low enough to escape fines.
  • 141 hospitals that in the first year were given the maximum penalty will get a lower punishment starting in October.

 

It’s difficult for individual hospitals to estimate what their fines will be because the penalties apply to every payment for a patient stay. However, the amount for some large hospitals could be as high as $1 million (using last year as a guide).

 

A spokesman from a mid-western hospital noted that more hospitals are taking readmissions seriously, in part because of the penalties. However, others note that if hospitals succeed in reducing readmissions they may actually end up with less revenue by forgoing those second patient admissions.

 

For hospitals treating low-income patients, it typically is more difficult to ensure post-discharge compliance with treatment and medication recommendations. For example, specialty diets may be too expensive; some medications may be prohibitively expensive. And some hospitals credit their low mortality rates in part to their aggressive recall of patients who are not healing.

 

Others note that hospitals can hardly dictate patient behavior and health after patients leave the hospital. And steps taken to intervene after discharge are not accompanied by extra payments from CMS for that care; for example, sending nurses to check in on patients at their homes, giving low-income patients free medications at discharge.

 

On the Horizon

Starting October 2014, Medicare will increase the final maximum penalty for high readmission rates to a three percent payment reduction for all patient stays. Also that year, Medicare plans to consider readmissions for more conditions, including chronic lung disease and elective hip and knee replacements. Health experts have also designed a way to measure all of a hospital’s readmissions, and that may ultimately be used for the penalties.

 

(Rau, “Armed With Bigger Fines, Medicare To Punish 2,225 Hospitals For Excess Readmissions,” Kaiser Health News, August 2, 2013)

 

For a refresher on both readmission rates and value-based purchasing, check out Value-Based Purchasing & Accountable Care Organizations, an advanced Finance course featuring Dan Grauman, Nate Kaufman and Monte Dube.

 

 

 

For a complete list of iProtean courses, click here.

 

 

iProtean Symposium & Workshop

Mark the Date!! October 2 – 4, 2013 at The Lodge at Torrey Pines, La Jolla, CA. Faculty: Michael Irwin (Citigroup), Todd Sagin, M.D., J.D. (Sagin Healthcare Consulting), Dan Grauman (DGA Partners), Pam Knecht (ACCORD LIMITED), Barry Bader (Bader & Associates), Ed Kazemek (ACCORD LIMITED).  For more information, click here.

 

For more information about iProtean, click here.