Hospitals Threatened by Insurers’ Growth Strategies

“Hospitals will face greater competition, risk of volume declines and margin erosion as the nation’s largest commercial health insurers aggressively pursue growth strategies that are aimed at lowering healthcare spending,” according to Moody’s Investors Service.

 

Insurers’ strategies include:

 

  • Acquisition of physician groups
  • Acquisition of non-acute care services
  • Tougher contract negotiations
  • Greater restrictions on member benefits

 

Moody’s analysts note that to some degree, insurers have engaged in these strategies in the past. But as the pace and magnitude increase, these initiatives will be increasingly disruptive to not-for-profit hospitals’ credit quality.

 

Moody’s provided the following detail:

 

  • Hospitals will be vulnerable to direct competition as insurers purchase providers. Over the last several months, health insurers have announced three significant deals that seek to purchase healthcare service providers. These transactions will result in shifting more care away from higher cost hospital settings. Two examples:
    • In the largest of the three deals, CVS Health plans to merge with Aetna Inc. Hospitals will face the risk that Aetna members will get their primary care services from CVS’s retail health clinics instead of hospital outpatient settings.
    • Optum, a division of UnitedHealth Group Incorporated and an active acquirer of physician groups, announced that it plans to buy DaVita Inc.’s medical group division. Optum’s moves will raise uncertainty for hospitals in markets where it owns physicians.

 

  • As Optum and health insurers attempt to move to value-based payment models that emphasize quality over quantity of care, hospitals will see even less volume. By owning physicians, Optum—working with its health insurance affiliate, UnitedHealthcare (UHC) and a number of other health plans—will be able to take greater control of premiums and expenses, including those related to hospital care. Hospitals would lose more business if Optum’s medical groups and its contracted health plans accelerate the shifting of patients out of the more expensive hospital setting. As a result, hospitals’ revenue and income would also be at further risk as insurers seek to add value by reducing healthcare spending.

 

  • Hospital revenues and margins will come under additional pressure as insurers are increasingly able to better flex negotiating power. When negotiating contracts, insurers will benefit from increased scale. At the same time, hospitals are becoming increasingly reliant on commercial payments to cover operating costs as governmental payers reduce rates. As insurers impose more restrictions on the types of care for which they will provide coverage, hospitals will be vulnerable to rising bad debt levels and fewer emergency room visits.

 

(From: “Not-for-profit and public healthcare – US: Hospitals face new threat from health insurers’ disruptive growth strategies,” Moody’s US Public Finance Weekly Credit Outlook, February 22, 2018)

 

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Recap of Hospital “Wins” in New Budget Deal

Although written about widely in the last week, let’s recap how hospitals benefit under the budget deal signed into law on February 9.

 

  • A two-year delay in cuts to Disproportionate Share Hospital payments
  • Medicare payment extensions for rural providers
  • Four additional years of funding for the Children’s Health Insurance Program
  • Opioid addiction funding
  • Repeal of the Independent Payment Advisory Board

 

In addition, various provisions in the budget address ACOs. For example,

 

  • Separate payments for ACO use of telehealth services, but only if the ACOs are in Medicare Shared Savings Program (MSSP) Track 2, Track 3, or future two-sided risk ACO models with prospective assignment
  • Beneficiaries assigned prospectively at the beginning of a performance year for MSSP ACOs
  • Beneficiaries allowed to choose to align with an MSSP ACO where their main primary care provider participates (but beneficiaries still retain the freedom to choose any provider)
  • ACO Beneficiary Incentive Program (see last week’s newsletter/blog)

 

. . . and EHRs and virtual care

 

  • CMS not required to tighten meaningful use standards for the Electronic Health Record Incentive Program over time
  • Beginning January 2019, stroke symptom patients can receive treatment through telehealth—geographic restriction eliminated

 

Rules and Regulations

 

The bill codifies CMS regulatory changes that aim to streamline and clarify rules for providers regarding compliance with the Stark Law. It also updated both the civil and criminal penalties for fraud and abuse in federal health programs.

 

Cuts

 

Offsets and cuts in the bill include:

 

  • Rescission of $985 million from the Medicaid Improvement Fund
  • Reduction in the 2019 Medicare Physician Fee Schedule update from 0.5 percent to 0.25 percent
  • Reduced acute care inpatient hospital payment when a beneficiary is discharged early to a hospice program
  • $1.35 billion in cuts over 10 years from the Prevention and Public Health Fund created by the ACA
  • Rescission of $220 million from the Medicare Improvement Fund

 

(Source: “Budget Deal Includes Big Wins for Hospitals,” HFMA Weekly, February 16, 2018)

 

 

The Board’s Role in Leading Through Transition, iProtean’s latest advanced Governance course, now appears in your library. It features Karma Bass and Marian Jennings on issues such as dealing with uncertainty, new elements for evaluating the CEO, prudent risk-taking, critical questions, recommended practices, destination metrics and changing over time.

 

 

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Budget Deal Establishes ACO “Beneficiary Incentive Program”

The budget deal passed late last week establishes the ACO “Beneficiary Incentive Program,” said by some to motivate beneficiaries to be more engaged in their care.

 

 

The program would allow ACOs to pay patients if they make primary-care appointments. The budget agreement also will allow beneficiaries to assign a physician in an ACO as their primary-care provider. (“Budget deal’s changes to Medicare ACO program encourage patient engagement,” Modern Healthcare, February 12, 2018)

 

 

Beneficiaries who receive services from Next Generation ACOs get a $25 check from CMS to Medicare patients who get an annual wellness visit. Called the Coordinated Care Reward, it is a precursor to the ACO Beneficiary Incentive Program.

 

 

The new program is voluntary and differs from the Coordinated Care Reward because the payment must come from the ACO. The payment can be up to $20. It is also limited to ACOs in two-sided risk tracks, suggesting that both Congress and CMS want ACOs to move to downside risk contracts.

 

 

The provision that allows beneficiaries to select a primary-care provider in an ACO will likely increase the opportunity for greater care coordination, according to an expert. An ACO will be able to better understand before the performance year begins which patients are in its population, offering more opportunities to engage with patients on prevention and wellness initiatives. (“Budget deal’s changes to Medicare ACO program encourage patient engagement,” Modern Healthcare, February 12, 2018)

 

 
The Board’s Role in Leading Through Transition, iProtean’s latest advanced Governance course, now appears in your library. It features Karma Bass and Marian Jennings on issues such as dealing with uncertainty, new elements for evaluating the CEO, prudent risk-taking, critical questions, recommended practices, destination metrics and changing over time.

 

 

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Survey: Physicians Doubt New Payment Models Will Contain Costs or Improve Quality

Getting physicians on board with value-based payment models does not necessarily mean they are convinced of the efficacy of these models, according to a recent survey by Leavitt Partners.

 

A summary of the survey results appears below:

 

  • Only 20 percent of physician respondents said either bundled payments or hospital-led ACOs would contain healthcare costs.
  • Significantly less than a majority of respondents said patient health improvements likely would result from bundled payments (19 percent), ACOs (29 percent) or episode-based payments (29 percent).
  • Pluralities of physicians said they were uncertain about the patient health benefits of ACOs (46 percent), bundled payments (48 percent), capitated payments (45 percent) and patient-centered medical homes (46 percent).
  • Majorities of physician respondents said they were uncertain about the health benefits of integrated delivery networks (56 percent), episode-based payments (55 percent) and global payments (58 percent).
  • Some physicians were aware that their employer is participating in value-based payment models but saw such participation in a negative light because it is different, affects how they are paid and is of questionable value to them.
  • More likely to improve outcomes, according to physicians in the survey, are physician pay-for-performance (40 percent) and patient-centered medical homes (40 percent).
  • More likely to contain costs are an increased focus on wellness and prevention (60 percent), improved management of mental health (56 percent) and better management of heavy utilizers of care (52 percent).
  • Only 41 percent of the physician respondents were at least somewhat familiar with MACRA.
  • 37 percent said some payment models such as capitated payments negatively affect patient health outcomes

 

Engaging Physicians 

 

Although a large number of hospitals, health systems and practices are involved in ACOs and bundled payments, few frontline physicians are aware of what those organizations are doing to participate and to improve results, the lead researcher at Leavitt Partners noted.

 

He added that frontline physicians are frequently uninformed about the practical effects of payment models or MACRA. Such unfamiliarity usually stems from an inability of organizations that operate such models to see the value in educating participating physicians about the benefits, and a lack of time on the part of physicians to receive such education.

 

Effective approaches to physician engagement include reaching out to all physicians—especially at smaller organizations—through a retreat or other type of group meeting. Such outreach allows organization leaders to discuss the reasons for participating in the model, the needed changes and the potential benefits with their physicians before the payment model even has launched, the researchers wrote.

 

“Such an approach usually instills at least a grudging willingness to experiment and eliminates outright negative attitudes,” the lead researcher noted.  (“Few Physicians Support Value-Based Models: Survey,” HFMA Weekly, February 2, 2018)

 

Another effective approach to engagement has focused on starting the model with a subset of clinicians who the organization believes are most amenable to moving toward value-based arrangements. That initial group would be included for the first few years, with the organization then publicizing the results and incorporating more physicians.

 

(Source: “Few Physicians Support Value-Based Models: Survey,” HFMA Weekly, February 2, 2018)

 

 

The Board’s Role in Leading Through Transition, iProtean’s latest advanced Governance course, now appears in your library. It features Karma Bass and Marian Jennings on issues such as dealing with uncertainty, new elements for evaluating the CEO, prudent risk-taking, critical questions, recommended practices, destination metrics and changing over time.

 

 

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