iProtean—Hospitals Challenge Two-Midnight Rule

The American Hospital Association (AHA) announced January 22 that four hospital systems have filed appeals asking the Provider Reimbursement Review Board (PRRB) to grant expedited judicial review for the hospitals’ challenge to certain new payment policies for Medicare Part A inpatient claims, specifically the “two-midnight” rule. (See iProtean newsletter, “Audits Delayed for Two-Midnight Rule,” October 1, 2013)

 

The 2014 Inpatient Prospective Payment System final rule on “two-midnight” stays took effect October 1, 2013. The two-midnight rule says that when a physician admits a patient with the assumption that the stay will span at least two midnights, the admission will qualify as appropriate for payment under Medicare Part A. However, admissions spanning less than that time period are presumed to be inappropriate for payment under Medicare Part A, and should have been provided on an outpatient basis under Medicare Part B. CMS developed the policy because of an increase in observation stays, which expose patients to higher out-of-pocket costs under Medicare Part B.

 

CMS has estimated that the new policy will increase inpatient expenditures by about $220 million, so it proposed to offset that by permanently reducing the standard payment rate to hospitals by 0.2 percent.

 

Modern Healthcare reported that Banner Health in Arizona, Einstein Healthcare Network in Pennsylvania, Wake Forest University Baptist Medical Center in North Carolina and the Mount Sinai Hospital in New York have filed appeals, asking PRRB to grant expedited judicial review for the hospitals’ claims that the 0.2 percent payment cut is “arbitrary and capricious because CMS relied on indefensible assumptions and offered no reasoned explanation for them. They also argue that the payment cut fails to comply with Administrative Procedure Act’s requirements for proper notice and comment and was not codified in regulation as the law requires, AHA said.” (“Hospital Systems Initiate Challenge to CMS’ ‘Two-Midnight” Policy,’” Health Lawyers Weekly, January 24, 2014)

 

Originally, CMS said it will not permit government recovery auditors to review the medical necessity of inpatient admissions of one midnight or less between October 1, 2013 and December 31, 2013, but it has extended the implementation date to March 31, 2014.

 

(Sources: “Hospital Systems Initiate Challenge to CMS’ ‘Two-Midnight” Policy,’” Health Lawyers Weekly, January 24, 2014; “AHA plans to fight CMS’ ‘two-midnight rule’ this year,” Modern Healthcare, January 23, 2014; and “Hospital Groups Seek 2-Midnight Rule Review,” HFMA, January 23, 2014)

 

iProtean subscribers, look for a new advanced Governance course in your library—Competency-based Succession Planning featuring Barry Bader, Lisa Goldstein, Anne McGeorge and Monte Dube.

 

 

For a complete list of iProtean courses, click here.

For more information about iProtean, click here.

iProtean— Medicare & Medicaid Underpayments Hit $56 Billion in 2012

The American Hospital Association (AHA) released a fact sheet last week that outlines the amount most U.S. hospitals were “underpaid” by Medicare and Medicaid in 2012. The underpayments affected at least 68 percent of hospitals and totaled $56 billion.

 

“Underpayment” occurs when the payment a hospital received for providing care is less than the costs of providing that care. (AHA Fact Sheet, 2014) Costs typically include the amount paid for personnel, technology and other goods and services required to provide hospital care. So underpayment occurs when the costs of providing care exceed the amount paid by Medicare and Medicaid for providing that care.

 

AHA collects aggregate information on the payments and costs associated with care delivered to Medicare and Medicaid patients by U.S. hospitals. The data come from AHA’s annual survey of hospitals. For this computation of underpayments, AHA noted that Medicare and Medicaid payments include all applicable payment adjustments (Disproportionate Share, Indirect Medical Education, etc.), and both fee-for-service and managed care payments.

 

Results of Data Analysis

Both Medicare and Medicare payments fell significantly below costs:

  • Combined underpayments were $56 billion in 2012—$42.3 billion for Medicare and $13.7 billion for Medicaid
  • Hospitals received payment of $0.86 for every dollar spent for Medicare patients, and $0.89 for every dollar spent for Medicaid patients
  • 69 percent of hospitals received Medicare payments less than cost; 68 percent of hospitals received Medicaid payments less than cost.

 

AHA also released a chart showing hospitals have seen $113 billion in Medicare and Medicaid payment cuts since 2010:

 

  • $53.8 billion—Cuts from sequestration (including cuts from the Bipartisan Budget Act of 2013)
  • $35.3 billion—MS-DRG Coding Offsets
  • $2.4 billion—Two-midnight offset
  • $3 billion—Long term acute care hospitals
  • $4.2 billion—3-day window
  • $12.2 billion—Medicaid SDH
  • $2.1 billion—Bad debt

 

(Sources: “AHA Says Medicare and Medicaid Underpaid Hospitals by $56 Billion in 2012,” Health Lawyers Weekly, January 17, 2014; and “American Hospital Association Underpayment by Medicare and Medicaid Fact Sheet 2014”)

 

iProtean subscribers, look for a new advanced Governance course in your library—Competency-based Succession Planning featuring Barry Bader, Lisa Goldstein, Anne McGeorge and Monte Dube.

 

 

For a complete list of iProtean courses, click here.

For more information about iProtean, click here.

 

iProtean— New Tool Helps Boards Assess Progress and ROI of EHRs

The Institute of Medicine’s (IOM) Digital Learning Collaborative and members of the Healthcare Financial Management Association (HFMA) have developed a new model that helps hospital executives and boards assess the return on investment of their electronic health record (EHR) systems and how to best configure these systems “to achieve optimal value,” according to a recent news release from HFMA.

 

EHR technology typically has been an area where board members and even some experienced executives feel vulnerable. It has been difficult to compare the various studies about implementation and benefits of EHRs because the differences in those studies tend to be significant. So far, assessing which differences arise because of the technology itself and the manner of its deployment and which differences are related to the methods used to assess costs and benefits has not been particularly successful or helpful.

 

In addition, data used in evaluating EHRs came from highly capitated systems. Healthcare finance experts have noted that the experience in these capitated systems may not clearly translate to other types of hospitals and systems, making it difficult to identify, for example, net financial benefits for hospitals. As a result, some board members have been reluctant to participate in an assessment of the costs and benefits of EHRs.

 

According to authors of a discussion paper on the model, “Return on Information: A Standard Model for Assessing Institutional Return on Electronic Health Records,” these common logistical and conceptual challenges have even hindered the adoption and implementation of EHRs.

 

The new model takes a standard approach to calculating the financial costs, benefits and implications of implementing and optimizing EHRs and related technology. It includes the following:

  • A catalog of categorized benefits, expenses and potential revenue impacts, and identifies the areas where each may exist
  • An alignment of benefits with the stated goals of the Office of the National Coordinator for Health IT’s meaningful use standards
  • Assessments of whether benefits are expected to accrue to the provider based on various payment methods
  • Designation of whether revenue impacts are expected to be negative or positive
  • Prioritization of benefits and revenue impacts  by their ability to quantify financial impact and the relative scale of financial impact

 

“A standard model would provide credibility in discussion with other executives, board members, and even in negotiations with EHR vendors . . . and the comparability the model provides would help identify more efficient approaches to implementation, based on differences in experiences between provider sites, and would accelerate learning about best practices.” wrote the co-chair of IOM’s Digital Learning Collaborative in a Health Affairs blog post.

 

The authors of the report expressed the hope that the model will “[accelerate] improving the business case for EHR implantation and advanced information technologies that improve the safety, quality and efficiency of health care and foster a learning health system.”

 

(“IOM Releases EHR Cost/Benefit Calculation Framework and Tool,” HFMA Weekly News, January 10, 2014)

 

(For a copy of the report and the tool, please contact Carlin Lockee at clockee@iprotean.com)

 

 

iProtean subscribers, look for a new advanced Governance course in your library—Competency-based Succession Planning featuring Barry Bader, Lisa Goldstein, Anne McGeorge and Monte Dube.

 

 

For a complete list of iProtean courses, click here.

For more information about iProtean, click here.

 

New Data from AHA Suggest Stronger Hospital Margins, But Negative Outlook Prevails for 2014

The American Hospital Association released its annual Hospital Statistics guide last week and some of its findings suggest a resilient, quickly adapting hospital industry through fiscal year 2012, according to Modern Healthcare.com which reported on select information from the guide.

 

The guide’s data highlight yet another disconnect among the various organizations that both report on and predict hospital health. While AHA’s retrospective data show stronger hospital margins in 2012, predictions for 2014 by industry analysts focus on the opposite.

 

2014 Outlook

AHA’s retrospective data from 2012 indicates an industry in a stronger position than industry experts had thought. But projections for 2014 from those experts are less encouraging. Modern Healthcare presented its 2014 outlook for hospitals and noted uncertainty about patient volumes and operating margins: “It’s uncertain whether hospitals will continue to see stagnation in the volume of patients in 2014, forcing them to find other ways to increase revenue and maintain operating margins.” (Modern Healthcare AM, January 6, 2014) It further noted that hospitals will continue to focus on squeezing operating expenses including supply costs and reorganization of services to achieve greater efficiency.

 

We reported Moody’s Investors Service 2014 Outlook for not-for-profit hospitals in early December—a negative outlook based on another year of slowing of revenue growth, contracting margins and the implementation of the Affordable Care Act. Both Standard & Poor’s and Fitch Ratings also predict a negative outlook for 2014.

 

Fitch Ratings notes the following key issues: continued pressure on patient volumes, reimbursement challenges and uncertainty related to healthcare reform. It places emphasis on the importance of effective  management and consolidation, integration and alignment strategies. (2014 Outlook: U.S. Nonprofit Hospitals and Healthcare Systems Outlook Report, Fitch Ratings, December 11, 2013)

 

Standard & Poor’s also lists top line revenue constraints and decreasing operating margins, health reform and changes in the payment environment as leading pressures on hospitals. It adds that the not-for-profit healthcare sector is “at a tipping point—where an increasing number of organizations will find themselves weighed down by issues that outstrip their ability to implement sufficiently robust positive countermeasures.” (The Outlook for U.S. Not-For-Profit Health Care Providers is Negative From Increasing Pressures, Standard & Poor’s Ratings Services, December 10, 2013)

 

AHA Hospital Statistics Guide

Key findings from AHA’s Hospital Statistics guide are listed below (please note that AHA released its guide to Modern Healthcare only; key findings are from a Modern Healthcare publication):

 

  • Care continued to shift from inpatient to outpatient, but hospitals showed stronger operating margins than in previous years—total net revenue in 2012 increased to $821.3 billion compared with $755.3 billion in 2011
  • Inpatient beds per capita remained steady at 2.6 per 1,000 people
  • Average length of stay remained consistent at 5.4 days
  • Emergency department visits increased 2.9% in 2012 (compared to a 1.7% increase between 2011 and 2010)
  • Outpatient visits increased nearly 2.9% (compared with a 0.7% increase between 2010 and 2011)
  • Fewer patients were treated on medical/surgical floors—these admissions decreased 1.2% from 2011 (compared to a 0.9% decrease between 2010 and 2011)
  • The level of uncompensated care continued to grow; hospitals spent 6.1% of their expenses on bad debt and charity care
  • The total number of hospitals increased slightly to 4,999 from 4,973
  • Consolidation continued at a rapid pace: 3,100 hospitals were part of a system in 2012 compared with 3,007 in 2011 (In 2008, 2,868 hospitals were part of a system.)
  • Fewer hospitals were part of group purchasing organizations
  • Acute care facilities employed 5.6 million people, about 1.5% more than in 2011.

 

(“Hospitals on the rebound, show stronger operating margins,” ModernHealthcare.com, January 3, 2014.)

 

 

iProtean subscribers, look for a new advanced Governance course in your library next week—Competency-based Succession Planning featuring Barry Bader, Lisa Goldstein, Anne McGeorge and Monte Dube.

 

 

For a complete list of iProtean courses, click here.

For more information about iProtean, click here.