Uninsured Rate Dropped to 9.1 Percent in 2015

Note: iProtean editorial staff will be on holiday next week, celebrating Memorial Day. Look for the next blog/newsletter June 1. Enjoy the holiday!

 

The uninsured rated dropped from a high of 16.3 percent in 2010, the year the Affordable Care Act was enacted, to 9.1 percent in 2015, according to data released by the CDC this week. This is the first year that fewer than 1 in 10 Americans lacked health insurance.

 

The secretary of HHS released a written statement in response to the data from the CDC, noting “exceptionally slow” increases for employer-based insurance coverage premiums, Medicare spending and healthcare prices.

 

Despite these slowdowns, concerns about healthcare affordability continue to dominate policy-making decisions. Discussions center on data highlighting increases in out-of-pocket costs, drug costs and rates of underinsurance.

 

One area where enrollee affordability may have improved, according to the CDC, was in a slowdown, even plateauing, of enrollment in high-deductible health plans (HDHPs). Policy-makers and analysts have criticized these plans for reducing enrollee utilization of both elective and needed healthcare services, while leaving providers with uncollectable bills.

 

HDHP enrollments jumped from 25.3 percent of the pre-Medicare population in 2010 to 36.9 percent in 2014; then dropped slightly to 36.7 percent in 2015. (“As Uninsured Rate Drops, Affordability Challenges Grow,” HFMA Weekly, May 21, 2016)

 

(Note: data from other surveys show HDHP enrollments increasing in both individual and employer-sponsored health plans in 2015. For example, Mercer’s national survey

of employer-sponsored health plans found enrollments in HDHPs increased two percentage points from 2014 and comprised 25 percent of all employees in 2015.)

 

What Is Happening On the Ground?

 

Hospitals have seen an increased number of underinsured patients this year, according to a recent survey of disproportionate share, children’s and rural hospitals responding to the survey.

 

Insured patients at those hospitals are struggling to afford their outpatient drugs because of unaffordable copayments (according to 88 percent of hospitals in the survey), deductibles (84 percent), or drug benefit design (71 percent). (“As Uninsured Rate Drops, Affordability Challenges Grow,” HFMA Weekly, May 21, 2016)

 

Patients’ inability to afford their out-of-pocket costs leaves that share of the costs to accumulate as hospital bad debt. Some of the largest publicly traded hospitals reported earlier this year that they have had large increases in bad debt. (“As Uninsured Rate Drops, Affordability Challenges Grow,” HFMA Weekly, May 21, 2016)

 

 

 

iProtean subscribers, the advanced Finance course, Population Health and Alternative Payment Models, featuring Marian Jennings and Dan Grauman, is in your library. Jennings and Grauman discuss the onset of alternative payment models within the context of population health management, and the levels of risk associated with these models.

 

For a complete list of iProtean courses, click here.

 

 

For more information about iProtean, click here.

NFP Hospitals Financially Stronger Than 3 Years Ago

The financial profiles of US not-for-profit hospitals are stronger than they were three years ago, says Moody’s Investors Service vice president Daniel Steingart. In his summary in Healthcare Quarterly, Steingart notes that “stronger financial footing will undoubtedly help hospitals mitigate the headwinds associated with changing and more stringent reimbursement models.” (“Not-For-Profit Hospitals: Financially Stronger as Cash Flow Growth Returned to Normal Levels,” Healthcare Quarterly, Moody’s Investors Service, April 18, 2016)

 

Key financial improvements include:

 

  • Operating cash flow growth, which has returned to normal levels
  • Improved leverage ratios including debt to cash flow and maximum annual debt service coverage
  • Cash reserves increases
  • Stronger balance sheets, on average (recent market volatility has tempered investment performance most recently, however)

 

As noted in last week’s summary of preliminary medians, strong operating performance resulted from significant gains in the number of people with insurance, growing patient volumes and sizeable reductions in bad debt expense. Hospitals in states that expanded Medicaid coverage also saw lower bad debt expense. “The improving economy, related job gains and stronger patient volumes also contributed to the sector’s stronger, performance,” Steingart said.

 

Many larger systems have focused on lowering costs in order to prepare for continued reimbursement pressure. Some of the initiatives noted in Mr. Steingart’s article include:

 

  • Improving productivity and creating efficiencies to reduce ongoing costs
  • Consolidation of shared services and back office functions in a single site
  • Operating improvements and synergy benefits by centralizing and improving revenue cycle, and cutting pharmaceutical and retail pharmacy costs

 

Initiatives related to updating electronic medical records (EMRs) are widespread. EMRs may help hospitals perform better under risk-sharing contracts with Medicare and commercial insurers. These systems often streamline billing, coding and eliminate redundancies. But implementation costs are high and can reduce margins while the system is installed, tested and operationalized.

 

 

 

iProtean thanks Moody’s Investors Service its permission to quote generously from its publication and for allowing us to share this information with our subscribers!

 

 

iProtean subscribers, the advanced Finance course, Population Health and Alternative Payment Models, featuring Marian Jennings and Dan Grauman, is in your library. Jennings and Grauman discuss the onset of alternative payment models within the context of population health management, and the levels of risk associated with these models.

 

For a complete list of iProtean courses, click here.

 

 

For more information about iProtean, click here.

 

Moody’s Releases Preliminary FY 2015 Medians

Moody’s Investors Service reported a continuation of “favorable operating performance” for not-for-profit and public hospitals, citing its preliminary FY 2015 medians.

 

“Strong revenue growth and strengthening profitability margins are due to gains in insurance coverage, volume increases, improved revenue cycle, expense management and the stabilizing of changes implemented by the Affordable Care Act (ACA),” Moody’s analysts wrote in its Sector In-Depth Report. (Preliminary FY 2015 Medias Show Strong Revenue Growth, Profitability; Liquidity Holding Steady, Moody’s Investors Service, Sector In-Depth Report, April 25, 2016

 

The key findings in the report appear below:

 

Median annual revenue growth rate continued to outpace the median expense growth rate

  • Median annual revenue growth rate was a robust 7.4 percent in preliminary FY 2015 medians and outpaced the median expense growth rate for the second consecutive year.
  • The not-for-profit hospital sector continued to stabilize; for example, the three-year revenue compound annual growth rate (CAGR) (5.6 percent) exceeded the three-year expense CAGR (5.5 percent) for the first time in four years.
  • Continued consolidation drove stronger medial annual revenue growth, benefits from gains in insurance coverage and favorable utilization trends.
  • Revenue growth will likely moderate in the full-year medians following weaker volume trends in the second half of 2015.

 

Surge in absolute operating income and operating cash flow materially strengthened margins

  • Following several years of little to no growth, median absolute operating income and operating cash flow grew significantly at 25 percent and 15 percent, respectively, in FY 2015 preliminary medians over FY 2014, driven to a large extent by greater insurance coverage, good volume growth and solid expense controls.
  • Significant improvement in operating performance translated into strong 3.4 percent median operating margin and 10.3 percent median operating cash flow margin, a multi-year high for the not-for-profit hospital sector.
  • Margins are expected to soften in full-year medians following lower volumes in the latter part of 2015.
  • Longer term margins should quell given tightening reimbursement, increased pension expense and exhausted cost cutting measures.

 

Gains in unrestricted cash and investments improved liquidity and debt ratios

  • Median growth rate of unrestricted cash and investments decelerated to 7 percent compared to 11 percent in FY 2014, allowing for only a slight improvement in median cash on hand to 219 days from 217 days.
  • Median absolute total debt decreased in FY 2015 to $292 million from $297 million in FY 2014. Coupled with the growth in absolute cash, this helped lift the median unrestricted cash and investments-to-total debt to 161 percent from 157 percent in FY 2014.
  • Modest capital spending (median capital spending ratio of 1.1 times) and healthy equity market returns through mid- year 2015 support the continued rise in liquidity and decline in leverage.
  • Fiscal 2015 liquidity medians will taper given weaker investment market returns in the second half of the year.

 

Continued growth across all utilization measures

  • Total admissions, including observation stays and inpatient admissions, grew 3.4 percent in preliminary FY 2015 medians, after several years of relatively flat growth.
  • Increasing volumes were due to the settling legislative environment following several years under the ACA, which has promoted a considerable reduction in the uninsured population through Medicaid expansion and the exchanges. Gallup reports the uninsured rate at 11.9 percent in 2015, a notable reduction from 17.3 percent in 2013.
  • Demand trends should level off in the full year medians with many systems reporting weaker admissions in the second half of 2015 due to a lighter flu season.

 

To see a copy of the full report, please contact clockee@iprotean.com

 

Once again, iProtean thanks Moody’s Investors Service its permission to quote generously from its publication and for allowing us to share this information with our subscribers!

 

 

iProtean subscribers, the advanced Finance course, Population Health and Alternative Payment Models, featuring Marian Jennings and Dan Grauman, is in your library. Jennings and Grauman discuss the onset of alternative payment models within the context of population health management, and the levels of risk associated with these models.

 

For a complete list of iProtean courses, click here.

 

 

For more information about iProtean, click here. 

Proposed Rules on APMs Generate Concern from Policy Analysts

Physicians participating in many existing alternative payment models (APMs)—including most Medicare accountable care organizations (ACOs)—will not qualify to receive future Medicare pay increases under proposed rules issued by CMS last week.

 

The proposed rules would implement changes through the unified framework called the Quality Payment Program, which includes two paths:

  • The Merit-based Incentive Payment System (MIPS)
  • Advanced Alternative Payment Models

(Administration takes first step to implement legislation modernizing how Medicare pays physicians for quality, DHHS, April 27, 2016)

 

The proposed rules detailed how physicians will be paid under Medicare starting in 2019; it identified the APMs that will qualify participating physicians for bonus payments:

  • Comprehensive Primary Care Plus (CPC+) [see iProtean blog/newsletter April 20, 2016]
  • Next Generation ACO
  • Medicare Shared Savings Program (MSSP) Tracks 2 and 3
  • Oncology Care Model with two-sided risk
  • Comprehensive ESRD Care (for large dialysis organizations)

No bundled payment programs and Track 1 MSSP ACOs were included in the initial list, although CMS noted it will continue to add to the list of qualifying APMs.

 

Ninety-five percent of the 434 MSSP ACOs are in Track 1, and participating physicians would not qualify under the proposed rules, according to a CMS official. Additionally, physicians participating with about 800 hospitals in the newly launched Comprehensive Care for Joint Replacement (CJR) model also would not qualify for APM payments. (“Many Existing APMs Excluded Under Proposed Physician Pay Rules,” HFMA Weekly, April 29, 2016)

 

A Healthcare Financial Management Association (HFMA) official noted that a leading concern for physician practices “appears to be the relatively small number of APMs it designated as qualifying participating physicians for bonus payments.” (“Many Existing APMs Excluded Under Proposed Physician Pay Rules,” HFMA Weekly, April 29, 2016)

 

The Department of Health and Human Services’ news release noted that:

 

“Medicare clinicians who participate to a sufficient extent in Advanced Alternative Payment Models – would be exempt from [The Merit-based Incentive Payment System] MIPS reporting requirements and qualify for financial bonuses. These models include . . . Alternative Payment Models under which clinicians accept both risk and reward for providing coordinated, high-quality care.

 

“Many clinicians who participate to some extent in Alternative Payment Models may not meet the law’s requirements for sufficient participation in the most advanced models. The proposed rule is designed to provide these clinicians with financial rewards within MIPS, as well as to make it easy for clinicians to switch between the components of the Quality Payment Program based on what works best for them and their patients.”

(Administration takes first step to implement legislation modernizing how Medicare pays physicians for quality, DHHS, April 27, 2016)

 

The proposed rule established three criteria that APM participants will need to meet to satisfy MACRA’s nominal financial risk requirement:

  • Marginal risk of at least 30 percent
  • Minimal loss rate of no more than 4 percent
  • Total potential risk of at least 4 percent of expected expenditures

 

Health policy experts noted the proposed rules mark a significant shift from what was expected. The appeal of APMs for many physicians focused on the 5 percent annual bonus that provides a more generous inflation update through 2024 than is available through MIPS—potentially a “real financial difference,” said one expert.

 

Another noted that the APMs require providers to both forgo revenue through a lower volume of services while investing millions in redesigning care, representing a significant risk to providers. “Not including Track 1 ACOs and bundled payment programs [in the proposed rules] could lead physicians to leave APMs and return to fee-for-service payment,” the expert noted. (“Many Existing APMs Excluded Under Proposed Physician Pay Rules,” HFMA Weekly, April 29, 2016)

 

Comments on the proposed rule will be accepted through June 26.

 

To read the full news release from DHHS, click here.

 

 

iProtean subscribers, the advanced Finance course, Population Health and Alternative Payment Models, featuring Marian Jennings and Dan Grauman, is in your library. Jennings and Grauman discuss the onset of alternative payment models within the context of population health management, and the levels of risk associated with these models.

 

For a complete list of iProtean courses, click here.

 

 

For more information about iProtean, click here.