Productivity Increases in U.S. Hospitals

Efficiencies in delivery of care for heart attack, heart failure and pneumonia for Medicare patients increased sharply from 2002 to 2011, according to a study to be published in Health Affairs in March. Heart attack and heart failure productivity grew 0.62 percent and 0.78 percent respectively; productivity growth for pneumonia reached 1.9 percent.

 

Researchers factored in quality of care and severity of patient illness (not fully considered in previous productivity studies). The results showed a significant departure from flat-to-declining productivity reported in past studies on hospital productivity.

 

Productivity Improvements and Payment Rates

 

Medicare’s payment rates have increased year over year based on the rate of healthcare cost inflation. When productivity remained static or declined, payment increases were based on increases in the price of labor, capital and materials so providers could continue to deliver the same level of care. Theoretically, with productivity improvements and payment increases, providers could deliver a higher quality or greater quantity of care, according to the authors of the study.

 

Conversely, the authors added, productivity gains may counter any negative effects from cuts in hospital payments to provide savings—a given because of the Affordable Care Act (ACA).  An example of ACA-mandated savings was a 0.5-percentage-point reduction in the Medicare increase for FY14. The reduction was linked to productivity growth in the broader economy. They noted that, at least in the inpatient setting, providers might not need to be concerned if CMS links provider payment to economy-wide productivity growth.

 

However, a Healthcare Financial Management Association executive noted that some productivity gains identified in the study “have been necessitated by current payment levels being lower than the cost to treat those patients” and “additional cuts through the ACA or other avenues will only continue to widen that gap between payment levels and the cost to treat those patients.” (“Study: Hospital Productivity Improves,” HFMA Weekly News, February 20, 2015)

 

The authors of the study wrote that, “In terms of the productivity of U.S. health care, the pattern of growth documented here suggests that at least in recent years . . . hospitals have not suffered from what has been called a cost disease, in which a heavy reliance on labor limits opportunities for efficiencies stemming from technological improvement.” (“Study: Hospital Productivity Improves,” HFMA Weekly News, February 20, 2015)

 

Even if the findings are confined to heart attack, heart failure and pneumonia, they still signal a substantial financial impact for hospitals, according to the authors. The three conditions represent a significant number of inpatient days.

 

 

 

 

iProtean subscribers, the new advanced Quality course, Board Mindsets to Drive Value, featuring Stephen Beeson, M.D., and Larry McEvoy, M.D. is now in your library. Dr. Beeson and Dr. McEvoy offer suggestions about working with physicians to build a different kind of organization where collaboration, innovation and change will become the norm.

 

In March, look for the new advanced Governance course, Two Imperatives for Boards, featuring Tom Dolan, Ph.D. and Karma Bass of Via Healthcare Consulting. Ms. Bass will be an expert presenter at iProtean’s upcoming symposium.

 

 

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Hospital Hiring Surge Continues in 2015

Despite earlier reports about a slowdown in job growth in hospitals in 2014, the Bureau of Labor Statistics (BLS) reported a robust increase in 2014, continuing through January 2015. The healthcare sector added 38,000 jobs in January; hospitals alone added nearly 10,000 jobs. In 2014, the healthcare sector averaged 26,000 new jobs per month.

 

Job growth occurred in January throughout the provider sector:

  • 9,600 jobs—hospitals
  • 13,400 jobs—physicians’ offices
  • 7,000 jobs—nursing and residential care facilities
  • 4,100—home health care services

 

Industry experts expect the trend to continue, and credit the increase to several factors including:

  • Improved health insurance coverage through public marketplaces/exchanges
  • More employer-sponsored insurance as overall hiring increases
  • Increased Medicaid coverage
  • Surge in hospital utilization by for-profit hospitals, especially in states that adopted voluntary Medicaid expansion

 

Too Early to Tell . . .

 

Increased hiring means more expenses, analysts noted, and thus could signal an increase in overall increase in healthcare spending. Healthcare spending has undergone an historic slowdown over the last several years, due in large part to the Great Recession and the implementation of the Affordable Care Act. Hospitals and other providers have a delicate balance to maintain, juggling various pockets of increased utilization with imperatives to continue to cut costs.

 

Another unknown remains the effect of consolidation on jobs. Many predicted that increased consolidation would necessitate job loss in hospitals as services were combined, scaled down and/or were eliminated across a large spectrum of delivery sites. The latest reports (Irving Levin and Associates and Kaufman, Hall & Associates) show hospital transactions actually declined in 2014, and any efficiencies created by merger and acquisition activity have yet to materialize.

 

(Source: “Hospital Job Surge Continues into 2015,” HFMA Weekly, February 13, 2015)

 

 

 

iProtean subscribers, the new advanced Quality course, Board Mindsets to Drive Value, featuring Stephen Beeson, M.D., and Larry McEvoy, M.D. is now in your library. Dr. Beeson and Dr. McEvoy offer suggestions about working with physicians to build a different kind of organization where collaboration, innovation and change will become the norm.

 

In March, look for the new advanced Governance course, Two Imperatives for Boards, featuring Tom Dolan, Ph.D. and Karma Bass of Via Healthcare Consulting. Ms. Bass will be an expert presenter at iProtean’s upcoming symposium.

 

 

For a complete list of iProtean courses, click here.

 

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Healthcare Groups Suggest Ways to Revamp Incentives for ACOs

Large health systems and other healthcare groups including the American Medical Association and the American Hospital Association (AHA) have approached the current Administration with suggestions about how to rework the Medicare Shared Savings Program’s accountable care organizations (ACOs).

 

These groups contend that the timeframe for taking on risk is too short and the bonuses too difficult and/or too small to be worth the investments and risk.

 

As reported here, CMS proposed changes to the ACO program in December and recently announced that 50 percent of Medicare spending that isn’t for managed care would be through ACOs and other new payment models by the end of 2018.

 

The proposed changes were welcomed, but industry spokespersons noted the changes did not go far enough. AHA and other organizations said the bonuses are too difficult to achieve, and encouraging ACOs to accept risk for potential penalties in order to earn greater bonuses will hurt those hospitals and medical groups least prepared to make the shift.

 

Some of the suggestions from AHA, AMA and 16 other healthcare organizations include:

 

  • No bonus reduction for ACOs that defer penalties (as provided in the CMS proposal)

 

  • Revision of bonuses based on quality: ACOs with high quality scores should be rewarded with additional payments. Currently, if an ACO has weaker performance against quality benchmarks, it gets to keep a smaller share of the savings it earns. However, strong quality performance doesn’t boost the financial return and there is not a pure penalty for poor quality.

 

  • More flexibility for ACOs to choose between two types of thresholds that savings must reach before ACOs can earn bonuses

 

  • Changes in how CMS identifies which patients are assigned to an ACO: patients should be identified at the start of the year without revisions that retrospectively change the patients against whose care the network’s performance is measured

 

  • A new option: more sophisticated ACOs could earn bigger bonuses it they accept the potential for larger penalties (the group added that CMS should consider allowing these ACOs to operate under global budgets)

 

(Source: “Eased ACO rules aren’t enough to lure more takers, healthcare groups say,”Modern Healthcare, February 8, 2015)

 

 

 

 

iProtean subscribers, the new advanced Quality course, Board Mindsets to Drive Value, featuring Stephen Beeson, M.D., and Larry McEvoy, M.D. is now in your library. Dr. Beeson and Dr. McEvoy offer suggestions about working with physicians to build a different kind of organization where collaboration, innovation and change will become the norm.

 

Please note that Dr. Beeson will be one of the featured speakers at the iProtean Symposium in March.

 

 

For a complete list of iProtean courses, click here.

 

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Alternative Payment Models Gaining Momentum

Last week we reported that the Department of Health and Human Services announced its initiative that 50 percent of Medicare payments be delivered through alternative payment models by 2019. This is the first time Medicare has set specific time frames and payment percentages for the shift away from fee-for-service payments.

 

Provider advocates, according to the Healthcare Financial Management Association (HFMA), generally supported the news but concern has been expressed about lack of detail. One HFMA executive said, “Lacking specific details, it is not yet clear how Medicare will reach the short-term payment reform goals that HHS announced . . . However, the goals of this payment initiative do increase both the potential significance of the proposed overhaul of the Medicare Shared Savings Program (MSSP) and the need to expand bundled payments.” (“Medicare to Shift 50 Percent of Payments to Alternative Models by 2019,” HFMA Weekly News, January 30, 2015)

 

The Importance of Accountable Care Organizations

 

It is likely that the Medicare Shared Savings Program (MSSP)—Medicare’s primary ACO program—would have to undergo significant changes in order to have an impact on growing the share of payments that are tied to quality. Only a quarter of those reporting first-year results achieved significant savings.

 

HHS proposed an overhaul of the MSSP program in December that would reduce the financial barriers to providers participating in the program. The changes under the proposed rule included the extension of the bonus-only period for participants in “Track 1” from three years to six years. Many worried that the existing time frame was too short for providers to develop value improvement steps and then widely implement such changes to avoid major penalties in a subsequent phase of the program. ((“Medicare to Shift 50 Percent of Payments to Alternative Models by 2019,” HFMA Weekly News, January 30, 2015 and “Providers Would Get a Boost Under Proposed Rule Changes to MSSP ACOs,” iProtean Connect, December 2, 2014)

 

Executives at leading insurance companies have pledged to increase the use of quality and cost-control incentives similar to ACOs, bundled payments and other contracts with the potential for rewards or penalties based on quality performance as well as better cost control. However, many questions remain unanswered. Some question whether meeting targets will accomplish the desired improvements in quality and efficiency; others have expressed concern that Medicare incentives may be tied to weak measures of quality.

 

One policy analyst noted, “If all you’re going to do is . . . put providers at risk for cost, but you don’t have a robust system for measuring quality, then you’re not leaving patients better off. “ (“Where healthcare is now on march to value-based pay, Modern Healthcare, January 28, 2015)

 

 

 

iProtean subscribers, the new advanced Quality course, Board Mindsets to Drive Value, featuring Stephen Beeson, M.D., and Larry McEvoy, M.D. is now in your library. Dr. Beeson and Dr. McEvoy offer suggestions about working with physicians to build a different kind of organization where collaboration, innovation and change will become the norm.

 

Please note that Dr. Beeson will be one of the featured speakers at the iProtean Symposium in March.

 

 

For a complete list of iProtean courses, click here.

 

For more information about iProtean, click here.