Healthcare providers should consider multiple factors when launching price transparency initiatives.
Health system and hospital executives must several questions before starting a price transparency initiative, says Amy Floria, CFO at Goshen, Indiana-based Goshen Health.
"It is the value proposition. Why does it cost more? What am I getting? What's included? What do your patients want? What is the price elasticity in your market? How price-sensitive are procedures? What are your competitors providing?" she says.
"It's also about defensibility," says Neville Zar, senior vice president of revenue operations at Boston-based Steward Health Care.
"There is a lot of regulatory pressure around price transparency, and it is probably every other couple weeks that either a regulator or attorney general or someone calls up and says, 'We have a patient complaint,' or a patient advocacy group calls up and says, 'We have a patient complaint.' So we have invested over the last 18 months in the technology, in the processes, to create transparency from a defensibility perspective as well as a market equilibrium perspective," he says.
Goshen Health is pursuing a dual strategy as the organization develops price transparency capabilities, Floria says. "We are looking at it as a couple different strategies. One strategy relates to growing competitors in the retail space and commodity services. We want to make sure we are able to compete. Our patients are also requesting more information on the cost of care," she says.
Accurate Price Estimates Elusive
One of the primary challenges in establishing price transparency capabilities at health systems and hospitals is generating accurate price estimates for patients before they receive medical services.
"What we hear is the ability to be transparent is only as good as the tools utilized to provide price estimates. Many providers that we talk to are investing in upgrades to their estimator tools," says Melinda Ramsdell, senior vice president and treasury solutions manager, specialized industries-southeast region, at Charlotte, North Carolina-based Bank of America Merrill Lynch.
A crucial part of the price estimation challenge at health systems and hospitals is educating patients about their health insurance coverage, Ramsdell says.
"A lot of our provider clients set up and assume most of the liability for education. How realistic is that long term when all stakeholders—providers, payers, and employers—share in the education responsibility? It is reality that many consumers don't have clarity about their personal insurance plans."
Steward has invested significant resources to help patients understand their health insurance coverage, Zar says. "The estimate is only as good as the insurance you have. So before we even provided the estimate, the one thing we started doing is getting what we call the right liable payer—the right insurance plan," he says.
Steward has established a call center to help the health system rise to the cost estimation challenge, Zar says.
"We set up a call center in Quincy, Massachusetts, where we've got 50 people on the phone and they're calling patients prior to service and they're trying to educate the patients. They're trying to get the insurance right, they're trying to get the estimate right, and they try to get all the information right before patients come in. … But I think there is joint responsibility—there's responsibility of the employer as well as of the provider to be more forthright."
Health insurance carriers also have a role to play in the price estimation process, says Lynn Guillette, vice president of finance-payment innovation at Lebanon, New Hampshire-based Dartmouth-Hitchcock.
"The insurance company has an obligation, too. For the HR department at an aerospace company, they're really just trying to make sure that they're providing a benefit to their employees, because that's what the market demands. … So the insurance companies have an educational role to play."
Boston-based Steward Health Care, a for-profit health system, uses a multi-layered approach to engage patients as financial partners.
A primary goal of patient financial engagement efforts should be encouraging patients to view their medical bills as a top priority, says Neville Zar, senior vice president of revenue operations at Steward Health Care.
"There is a sense of prioritization because consumers prioritize debt. So the mortgage bill, it gets paid straight away. Then the credit card gets paid. Then the question becomes, 'Am I going to pay the hospital bill or am I going to pay my cable bill? I'm going to pay my cable bill.' So medical debt goes to the bottom of the pile. It's discretionary income being used on non-discretionary services," Zar says.
"We try to approach it so that the more patients can do up front, the better."
Consistent messaging is critically important to help ensure patients keep medical bills at the top of the pile, he says. "Scripting is important for the front-line staff. You have a script that's a consistent message to patients."
Communication efficiency is also a key factor in Steward's patient financial engagement strategy, Zar says. "So, you may have two touches in an outpatient procedure. For diagnostic imaging, it really should be one call, but most providers will have somebody who will call up and do the preregistration.
Somebody else will call and say, 'We don't have the referral, so call your doctor's office and get the referral.' Someone else may call and say you owe a $50 co-pay. If you can get one call that does it all, we believe you will have better patient satisfaction."
For patients who face significant financial challenges paying for a medical service, Steward has developed a hands-on approach that includes call center representatives to help patients and their physicians work through the problem, he says.
The Delay-defer Process
"Let's say a patient has a scheduled service and either they don't have coverage or they're underinsured… We have a process, what we call delay-defer, and we do this 48 hours prior to service. We will delay the service."
"But at the end of the day," Zar says, "that's the physician's decision. So the reps on the phone aren't making the decision to delay the further service, they're saying, 'We have got to take a time out. We have got to talk to your doctor because if you need that procedure, we're going to do it.'
"In any given week, we process thousands of transactions and have 10 to 15 patients on the delay-defer list, which means we can't verify coverage or they have high out-of-pocket costs that we know they can't meet. We'll delay the further procedure and we'll create an item list. We'll contact the physician and say, 'What do you want to do?'
"If the doctor says, 'Go ahead,' then we're going ahead and we know we're going to eat that cost. But if the physician says, 'We can delay this for 30 days,' then we go back to the patient and say we're going to delay this for 30 days until we figure out what your coverage needs are; and with most of those delays, the right outcome happens from just giving you more time to figure it out."
In Washington, open season has been declared on Obamacare, with a Democratic filibuster in the Senate likely to serve as the main limit on the culling.
The Republican-controlled Congress appears certain to continue its years-long effort to repeal President Obama's signature domestic policy initiative, and President-elect Trump's healthcare team is set to feature ardent Obamacare foes.
With last week's nomination of U.S. Rep. Tom Price, (R-GA), for Department of Health and Human Services secretary and Seema Verma, MPH, for administrator of the Centers for Medicare & Medicaid Services, the fate of the Patient Protection and Affordable Care Act (ACA) appears grim.
Three elements of the EPFA build a framework for scuttling the Obamacare insurance exchanges:
Age-adjusted tax credits that individuals would use to buy private insurance
Consumer-friendly rules for health savings accounts
Federal grants to finance state-operated high-risk pools that would help replace the ACA's preexisting condition provision.
Verma is the president, CEO, and founder of SVC Inc., an Indianapolis-based healthcare consultancy which has helped several states design waivers for Medicaid expansion under the PPACA.
Most notably, she helped design and implement Medicaid expansion waivers under two Indiana governors—Mitch Daniels' Healthy Indiana Plan (HIP) and now-Vice President-elect Mike Pence's HIP 2.0.
Under HIP 2.0, which was implemented in February 2015, many adult Medicaid enrollees are required to make monthly contributions from $1 to $27, the Indianapolis Star reported in January 2015.
The requirement mirrors provisions of Medicaid waivers that Verma helped design in Michigan and Iowa. "Indiana, like Iowa and Michigan, [has] similar themes of personal responsibility and encouraging healthy behaviors.
They all include some form of monthly contribution for those above poverty [level]," the Star reported.
Even politically popular components of the ACA could be ripe for repeal-and-replace efforts, says Merrill Matthews, PhD, resident scholar at the Irving, TX-based Institute for Policy Innovation (IPI).
Matthews, who also serves as vice chairman of the Texas Advisory Committee of the U.S. Commission on Civil Rights, characterizes the nonprofit as a "free-market think tank."
Price and other Republican lawmakers are eager to replace the pre-existing condition provision of the PPACA with high-risk pools because the Obamacare exchanges lack sufficient safeguards against beneficiary gaming, Matthews says. For example, he says payers were unsuccessful in lobbying Democratic lawmakers to include stiff penalties in the ACA for people who shun the individual mandate to buy health insurance.
"They were trying to convince the Democrats to make the penalty for not buying insurance equal to the cost of insurance—if that were the case, you would just buy the insurance. But I told them they were dreaming on that," Matthews says.
"Democrats have long believed that people should be able to apply for health insurance and get it regardless of medical condition."
Based on the pre-ACA experience with state-operated high-risk pools, relying on them as the safety-net insurance option for poor individuals who are uninsured or underinsured would likely require federal financing, Matthews says.
"There is a precedent for the federal government providing funding for high-risk pools. I suggest we go back to something like that, but there were no strings attached to those funds," he states.
"In some cases, high-risk pools worked really well, but some of them did not work so well. Florida had a high-risk pool but they did not fund it until the last minute. … If you come in with federal funding, I would argue that you have to have best practices to make sure all high-risk pools are working similarly to other high-risk pools across the country and are going to function well."
With Trump, Price and Verma all favoring federal block grants to the states as the primary financing mechanism for Medicaid, the ACA's approach to expanding the program to more low-income adults appears doomed, he says.
"I suspect Medicaid expansion is going out the window. If Congress does approve repeal legislation, I expect they will have a two-year grace period where the subsidies and Medicaid expansion wind down."
Although conservative lawmakers have been advocating Medicaid block grants for decades, the reform challenge is daunting.
"There is no clear model out there for how to block-grant the money to the states. For 25 years, Republican boilerplate has been to block-grant Medicaid to the states, but there is no outline for how that would work exactly," Matthews says.
Revenue cycle teams boost their effort to engage patients financially.
This article first appeared in the December 2016 issue of HealthLeaders magazine.
Laurie Hurwitz is on a mission to revolutionize revenue cycle operations at Gundersen Health System and encourage other healthcare providers to align the bill collection process with a patient-centric approach to medicine.
Over the past three years, Hurwitz, the executive director of revenue cycle at the La Crosse, Wisconsin-based health system, has helped several initiatives that are designed to improve the nonprofit organization's financial engagement capabilities with patients, including the creation of a 17-member financial counseling staff. These initiatives have increased the up-front collection bill payments from patients, but that gain for Gundersen pales in significance compared to achieving fundamental change in the financial relationship between patients and the healthcare system, Hurwitz says.
"The fact that we weren't asking for money before is far less troubling than the fact that we weren't telling patients that something was going to cost them."
"To me, this isn't about increasing point-of-service collections. This is about making sure our patients are fully informed with all of the information that they need to make critical decisions. The fact that we weren't asking for money before is far less troubling than the fact that we weren't telling patients that something was going to cost them before they had it done. That's a very uncomfortable thing for people in healthcare to think about because we say that we don't want a patient deciding against having care because of what something costs; but the truth is, patients have the right to make that decision, and it is our responsibility to see to it that they have the information to make the decision that is right for them and right for their families."
Gundersen's financial counselors are playing a crucial role for patients, she says. "It is also incumbent on us to make sure patients understand there are resources out there that we can help them find. Everything from Medicaid to our own internal financial assistance program. It's not fair for patients to go through some of the very challenging medical treatments that they have to go through and their journey to get well while being worried about what it's going to cost when the bill shows up. And that's what everybody does."
The practice of hiring staff members to play a financial engagement role with patients is so new that health systems and hospitals are trying to figure out the best title for the position. "We have gone back and forth on what the right term is. We call them financial counselors now, but we have talked about whether that is the right title or financial advocate is better," Hurwitz says.
As the Consumer Age dawns in the healthcare industry, revenue cycle teams at health systems and hospitals across the country are employing staff members to play a financial engagement role for patients who struggle to pay their bills, particularly for inpatient hospital services.
"Our best practice is to meet with all patients who have a financial responsibility, so that we can take a payment or establish a financial assistance plan as early as possible."
At St. Francis Hospital in Columbus, Georgia, hospital registration staff have been providing financial counseling services for years, says Linda Glass, director of patient access services. However, the 376-licensed-bed acute care facility created and staffed a full-time "benefits advisor" position in July to help patients navigate their financial obligations at any time during their hospital stay, she says.
"We train all registration staff in all areas except ER on what all the processes are, so they can assist patients at all times," Glass says of financial counseling at St. Francis. "We have one employee called a benefits advisor who goes to the floors to discuss more in-depth with inpatients, especially those coming from the ER. We do not feel like doing this in the ER is of much benefit due to the situation, timing, and flow of patients. We are set to see 70,000 patients through the ER this year, and 65% of admissions come from this area. The benefits advisor goes to the floors and can spend more time with patients in a less stressful area or situation like in the ER."
At St. Francis, revenue cycle staff members who provide financial counseling to patients need to know the financial resources that are available and the procedures to access those resources, but that is not the most important capability to succeed in the role, Glass says. "A good financial advisor is someone who understands and can explain insurance benefits and all the different programs the hospital has from financial assistance, payment plans, and the company we use to apply for Medicaid assistance. The most important piece is they must have good customer service skills and not get easily upset. To go in and discuss with patient or family while someone is in the hospital how much money they owe is not always a good experience. Some patients and family members will be upset that you are going to ask for money while their loved one is sick. … The advisors need to have the ability to explain that they are there to assist the patient so we can get any type of programs or assistance started early and not when all the bills start arriving after they get home."
Starting the financial-engagement process with patients as early as possible is a top priority for the St. Francis revenue cycle team because timeliness benefits both the patients and the hospital, Glass says. "A lot of patients want to hear what they might owe and are willing to work with us. Our best practice is to meet with all patients who have a financial responsibility, so that we can take a payment or establish a financial assistance plan as early as possible. If not, we will be months down the road before this is set up and payments start coming in."
At Gundersen, the best practices of financial counselors are focused on informing patients about the resources that are available to help pay for medical bills, Hurwitz says. "We do not provide financial advice to patients. We help explain insurance benefits to patients because most people do not understand them—we see that as our responsibility to educate them. We provide patients with information about resources that can help them with their financial obligations. We provide them with estimates, both the total charges and their out-of-pocket responsibility. So, we're providing them with resources and information; we are not providing them with advice."
The Gundersen financial counselors are expected to possess or develop a relatively advanced skill set, says Shannon Carey, manager of revenue cycle at the health system, which is centered on 325-licensed-bed Gundersen Lutheran Medical Center in La Crosse. "One of the most important things I look for is outstanding communication skills, verbally and in writing. I also look for good deescalation skills. ... After patients get their bills, the financial counselors need to be able to deescalate situations and give information to the patients to make sure they understand. We try to do more behavioral interviewing to get people with these kinds of exceptional skills."
The financial counselors also need specialized business skills to function effectively, Carey says. "They have to have good computer skills, too. We have multiple systems that they have to be fluent in for giving good service here. Mostly, they're in an office without a group around them, so they need to have a strong independent work ethic and be able to be independent thinkers. There's a lot of attention to detail and follow-up work. We can't always give answers to questions at the time the patient is present—we may have to wait for information from an insurance company or the county. They have to have a basic knowledge of coding and medical terminology; especially when they are trying to give patients estimates, they need to understand if there are missing codes or what might be entailed in a procedure that a patient could be billed for. When patients run into denials, the financial counselors have to have an understanding of insurance rules and coding rules. We don't require them to be coders, but they have to have a general understanding. And they have to be able to handle money and balance cash drawers because they are taking payments."
Convincing a health system's leadership team to embrace creating a financial counselor job title and finding suitable candidates to fill the role can be daunting, some financial leaders say.
"It's challenging, that's for sure," Hurwitz says. "Health systems have a lot of layers and processes. Whenever you try to do something new and different, it's very difficult to find out where the new thing fits into the old scheme. We're still trying to work our way through that. We've made progress; not as much as we would like. It's an enormous challenge—Shannon's description of a financial counselor is a superhero."
Not surprisingly, there are precious few healthcare financial-counseling superheroes looking for work in the job market, Carey says. "We have to train them when they come here. In addition to good computer knowledge, the skill that we look at mostly is the communication piece. Are they going to be a good face-to-face representative who is able to comfort people and get them through difficult times? That's something that we can't train necessarily. Other things, like being able to quote insurance, can be trained once a new financial counselor gets here."
Pinpointing the financial impact of Gundersen's financial counselors and the other patient financial-engagement initiatives that the health system has launched over the past three years is difficult, but Carey and Hurwitz are convinced the efforts are having a positive effect on the bottom line.
Part of the difficulty of gauging the bill-collection impact of Gundersen's financial counselors is the absence of a historical baseline because the health system only began asking patients for money up front when the counselor roles were filled three years ago, Carey says. "Part of what our counselors do is preregister all of our surgical patients, and they give patients an estimate of what the entire procedure will cost and the out-of-pocket costs; then we ask for that up front. Prior to having the financial counselor role, we didn't ask for that money up front at all, so any payments we are collecting before the service is provided are new and a benefit to the organization."
A key measure of the financial impact of the counselors and other patient financial-engagement initiatives at Gundersen is the cost to collect medical bills, Hurwitz says. "While we have added these services, we have not increased our cost to collect. We've done a lot of things that are patient-facing, but we have not increased our cost to collect; we have actually reduced it a little bit. It's not a whole lot different from what's been going on in manufacturing for years. If you can do things right from the beginning, you have a whole lot less work on the back end, and the work on the back end is more expensive. It's much harder to fix something than it is to prevent something."
Taking a page from Maryland's all-payer model, the Green Mountain State sets its sights on value-based transformation for all healthcare providers in the state.
The state of Vermont has received the regulatory green light from the Centers for Medicare & Medicaid Services (CMS) and state officials for its unprecedented Vermont All-Payer ACO Model.
With that go-ahead, the state will design and implement an all-payer accountable care organization that will serve the vast majority of residents in the Green Mountain State and include nearly every healthcare provider statewide.
With six performance years set to start January 1, the statewide initiative has lofty goals. The CMS webpage for the Vermont All-Payer ACO Model states:
By 2022, the "ACO scale targets" for the initiative are 70% of all insured residents in Vermont and 90% of all Medicare beneficiaries in the state receiving medical services through an ACO.
Under the initiative, annual per capita healthcare spending growth in Vermont is not supposed to exceed 3.5% for all major payers. For Medicare beneficiaries, spending growth is supposed to be held to 0.1% to 0.2% below the level of national Medicare spending growth.
The initiative is designed to take a leap forward from the Maryland All-Payer Model, which since 2014 has focused on shifting hospitals to a value-based care model. "[The Vermont model] will provide valuable insight for other opportunities for CMS to participate in state-driven all-payer payment and care delivery transformation efforts," the CMS webpage for the Vermont initiative states.
"[The Vermont model] will provide valuable insight for other opportunities for CMS to participate in state-driven all-payer payment and care delivery transformation efforts," the CMS webpage for the Vermont initiative states.
The Vermont Care Organization (VCO) will take the leading role in implementing the initiative.
In an op-ed piece that The Barre Montpelier Times Argus published Nov. 16, VCO Chair of the Board Thomas Huebner set the bar high for the Vermont All-Payer ACO Model:
"The speed at which things have moved reflects the commitment of CMS and the medical community to change [the] way healthcare is provided," he wrote. "The Vermont Care Organization (VCO) has been created to be… an ACO. In fact, we hope to be the single Accountable Care Organization for Vermont."
"As we talk with folks, we are being asked for some very basic information, often starting with the key question: Who are you guys? Who's really running your organization?
"The answer is—we are, your local healthcare providers. Our statewide network—in every Vermont county—is comprised of: doctors, nurses, primary care clinics, hospitals; agencies working in home health, mental healthcare and substance use treatment, and rehabilitation; plus community-based human service organizations and much more."
In addition to his VCO role, Huebner is president and CEO of Rutland Regional Medical Center, a 126-bed acute-care hospital based in Rutland, VT.
For physician practices, a potentially crucial element of the Vermont All-Payer ACO is that participation in the initiative qualifies physicians for a Medicare financial bonus under the Advanced Alternative Payment Model provision of MACRA, which is set for full implementation in 2018.
The timeline for implementation of the Vermont All-Payer ACO is similar to the MACRA implementation timeline.
Next year, the primary focus of MACRA implementation is prodding physicians to adopt the reporting requirements of Medicare's new payment system, which is replacing the widely reviled Sustainable Growth Rate formula.
For the Vermont All-Payer ACO model, 2017 has been designated "Performance Year 0" of the initiative, the CMS webpage says.
Performance Year 0 features $9.5 million in "start-up investment" from CMS to help the state's healthcare providers boost care coordination and collaboration, according to the webpage.
Next year's start-up funding will help physicians achieve "practice transformation in order to help Vermont achieve the statewide health outcomes, financial, and ACO scale targets" from Performance Year 1 through Performance Year 5, the CMS webpage states.
The current system could remain in place for 'a couple more years' as Republicans decide what to keep—possibly shared savings models and Medicare demonstration projects—and what to shed.
With ACA-averse Republican lawmakers in control of Congress, President-elect Trump's ability to honor his pledge to repeal President Obama's most ambitious domestic-policy initiative appears beyond doubt.
The scant details Trump has offered about his plans to replace the healthcare reform law, however, portend many suspenseful weeks ahead for healthcare industry leaders.
The president-elect's "Healthcare Reform" position paper features seven concrete proposals, five of which are directly related to the ACA:
"Eliminate the individual mandate. No person should be required to buy insurance unless he or she wants to."
"As long as the plan purchased complies with state requirements, any vendor ought to be able to offer insurance in any state."
"Allow individuals to fully deduct health insurance premium payments from their tax returns under the current tax system."
"Allow individuals to use Health Savings Accounts. Contributions into HSAs should be tax-free and should be allowed to accumulate."
"Block-grant Medicaid to the states. Nearly every state already offers benefits beyond what is required in the current Medicaid structure. The state governments know their people best and can manage the administration of Medicaid far better without federal overhead."
Devon Herrick, PhD, senior fellow at the Dallas-based National Center for Policy Analysis, gave his opinions on Trump's proposals to replace portions of the ACA. The transcript below has been lightly edited.
Herrick: Taken together, the Trump health proposal is a good start. But he needs to fill in the details on how to transition from where we are now to where we need to go.
The transition will take time. I expect the current system will be in place for a couple more years; since it would be very difficult to tell people—the 85% who get subsidies—in February that they are going to lose their subsidy but hopefully get a cheaper premium.
What might those details look like? Conservative health policy analysts will likely push for a tax credit to assist individuals purchasing their own coverage in a manner similar to how employees get tax exclusions. States will likely reinstate "guaranteed renewal" in place of "guaranteed issue."
Currently, some people are gaming the exchange system: Signing up after they have a health concern—say, a pregnancy—then dropping coverage after they are treated. That has to stop.
Guaranteed renewability would force people to maintain continuous coverage if they were to have coverage that is not underwritten. I [also] expect states will want to create high-risk pools.
HLM:Gauge the likely financial impact of Trump's proposals for health systems, hospitals, and physician practices.
Herrick: It is not yet clear to me how a Trump presidency will impact doctors and hospitals. Currently, doctors and especially hospitals are struggling in a market where many of their patients have high-deductible plans and are essentially paying much of their medical bills out of pocket.
One potential difference is that some patients who would otherwise have high-deductible coverage could be uninsured. But except for catastrophic care, it is hard to see how a doctor or hospital would be better off or worse off under those conditions.
HLM: The ACA is much more than the public insurance exchanges and Medicaid expansion. What would be the likely impact of repealing the ACA in total without making accommodations to replace elements of the law that underpin reforms such as accountable care organization models and bundled-payments programs?
Herrick: The shared savings models and demonstration projects under Medicare will likely remain one way or another. ACOs are an experiment that is bearing fruit, and I cannot imagine these going away.
New billing-code rules for primary care physicians who treat Medicare patients will increase payments for medical services that are rendered outside of face-to-face office visits.
New Medicare payment rules for physicians set to start on Jan. 1 are a positive development for primary care practices, the American Osteopathic Association says.
Several provisions of the 2017 Physician Fee Schedule final rule are designed to boost payments to primary care practices for non-face-to-face care management, care coordination and cognitive impairment services, according to a Centers for Medicare & Medicaid Services fact sheet released last week.
CMS released details about the 2017 PFS final rule on November 2.
"CMS is finalizing several revisions to the PFS billing code set to more accurately recognize the evolving work of primary care and other cognitive specialties to accommodate the changing needs of the Medicare patient population," the fact sheet says.
"Historically, care management and cognitive work has been 'bundled' into the evaluation and management visit codes used by all specialties. This has meant that payment for these services has been distributed equally among all specialties that report the visit codes, instead of being targeted toward practitioners who manage care and/or primarily provide cognitive services."
Laura Wooster, MPH, interim senior vice president for public policy at the AOA, told HealthLeaders last week that her organization is cautiously optimistic about the billing code changes in the 2017 PFS final rule.
"In terms of what they have done previously, this does feel a little different. We are pretty optimistic that this will be a step forward. The devil will still be in the details though. Some of these codes will be complicated to educate our members on so that they can take full advantage of them," she says.
Allowing primary care physicians to bill for more medical care services that are conducted outside of face-to-face visits with patients is a significant improvement of the PFS, Wooster says.
"What had happened previously was that by having services bundled into an evaluation and management visit code, it made those codes available to all specialties, which was a good thing when physicians had to do additional specialty work. But it also made it harder for primary care, which has a certain level of care beyond [face-to-face interactions with patients]."
She gave a hypothetical example of how the new codes will work. "With one of the codes for the non-face-to-face time, the physician will have to document an hour of time in order to be paid for that code. In practice, that hour could be reconciling the 20 different medications a patient is on to make sure two of them are not conflicting with each other and making the patient worse."
"That takes time. Some of it could be care coordination in terms of reaching out to other physicians and specialists that the patient is seeing, then doing follow-up and getting care plans to see whether there is any reconciling that needs to be done there. A lot of that back-end work is not part of the usual visit code."
The new PFS billing-code rule for cognitive-assessment reimbursement should help patients and give primary care practices a financial boost, Wooster says.
"One of the other codes that we were happy to see lets physicians to be paid for cognitive assessments. So, if physicians have elderly patients, they can take the time needed to do cognitive assessments to see whether patients have the early stages of senility or Alzheimer's or dementia, then physicians can get paid for taking the time to do those assessments.
"There is limited time in most visits—about 14 minutes—so the cognitive assessment code allows physicians to take the extra time and still stay in business."
The billing-code changes and other provisions of the 2017 PFS final rule are expected to increase Medicare payments to primary care practices about $140 million next year.
The shift to value-based care adds new investments, including outpatient facilities.
This article first appeared in the November 2016 issue of HealthLeaders magazine.
The shift to value-based delivery of medical services has boosted investment in outpatient capabilities, which has added a new element to the capital-project mix at health systems and hospitals.
"The ways of paying for capital projects are not changing all that much, but what we are buying is changing. There's a movement toward a different model, so we are investing in new capabilities, like patient-centered medical homes," says David Smith, senior vice president and CFO at Hollywood, Florida–based Memorial Healthcare System.
Two of the biggest capital projects underway at MHS are construction of outpatient facilities, Smith says. "We are expanding our geographic footprint. Our board has approved the building of two urgent care centers, on the east side and the west side of our district."
Operating in a state-chartered district, MHS features six acute-care safety-net hospitals. The health system posted patient service revenue at $1.8 billion for the fiscal year ending April 30, 2016.
MHS will wholly own the new urgent care centers, which will both be located in new buildings. However, the health system is only constructing one of the new structures. "The one we're building from the ground up is about 5,000 square feet, and the cost is $2.5 million, which includes equipping it," Smith says. "What drives up costs a lot in South Florida is we are in Hurricane Alley, and we have different codes here. You have to construct the buildings to be hurricane-resistant, which makes them a much more expensive proposition."
In addition to growing its market footprint, MHS recognizes the need to invest in outpatient facilities, he says. "There's already retail clinics. Urgent care centers are popping up all over the place in this market, and there are ambulatory care facilities, so the future of healthcare will include these shorter-stay patients who are no longer going to be in the hospital. That means hospitals will become at least somewhat more capital-intensive because they will be the place where the high-tech care is rendered. What we're seeing is not necessarily a lessening of the hospital side of capital projects, but more of an overall growth in capital investment because we need to account for the outpatient world as well."
Consumerism in value-based healthcare puts a premium on convenience, Smith says. "The whole idea is to make it easier on the patient. One of our affiliates has a partial ownership in a couple of ambulatory surgical facilities, and we see in the future where those will also become recovery care centers, where patients we need to have stay one night or even two nights can come in and not have to receive care in a hospital."
Local market conditions can dictate that a health system embrace a more traditional approach to capital projects, says Ben Spence, CFO of Lee Health, based in Fort Myers, Florida.
"Our investment in acute care is heavily weighted on the age of one of our facilities and the growth in our population. Lee Health serves Lee County, Florida, an area of rapid growth that also is twice the national average for population over age 65. Seniors have higher use rates for inpatient care and often have multiple chronic conditions. We also have an aging 400-plus-bed facility that was built in the 1960s and 1970s that needs to be replaced. We do feel that our efforts to improve health in our population will reduce inpatient use rates that will result in less demand for new beds, but we will still require hospital-bed expansion to replace and allow for modest inpatient growth," Spence says. "Other areas with slower growth, newer facilities, and younger populations are better situated to avoid future bed expansion."
Lee Health has a total of 1,426 licensed beds distributed across four acute-care hospitals, a rehabilitation hospital, and a children's hospital. In 2015, the health system posted patient service revenue of $1.4 billion.
While Lee Health is forecasting an ongoing need for capital projects on its hospital campuses, the health system has been increasing investment in outpatient facilities, Spence says. "During the past 10 years, we have allocated a growing share of our capital spending to outpatient services and will continue to do so going forward. We believe that expanding outpatient services will help keep patients out of the hospital and reduce our future capital needs for new bed towers."
For capital projects, planning is paramount
Growth in capital projects at health systems and hospitals makes planning for capital investments as important as ever, says R. Edward Howell, professor of public health sciences at the University of Virginia School of Medicine and former CEO of University of Virginia Medical Center in Charlottesville.
"Taking the longer-term approach creates the opportunity to make sure you are giving enough attention to infrastructure—electrical, plumbing, and HVAC—because healthcare institutions put a lot of drain on infrastructure," Howell says. "It's all too easy to say that we will spend on initiatives that make our physicians and board happy, or that add a lot of glitz to our patients, and forget the infrastructure. But the infrastructure is important. It doesn't take too many days of having your operating rooms closed because your HVAC crashed, or your imaging center closed because your electrical system failed, to realize just how important your infrastructure is to your organization."
For the fiscal year ending June 30, 2015, University of Virginia Medical Center posted patient services revenue of $1.4 billion. The teaching hospital has 584 licensed beds.
Howell says he prefers planning for capital projects over a span of 10–15 years, with a three-pronged approach. "First is taking an inventory of your physical plant; you should do it all the time. You get some sense of the age of your facilities. Second is the demand on your facilities—the percentage of utilization of your operating rooms. For example, if you have 80% utilization, you have operating capacity; if you have 95%, you don't have capacity.
"Third, look at capital from a financial perspective over the long term. You need to make some determinations on how much you are going to be spending on equipment and spend that amount consistently. For 12 years here, we spent between 8% and 9% of our operating budget on capital equipment and related renovations for capital equipment every year, just like clockwork. That gives you a nice steady stream of funded depreciation," Howell says.
Smith says MHS plans on a shorter time horizon for most capital projects, but the health system's five-year plan is updated on an annual basis. "We look out at a five-year horizon that includes what projects we feel we're going to need to do, either expansion of services, product lines that need to be enhanced, or major equipment purchases."
Financing recipes for capital projects
When health systems and hospitals are determining the form of financing for a capital project, size definitely matters.
MHS is financing the health system's two new urgent care centers with internal sources of funding, including operating revenue, Smith says, noting larger projects require at least some external financing. "We financed the urgent care centers through internal funds. We are very lucky that we are financially able to do that. For projects that are $3 million to $5 million, we would typically just finance those through operations. If we have a very large capital purchase, like when we built our children's hospital in 2011, we float a bond issue," he says. "There was also fundraising for the children's hospital—we had a huge capital campaign." The children's hospital cost more than $100 million to build, says Smith.
Howell says a wide range of options should be considered when selecting the optimal mix of financing for capital projects.
"You need to fund capital with all of the options available. First is operating margin. Most people believe that you need a minimum of 3% just to maintain your capital position. You should have as much as 5% operating margin in order to have adequate capital capacity," he says. "Combine that with funded depreciation: Make sure you fully fund your capital items—each and every one of them that qualifies for funded depreciation—and make sure you don't confiscate your funded depreciation for operating needs. You adequately invest both your reserves from operations and your funded depreciation, then maximize your interest revenue stream. You combine all of that with debt."
Nonprofit health systems and hospitals have multiple financing options for capital projects, according to Spence. "New hospitals or large-scale projects are often funded with bond issues that provide low-cost financing to health systems with good credit ratings and can spread the debt payments over 30 to 40 years at a variable or fixed rate. Smaller-scale projects can be funded through direct bank loans that also offer very attractive interest rates and terms for providers that are viewed as low-risk due to their long-term financial results and stability. Cash flow from operations is also a great source of funding for providers that have a strong balance sheet and cash position," he says.
For-profit healthcare providers have a keen sense of the financing market, Howell says. "The for-profits are acutely aware of capital markets, especially rates, and tend to go to the bond market when the rates are the best."
Nonprofit and for-profit organizations each have strengths and weaknesses in securing financing for capital projects, Smith says. "From a financing perspective, the for-profits have somewhat similar vehicles. They can't do tax-exempt debt like we can, but they have the opportunity to do equity financing that we do not have the ability to do. They can just sell common stock and raise funds that way to finance their capital needs."
It may be tempting for some healthcare executives to allow a large capital project to develop into a crisis that can serve as a rallying point for fundraising, but preparedness is a far safer strategy, Howell says. "The quick and easy is facing a capital crisis and turning to debt financing. But I have seen numerous hospitals that over-borrow. They are the ones that become the 'mergees' in a lot of mergers because they find they had little or very limited debt capacity."
Patient data informatics can improve clinical outcomes, but stakeholders will have to build a seamless flow of information and win over skeptical patients.
The digital revolution in the healthcare industry is spreading far beyond the boundaries of the hospital walls.
"People are using smart phones and they are using their Fitbits and other wearables such as the Apple Watch. So people are tracking the basics—how many calories they burn in a day and so forth," says Sanket Shah, a University of Illinois at Chicago adjunct professor in the school's Department of Health Informatics and Health Information Management.
"That activity has exploded over the past five or six years. We are seeing from these examples that there is a market for this technology, and people are willing to engage and interact in generating information that is critical to their health," Shah says.
Health systems, hospitals, physician practices, and healthcare payers are already seizing opportunities to realize the potential of home-based data collection technology, he says. Shah lists weight scales, pedometers, blood pressure cuffs, and glucose monitors as tools for targeting obesity, hypertension and other chronic conditions.
"Better clinical outcomes also generate better financial outcomes. You are avoiding unnecessary hospital admissions and visits to the ER because you have a pulse on the patient population."
Data collection through home-based technology is destined to become a key component of the financial mechanisms that support value-based care, Shah says.
"A lot of measures are tracked and leveraged to distribute incentives for not only health systems and other providers but also for patients. Common measures, such as diabetics' a1c levels, will be monitored across all government programs, all ACOs, and all pay-for-performance contracts.
"So if you are leveraging these [home-based] devices that are targeted at core chronic conditions, and the majority of financial measures are tied to these chronic conditions, there is opportunity," Shah says. "You can get a step ahead."
Deploying home-based data collection technology has tremendous potential to boost clinical outcomes and generate financial opportunities. However, there also are tremendous challenges, he says.
Having the proper strategic plan in place—across multiple areas—is crucial.
"First and foremost, you have to pilot programs. You have to identify a particular patient population and start small to see how your patient population is reacting to these medical tracking devices and what you are receiving in terms of data," he says.
"Ultimately, you learn, adapt and evolve to roll out to a larger scale and gain more efficiency and profits."
The adage that you have to spend money to make money applies to securing a return on investment from home-based data collection, Shah says.
"You have to have the right infrastructure. These devices have to be integrated not only to your own analytic environment—your claims warehouse and your [electronic medical record]—but also integrated with your online patient portals.
"That seamless flow of data is critical. If you connect those dots properly and lay out a plan, there are opportunities for financial gains."
However, building the robust analytics capabilities to harness the home-based data is a challenge.
"We are getting all this information from these devices, and it is going to take a lot of expertise to sift through it and to identify the salient information so you can make use of it," Shah says.
"You need to create algorithms and predictive modeling based on all of this data that is being collected."
There also is the challenge of helping more older patients to embrace new technology. "It is a challenge, but it is not an excuse… You have to have a willingness to work with the individual patient and to establish family support to get our older population more connected," he says.
"If you can show that there is a real benefit, then there is an opportunity to overcome the generational barrier."
A proposal to create a new track in the Medicare Shared Savings Program (MSSP) with limited downside risk is drawing guarded optimism from a pair of healthcare-provider trade associations.
As part of the 2017 final rule announced earlier this month for the Medicare Access & CHIP Reauthorization Act of 2015 (MACRA), federal officials signaled their intention to create MSSP Track 1+.
Under current regulations, MSSP Track 1 bears no downside risk for accountable care organizations (ACOs); MSSP Track 2 and Track 3 feature both upside and downside risk.
"It is a pretty big jump in terms of downside risk to Track 2; so it would be helpful, particularly to retain ACOs that are already in the program, to give them something in between Track 1 and Track 2," says Melissa Myers, JD, MPA, senior associate director of policy for the Chicago-based American Hospital Association.
CMS provided few details about MSSP Track 1+ in the 2017 MACRA final rule, with only one paragraph on one page devoted to the proposal in the 1,746-page document.
That paragraph indicates CMS is considering "developing and testing a "'Medicare ACO Track 1+ 'Model" starting for the 2018 performance year".
The Track 1+ Model would test a payment model that incorporates more limited downside risk than in Tracks 2 or 3. CMS envisions Track 1+ as an on-ramp to Tracks 2 or 3. The model could be open to:
Track 1 ACOs that are within their current agreement period
Initial applicants to the Shared Savings Program
Track 1 ACOs renewing their agreement that meet model-eligible criteria
However, until CMS provides more details about MSSP Track 1+, physicians, hospitals, and other ACO stakeholders will have to look to current rules for MSSP and the 2017 MACRA final rule for possible guidance, says Laura Wooster, MPH, interim senior vice president of public policy for the Chicago-based American Osteopathic Association (AOA).
In the 2017 MACRA final rule, CMS pegs the downside-risk cap associated with most Advanced Alternative Payment Models such as MSSP Track 2 and Track 3 at 3% of total-cost-of-care spending benchmarks.
"If the losses are staggering, you don't owe CMS all the money. It's capped. They don't want to put you out of business," Wooster says. "Reading between the lines, I am going to speculate that the Track 1+ ACO will have a total risk of 3%."
If CMS moves ahead with creating MSSP Track 1+, federal officials should do more than just make the downside risk lower than the levels set in Track 2 and Track 3, say Wooster and Myers.
"If they have any additional adjustments for physician ACOs or additional assistance, that would really help get this going and get more practices interested in getting involved, says Wooster.
"Right now, a lot of ACOs are viewed by physicians as big hospital things that are out of reach or unattainable"."
CMS has put several adjustments and assistance measures in place for shared-savings programs with downside risk, and MSSP Track 1+ should include similar measures, says Myers.
"CMS has made tools available for higher-risk tracks, such as waivers for Medicare payment rules, the geographic limitations on telehealth, and three-day inpatient stay requirement for skilled nursing facility coverage.
"We strongly urge CMS to make those tools available to all ACOs, not just ACOs that have a high level of downside risk"," Myers says.
