The five-member National Labor Relations Board is sharply pro-labor, and could provide favorable rulings that will make it easier to organize next year. Expedited elections are "the biggest concern that employers should have," says one expert in labor and employee relations.
The uncertainty and shifting landscape in the healthcare industry continues to favor organized labor's efforts to unionize hospital workers, and there is no indication that the trend will slacken in 2014.
"We have seen a tremendous increase in union activity and petition activity since mid-summer," says James Trivisonno, president of Detroit-based IRI Consultants, which tracks organized labor activity in the healthcare sector for theAmerican Society of Healthcare Human Resources Administration.
"The catalyst is change as a result of the Affordable Care Act. Hospitals are scrambling for ways to reduce costs and improve processes. Those translate into change. People don't like change. Even if it doesn't result in cost reduction, the thinking is it's my job and the way I do it is changing. I don't understand it unless it is communicated properly. I liked the old way we were doing things even though it was inefficient, and I was used to it and that is the way we did it for 10 or 20 years. Unless properly implemented and executed, change can result in uncertainty. Uncertainty leads to poor quality and turnover or they get a union to promise that it won't happen again."
IRI's 2013 Labor Activity Report for ASHHRA found that:
36% of this year's survey participants reported having unionized employees. That's a 6% increase from the 2012 survey. Healthcare service workers and other non-professionals and nurses are the most commonly targeted employees.
Unions' success in organizing healthcare continued with more than 68% of representation elections resulting in union recognition in the first six months of 2013.
The Service Employees International Union (SEIU) won 55% of its representation elections in healthcare in the first six months of 2013. The union was involved in more elections than any other union, accounting for more than 40% of all representation elections held in healthcare in the first six months of 2013.
The American Federation of State, County and Municipal Employees (AFSCME) won 57% of its elections in healthcare in the first six months of 2013.
National Nurses United (NNU), which won 100% of its elections in the first six months of 2012, had limited election activity in the first six months of 2013. However, the union continues to grow through organizing and acquisitions of other nurse unions, and continues to push an active legislative agenda in many states and Washington, D.C.
The states with the highest number of representation elections filed to represent healthcare employees were (in order): Pennsylvania, California, New York, New Jersey and Ohio.
Trivisonno says the makeup of the five-member National Labor Relations Board and its advisory staff under President Barak Obama is also sharply pro-labor, and could provide favorable rulings that will make it easier to organize.
"Look for NLRB go back to the rulemaking and look for expedited elections," Trivisonno says. "That is the biggest concern that employers should have. When you get a petition you have to communicate as an employer the implications and consequences of unionization. If you only have 10 to 14 days to communicate your message to thousands of people, it is going to be extremely difficult, particularly because you can't shut the place down with healthcare. We have had situations with six months and barely prevailed. I don't know how we are going to do it in two weeks."
In addition, the NLRB will review dozens of decisions it made from 2008 to 2010 when the board contained only two members owing to Republican objections to Obama's candidates. The U.S. Supreme Court in Process Steel vs. the NLRB in 2010 ruled that the two-member NLRB did not have the authority to decide cases, so many of those cases will be reviewed again by the five-member board.
With the current pro-labor makeup on the full board, Trivisonno says "there are a bunch of cases lined up that they are waiting to hear and they will overturn previously decided cases and change the way the pendulum swings."
While much of what happens at the federal level is beyond the control of most hospital executives and administrators, Trivisonno says steps can be taken to deflect union organizing efforts. It starts with being proactive and communicating your hospital's stance on organized labor and why you oppose it.
"You have to assume that any time you implement any change or cost reduction you are also creating uncertainty," he says. "Unfortunately a lot of employers wait until that change is about to occur before they communicate with employees. You have to explain it well in advance through business literacy what the environment is and where you are in the marketplace. It is about being proactive in communication and then creating a compelling case for why you have to make the changes you do."
Trivisonno says unionization efforts are rarely about wages and hours.
"The union turns it into treatment and respect," he says. "They haven't treated you properly. They don't respect you enough to give you a pension that is going to support you when you retire. That is how they flip it. They turn it from a rational issue to an emotional issue and that is in their wheelhouse. Without the emotion the union's got nothing."
He says unionization drives fall short when they run up against hospitals that have spent years building trust and communication between leadership and staff.
"Create a culture where people say 'Hey, I'm good. My problems are being solved. They're listening to me.'You can't do that overnight," he says. "The union messages sort of clang rather than ring true – to use a bell analogy – when you have a situation where someone says 'that doesn't sound right. I know this guy. He wouldn't break that way.' So for those organizations that try to suddenly overnight create this communication mechanism and engagement mechanism it becomes much more difficult."
With all the change occurring in healthcare, Trivisonno says hospital leadership should just assume that at some point they will face some sort of organizing effort.
"Be prepared. Make sure that your management team is ready because the unions are not backing off. There are three more years with this administration in Washington and now that they have a full board complement they are coming," he says.
"Most employers' positions are very rational. Talk about it from orientation all the way through and make sure your managers have the skills, because this is a subject that people often have different opinions on. Managers don't like walking into a room where there could be conflict. So having them comfortable with the issue and seeing that they have their little elevator speech about the organization's position on unions is essential."
"You should be talking proactively with your staff about your positions on unions. People are afraid of talking about the 'U' word. The thinking is that if we talk about unions we will stimulate union activity. Wrong! It's like talking to your children about drugs and sex. You have to get out there and get ahead of it."
Most of the states that are rejecting or noncommittal on Medicaid expansion also rank near the bottom in population health in an annual survey. Conversely, the residents in many of the states that have embraced the expansion are among the nation's healthiest. America's Health Rankings for more than 20 years has ranked state population health on measures that include diabetes, obesity, smoking, and physical activity. States at the bottom of the list include: No. 50, Mississippi; No. 48, Louisiana; No. 47, Alabama; No. 44, Oklahoma; No. 43, South Carolina; No. 42, Tennessee.
"It is amazing," says Sara R. Collins, vice president, healthcare coverage and access, at The Commonwealth Fund. " States that are not expanding have among the highest rates of diabetes and obesity among lower income families. These are people earning less than $25,000 a year. These are families, many of them are uninsured, who would significantly benefit from the insurance coverage provided by the Medicaid expansion if those states were to expand."
"These states also have among the highest rates of uninsured in the country. Texas has the highest rate of uninsured, or more uninsured as a percentage of the population than any other state. So, the taxpayers in the states are contributing to the cost of the Medicaid expansion. It's important that all states expand their programs not only so that their residence can benefit but so that they can get the benefit from the federal spending that is leaving their states in the form of tax revenues."
Citing bipartisan support in Congress, Ardis Dee Hoven, MD, president of the American Medical Association, believes a "doc fix," in the form of a total repeal of the sustainable growth rate funding formula for physicians, is imminent.
Ardis Dee Hoven, MD, President of the American Medical Association
After years of lobbying, the American Medical Association may be close to witnessing the repeal of the much maligned Sustainable Growth Rate funding formula for physicians. An amendment in the bipartisan budget deal that emerged this week in Congress calls for repealing the SGR permanently and creating a three-month long bridge to prevent the looming 24% cut to physician Medicare reimbursements.
AMA President Ardis Dee Hoven, MD, spoke with HealthLeaders Media on Wednesday about the AMA's latest efforts to repeal the SGR, and why it's different this time around. The following is an edited transcript.
HLM: The AMA has tried unsuccessfully for years to get repeal SGR. What's different this time?
ADH: This time the momentum and bipartisan bicameral support for repealing SGR getting us to a better place is well underway. The collaborative effort, the work that these committees have been doing in terms of listening to us and understanding and incorporating our recommendations into the proposed pieces of the legislation is important and we are appreciative. It started with the [House] Energy and Commerce Committee [which] came out with their bill in late July to get the ball rolling.
HLM: But why has the momentum finally shifted toward permanent repeal?
ADH: Everybody is tired of having to deal with this on an annual basis. The concept is destabilizing the Medicare program [and that] is something that most people and members of Congress just cannot tolerate. Then, for the first time, we saw a significant fiscal change around repealing the SGR.
We have paid something like $146 billion over the last ten years just patching it and now the Congressional Budget Office is marking this at about $116 billion to replace it. The numbers are getting better. It's the fiscally responsible thing to do and members of Congress understand this.
HLM: How will the repeal of SGR be funded?
ADH: The AMA and physician leadership have been talking about policy and what we think is in the best interests of patients and the Medicare program. We understand the fiscal issues. We understand the pressures that members of Congress are under right now and their fiscal responsibilities as they manage that. We are going to have to entrust that to them, knowing that this is going to be difficult for them. But I am convinced that they are going to do this. I am very optimistic about this and I am anxious to see it through.
HLM: What replaces the SGR?
ADH: What happens is a total repeal. It is my understanding that we will have about three years of payment updates. That is what is being proposed right now by the Ways and Means Committee—of about .5%. That will allow physician practices to stabilize and allow them to begin to move to new alternative payment models such as accountable care organizations, primary care medical homes, bundled payments, and other models of payment around delivery and have that period of transition to these new innovated models of care. That is what is going to replace SGR.
HLM: What should we look for in the coming days and weeks?
ADH: We know the mark ups are going to happen on Thursday. We are going to see the (House) Ways and Means and [Senate] Finance committee beginning to do their final evaluations of amendments and… giving us solid information as to what they are going to propose in their legislation.
HLM: How will we know that this thing is still on track in the coming days and weeks?
ADH: You will see evidence of it fairly soon. You are going to see bipartisan support for this. You are going to see support from the medical communities, [and ]the state and specialty societies as well. You are going to see some bipartisan support financially for how this is going to be managed. That's when we will know it's go on track.
HLM: Will any of this happen by the end of the year?
ADH: The cut of 24% that we would normally experience this year would go into effect on Jan. 1. We know that Ways and Means is proposing a bridge of three months, which is really a pathway to get us to repeal. We want them to get it correct and make sure that all the 'I's are dotted and the 'T's are crossed. We are very supportive of this bridge period to get us to the permanent repeal.
We know that during that bridge there will be a .5% payment update for the three months and then starting with the calendar year, the new proposal would go into place. Things are actually stabilized. The plans are in place. Members will go home for the holidays. They will return and continue to complete their work.
HLM: What are the biggest threats to the SGR repeal?
ADH: The threats are getting less and less as the days go by. From my perspective there aren't any significant threats out there at this point. The important thing is not just repealing SGR but getting the elements changed that we felt strongly about. We have already seen that happen with pieces around the quality reporting issues, the payment for care coordination services, and development and implementation of alternative payment models. These sorts of things we have already worked significantly through with Congress.
The big issue of late has been the payment updates over a period of years to stabilize Medicare, and the Ways and Means Committee announcement is that they are going to propose a three-year stabilization period with payment updates, which is very good and supportive of where the AMA and physician leadership have been.
HLM: What should individual AMA members and other physicians do to help?
ADH: They need to stay tuned. They need to watch our website and our information which is going to be rapidly rolling out to them about what is happening, what the plan is, what the process is, and what they need to be doing about it. Until we see the final language… they need to stay informed.
When we say it's time to encourage calling they need to do it. If they already have a strong relationship with their members of Congress they should be on the phone or electronically talking to them about the need to repeal SGR permanently and to advocate for the changes we are recommending to Congress.
Because of medical liability concerns, federally qualified health centers have been mostly unable to tap into the good will of local clinicians who want to volunteer their medical services. Pending legislation may turn that around.
The nation's 1,200 health centers and the approximately 22 million patients they serve may soon benefit from legislation under consideration in Washington, DC, that is so commonsensical and cost-effective that even the current incarnation of Congress, arguably the worst ever, probably won't screw it up.
Because of medical liability concerns, federally qualified health centers have been mostly unable to tap into the good will of local clinicians who want to volunteer their medical services. Staff clinicians at FQHCs fall under the Federal Torts Claim Act. Volunteer clinicians do not and the cost of medical liability insurance is prohibitively expensive.
The Family Health Care Accessibility Act of 2013 (H.R. 2703) would extend FTCA protections to all clinicians practicing in FQHCs. If the bill becomes law, it has the potential to provide immediate and substantive relief for FQHC clinicians while improving access to care for vulnerable populations.
More clinicians means more volume and maybe keeping the doors open a little longer at these clinics just as the nation is poised to expand the Medicaid roles and millions of Americans gain some sort of coverage through the health insurance exchanges.
A 2009 Government Accountability Office report found that only 7% of FQHCs reported using volunteers. In addition, supports of the bill say there is virtually no fiscal note attached to the legislation. The GAO estimated that nationally "an additional $6 million would be paid in claims and lawsuits from fiscal years 2009 through 2013 if FTCA coverage were expanded to FQHC volunteers. The Congressional Budget Office estimated that the expansion would result in claim and lawsuit costs of less than $500,000 in fiscal year 2009, $1 million in each of fiscal years 2010 and 2011, and $2 million in each of fiscal years 2012 and 2013."
The Family Health Care Accessibility Act could be funded from health centers' annual appropriations. Without the liability protections, the National Association of Community Health Centers and other supporters of the bill say that medical malpractice insurance for physician-volunteers at CHCs could cost as much as $100,000, reducing the number of professional healthcare volunteers at a time when health centers are expanding services and access to meet the growing needs of their
An earlier version of the bill in the 111th Congress passed the House 417-1 but bogged down as the session expired. According to an arcane govtrack.us formula, the newest version of the bill has only an 8% chance of clearing the House Energy and Commerce Health Subcommittee, where only 11% of bills emerged and only 3% were enacted in 2011–13.
However, the bill has broad bipartisan support, starting with sponsors, Rep. Tim Murphy, (R-PA), and Gene Green, (D-TX), and they're confident it will pass this session and become law. "The Family Health Care Accessibility Act is exactly the kind of bipartisan reform that Congress should pass so low-incomes families and children have access to quality affordable coverage," Murphy said in a media release touting the bill.
At a subcommittee hearing last month, Robert MtJoy, CEO of Cornerstone Care, Inc., a FQHC serving about 23,000 people in rural southwest Pennsylvania, testified that access to affordable primary care continues to be one of the most persistent challenges in healthcare.
"Research indicates that approximately 60 million Americans live in a community without access to a primary care provider. While health centers are engaged in many workforce development initiatives, one immediate solution to alleviate this workforce shortage is the use of volunteer providers," MtJoy told the subcommittee.
"By extending FTCA coverage to include volunteer providers, there will be more providers available to meet the needs of the millions of patients who still lack access to care. Recruitment and retention of healthcare providers is one of the greatest challenges I have. And unfortunately the looming critical shortage of primary care physicians will be more profoundly felt in rural areas like mine. We've got an aging physician population getting ready to retire and this bill allows us to take advantage of this valuable resource to assist us in addressing this shortage."
While this bill seems likely to pass, it won't hurt if healthcare clinicians and executives from across the nation contact their representatives in Congress to ensure that they intend to vote for it. In fact, anyone who supports improving access to primary care should encourage Congress to support The Family Health Care Accessibility Act.
Failure to comprehensively test the ICD-10 diagnostic coding system will dramatically increase the potential of catastrophic cash flow disruption for physicians practices, says the Medical Group Management Association.
Susan L. Turney, MD, President and Chief Executive Officer, MGMA-ACMPE
The October 2014 roll out of ICD-10 could become a fiasco of epic proportions unless the federal government mandates more rigorous "end-to-end" testing of the complex diagnostic coding system to ensure that it actually works, the Medical Group Management Association told the federal government this week.
In a letter Monday to Health and Human Services Secretary Kathleen Sebelius, MGMA President Susan L. Turney, MD, commended the government's decision to initiate testing of ICD-10. However, Turney called the planned "front-end" testing that determines if providers can file claims correctly "simply insufficient. We strongly urge that the agency undertake full end-to-end testing with physician practices as soon as possible."
"Failure to appropriately test ICD-10 could result in operational problems similar to what the department experienced with the rollout of healthcare.govand will dramatically increase the potential of catastrophic cash flow disruption for practices following the Oct. 1, 2014 transition date," Turney said in the letter.
"Complete end-to-end testing is critical for a number of reasons. First, this type of comprehensive testing permits software developers, such as those in the practice management system and electronic health record field, to ensure that software can be appropriately configured for physician practices."
"Second, end-to-end testing can identify critical problems well prior to the Oct. 1, 2014 compliance date and permit trading partners to institute the appropriate modifications to systems and/or workflow. Finally, end-to-end testing is the only practical method practices will have to accurately predict and respond to Medicare coding edits and fully understand the impact that ICD-10 will have on reimbursements."
Turney said that "end-to-end testing between trading partners is absolutely critical to measure operational predictability and readiness."
"In addition, commercial health plans traditionally take their direction on these types of operational issues directly from Medicare. With Medicare refusing to engage in end-to-end testing with their physician practice partners it is likely that many of these commercial plans will also not test," she said.
'A Little Hyperbole'
Turney noted that the healthcare industry was wracked by confusion with the transfer in January, 2012 to HIPAA Version 5010. She said that a failure to identify issues with ICD-10 "well before the compliance date will lead directly to a protracted industry implementation and significant disruption of cash flow for a large number of physician practices. With HIPAA Version 5010, more testing and better dissemination of the testing results could have averted many of the problems that practices, clearinghouses, health plans, and software vendors experienced prior to and immediately after their 'go live' dates."
Steve Sisko, an Arizona-based healthcare industry consultant, says that MGMA is exaggerating the effect of potential snafus in the ICD-10 rollout.
"I do believe the MGMA is trying a little hyperbole to leverage the current 'government can't get it right' fervor for their anti-ICD-10 agenda," Sisko said in an email exchange with HealthLeaders Media. "I think that providers have to be careful with making a big deal out of ICD-10 and playing it as something the payers will drop the ball on. My sense is that it's the providers who are lagging with their ICD-10 migration and conversion efforts. The providers tried this same approach when 5010 was hiccupping last year and was granted an enforcement delay."
"Personally I don't think the two efforts are comparable and while I suppose anything is possible, I don't think any issues associated with the ICD-10 rollout will be major or as concentrated in certain functional areas like the HIX rollouts. I do suspect there will be some problems – relatively minor – that will be blown out of proportion."
'Nobody Seems to Be Ready'
But Robert Tennant, a senior policy advisor at MGMA, says the comparison is apt. "What the exchanges showed us was that if you don't test and you just go live with something, you run the risk of problems. And ICD-10 is a massive list for the industry and for Medicare," Tennant says.
"There are a lot of moving parts here that have to flow together in order for this change to happen. Part of it is the practice management and electronic health records software vendors have to upgrade their products' clearinghouses. The vast majority of claims are submitted through clearinghouses and they are telling us they have not received the claim edits from the health plans, including Medicare, including the policies and procedures that wrap around these codes. We are all vectoring towards this October date and nobody seems to be ready, and that includes the government."
"ICD-10 is a better code set. We'd be the first to agree with that. But we have to ensure that the implementation process is done in a way that is not dramatically negative for physician practices. We are very concerned about the potential of productivity decreases from both clinicians and coders and also concerns about the cash flow disruption following the October date.
Tennant says he hopes the HIX rollout fiasco and the potential political fallout have made HHS more sensitive to concerns raised by healthcare providers.
"They are acutely aware that though the ICD-10 mandate was under President Bush's watch, this is going to be seen as an extension, rightly or wrongly, of President Obama's policies," he says. "It is incumbent upon CMS to take every step possible to ensure that the transition, if it goes forward, is a successful one. Right now the first thing they can do is begin to test."
Topping a list of recommendations, MGMA called on CMS to expand the existing Medicare front-end testing week in March 2014 to permit complete end-to-end testing with any willing physician practice.
"This testing should include return of the remittance advice to allow practices to clearly determine how ICD-10 will impact their reimbursement rates," Turney said. "If you are unable to provide testing services for all willing providers, we urge you to conduct end-to-end testing with a sufficient number and breadth of specialties to facilitate the identification of the most common claim adjudication issues."
Nearly two years after its entry into the Michigan market, for-profit LifePoint expands its footprint with deals in two rural communities.
LifePoint Hospitals has finalized affiliations with two rural hospitals in Michigan's Upper Peninsula, and the for-profit hospital company says it will continue to look for other provider partners as it builds a network in the remote region.
Leif Murphy, CFO and executive vice president at Brentwood, TN-based LifePoint
"We are actively working to build the network of providers in that market," says Leif Murphy, CFO and executive vice president at Brentwood, TN-based LifePoint. "Our strategy is to own and operate community hospitals, and most of our hospitals you will find in rural markets that look just like the Upper Peninsula. It is where we bring great value in terms of our operating model and the delivery of services that those communities really need."
Last week LifePoint announced that it would purchase Bell Hospital, a 25-bed critical access hospital in Ishpeming, MI, about 14 miles west of Marquette. In a separate deal, LifePoint said it would enter a "joint venture" with Portage Health, which includes a 36-bed community hospital and a 60-bed skilled nursing unit in Hancock, MI, about 100 miles northwest of Marquette.
The negotiations were announced earlier this year and both deals must be approved by Michigan's attorney general.
In 2012, Duke LifePoint, a joint venture between LifePoint and Duke University Health System, purchased the 315-bed Marquette General Hospital, which serves as a tertiary care hospital for the region.
"Our goal will be to make sure that Marquette is delivering a level of service that will ensure that Portage and Bell will send all of their referral business to Marquette, but Marquette will have to earn this," Murphy says. "Marquette is our tertiary hospital that provides those complex clinical services: heart, cancer, orthopedics. Portage and Bell are secondary hospitals that are not maintaining today some of those more tertiary service lines."
Murphy says Duke will not have a direct ownership interest at Bell and Portage, "but they will be involved in the quality and patient safety programs and the coordination and building of the network throughout the Upper Peninsula."
LifePoint's affiliation with Duke at Marquette General Hospital was an attractive selling point when negotiating with trustees at Bell and Portage. "They want to provide the absolute best care for their patients in their market," he says. "With the clinical expertise that Duke will bring to the tertiary hospital at Marquette when they are referring their patients into Marquette as a tertiary hospital, they will know they'll have Duke services and quality and safety programs all in play."
As part of the final acquisition agreement with Bell Hospital, LifePoint will make $5 million in capital investments to the critical access hospital over the next decade, including an improved IT infrastructure and equipment and facility upgrades. Bell also will have access to support and resources to help it recruit and retain physicians, enhance its clinical services to meet the changing needs of its community, and improve its operations.
In addition, proceeds from the sale will eliminate Bell's debt, leaving an additional $4 million that Bell plans to use to support community charities, LifePoint and Bell said in a joint media release.
"Bell Hospital looks forward to beginning this next chapter in the rich legacy of our hospital," Floyd Bounds, Bell Hospital CEO, said in prepared remarks. "We are excited for the months ahead and for the opportunities we will have to be a part of creating healthier communities across the U.P. with LifePoint. This is truly an exciting day for our hospital, physicians, employees, and patients."
Murphy says LifePoint is not overly concerned about suggestions that the federal government may reconsideror revoke the status of hundreds of critical access hospitals across the United States.
"It is one more analytical part of every puzzle," he says. "Whether or not the exceptions will continue will have no bearing on our commitments to the hospital."
In the deal with Portage, LifePoint will own 80% of the joint venture and Portage Health will retain a 20% ownership stake. Governance will be equally shared, and an eight-member board with equal representation from Portage and LifePoint will be established to ensure that the community has an active voice in Portage Health's future.
Over the next decade, LifePoint will invest $60 million in capital improvements at Portage, including upgrades for technology and equipment and improved facilities. The $40 million in proceeds from the deal and retained assets from Portage Health will support the retained businesses and create a locally governed charitable foundation, according to a joint media release.
"As we considered Portage Health's future, our board vetted a number of strategic partner options," Portage Board Chairman Steve Zutter said in prepared remarks. "This joint venture with LifePoint offered us a unique opportunity to share ownership of Portage Health and gain access to significant resources to grow and expand our services. We are excited for the future."
Allan Baumgarten, an analyst who writes regularly about the healthcare sector in Michigan and other states, provided a snapshot of the Upper Peninsula hospital market in an email exchange with HealthLeaders Media.
"There are about 12 hospitals in the UP, including several that are small, critical access hospitals. The Duke/LifePoint joint venture acquired Marquette General last year, which is by far the biggest hospital in the UP. The deals with Portage and Bell were first announced in February and March. I don't think there is much difference between describing the deals as full acquisitions or joint ventures. I suspect the JV converts to full LP ownership in a few years. Not sure who they see as competitors—some of the other small hospitals are owned by Aspirus, a Catholic system with its largest hospitals in Wausau, WI. The next closest large hospitals would be either in Petoskey, where the McLaren system from Flint has acquired the hospital, Munson in Traverse City, or maybe one of the Trinity/Mercy hospitals in Cadillac."
The volume and value of hospital mergers and acquisitions increased in the third quarter of 2013 when compared with the same period in 2012, although the fundamental reasons for the market consolidations are essentially the same, according to a PwC report. Healthcare sector churn is far from settled.
The volume and value of hospital mergers and acquisitions increased in the third quarter of 2013 when compared with the same period in 2012, although the fundamental reasons for the market consolidations are essentially the same, PricewaterhouseCoopers says in a new report (PDF).
The total number of hospital merger and acquisition transactions globally increased from 12 in Q3 2012 to 19 in Q3 2013, an increase of 58.3%. Conversely, for the first nine months of 2013, overall deal volume dropped 6.6%—from 60 in YTD12 to 56 in YTD13. Overall deal value increased significantly from $38 million in Q3 2012 to $12.3 billion in Q3 2013. This is the result of hospital system acquisitions valued at more than $1 billion in Q3 2013. Excluding those mega-deals, PWC says the remaining transactions were smaller and may not have disclosed deal value information based on these being private or not-for-profit transactions.
The merger and acquisition activity was led by Community Health Systems Inc.'s $7.6 billion acquisition of Health Management Associates and the completed merger in September of Scott & White Healthcare and Baylor Health Care Systems.
Dan Farrell, a partner at PwC, says uncertainties around the Patient Protection and Affordable Care Act continue to press consolidation in the healthcare market place: building economies of scale, capital needs, and improving market share. The PPACA creates ramifications for healthcare delivery and reimbursements and capital needs.
"I don't think much has changed in terms of the fundamentals from last year to this year. Everyone is bracing themselves for what they are predicting will be the changes around the Affordable Care Act," Farrell says. "Not too much certainty has been given through today, so people are still placing their bets on where they think things are going to fall out."
Farrell says the concerns of providers around concepts such as accountable care organizations lies not so much in whether or not the new value-based reimbursement model will work, but what optimal structure ultimately will take shape.
"There are two dynamics that everyone can agree on with ACOs and the impact of the ACA," he says. "One, you need to increase your scale because you are going to deal with a lot more at-risk contracts. So, where you have at-risk arrangements, scale can minimize the potential financial risk.
"A little more technically complex is the need to extend your continuum of care, specifically around hospitals and physician practices. Payers are looking at building out their continuum of what they control beyond the four walls of the hospital and into other areas such as home health, long-term care, and skilled nursing. So we see a lot of deals that are focused either around: one, increasing the scale or, two, extending the continuum of care."
While the value and volume of healthcare mergers and acquisitions will vary from quarter to quarter, Farrell says the underlying catalysts will remain in place for the foreseeable future.
"You see the same themes, which is health systems or large national players looking to find lower cost settings of care outside of the hospital," he says. "Once again, coming full circle you have people looking at taking at-risk contracts and accepting more of a population health view and where they do that they want to make sure they are capable of providing care in the lowest possible care setting."
The current healthcare sector churn is far from settled. "As long as there is still some significant uncertainty from the payer/provider perspective, you are going to have people placing their bets on the roulette table on where they think things will shake out," he says. "We had the technical glitches with the insurance exchange implementation, and the effectiveness and structure of the ACOs are still an undecided area. Many people are still considering where they think the sectors individually are going to head. We see transition activity that represents that uncertainty."
The 20 states rejecting Medicaid expansion are leaving billions of dollars in federal funds on the table, even as the taxpayers of those states pay for the expansion costs for states that accept the deal.
The 20 states that are rejecting Medicaid expansion under the Patient Protection and Affordable Care Act are leaving billions of dollars in federal funds on the table, even as the taxpayers of those states pay for the expansion costs for states that accept the deal, a new study from the Commonwealth Fund shows.
"In states that don't expand their Medicaid programs the people in their state who are below 100% of poverty will not be eligible for new options for health insurance under the ACA," says Sara Collins, vice president, healthcare, at the Commonwealth Fund. "Taxpayers across the country are contributing to this program, but for the states that don't expand their programs it means that they are not getting those benefits that the residents in other states are getting. There is both a healthcare loss for individuals who aren't eligible for any of the new options under the law and there is a significant economic loss for states that don't move forward."
The study—How States Stand to Gain or Lose Federal Funds by Opting In or Out of the Medicaid Expansion—examines federal taxes paid by state residents. States with the highest net losses include Texas, which will see a net loss of $9.2 billion in 2022; Florida, which will lose $5 billion; Georgia, which will lose $2.9 billion, and Virginia, which will lose $2.8 billion.
The study is the first to calculate the net cost to taxpayers in states turning down Medicaid expansion. Using data from the Urban Institute projecting Medicaid enrollment and spending under the law in the year 2022, researchers estimated the effects of states' decisions about whether to accept the health reform law's expansion of the Medicaid program to residents with incomes at or below 138% of the federal poverty level ($32,499 for a family of four).
The expansion became voluntary for states after the U.S. Supreme Court's 2012 ruling. Medicaid is mostly funded by the federal government, which pays 100% of the expansion costs through 2016. The federal contribution will be reduced to 90% by 2020, where it will remain after that.
The Commonwealth Fund study estimates that if all states expanded Medicaid under the law, as many as 21.3 million people would gain coverage by 2022. In addition to improving access to care and financial security for the newly insured, healthcare providers in states would benefit from reduced uncompensated care costs, the study suggests.
Collins says the study may actually be low-balling the costs to residents of states that reject the Medicaid expansion, because it does not factor in the value of cost-shifting as a hidden tax to pay for uncompensated care. "It actually is an underestimate in some ways because local tax dollars finance uncompensated care at hospitals," she says. "To the extent that those federal dollars would replace that, those local expenditures that local taxpayers are still financing would otherwise be covered were people to have health insurance coverage."
Collins says there are signs that some states are beginning to reconsider their rejection of Medicaid expansion, now that they face the loss of billions of dollars in federal aid.
"Over time, states are going to look at the costs both in terms of lost health insurance coverage for residents but also the significant economic impact on their states and on their safety net hospitals, who will continue to have to serve people who are uninsured even though there is federal funding available for them," she says. "The argument and rationale for expanding Medicaid is pretty strong on multiple counts. We may see a similar trend that we saw in the original Medicaid program, that all states eventually participated in the program just as they did eventually with the Children's Health Insurance Program."
Robert Bosl, MD, has for the past 33 years served about 2,500 patients around the town of Starbuck, MN. This annual award recognizes what is right in rural healthcare delivery, but it also inadvertently shows us much of what is wrong.
Robert Bosl, MD
Since 1992 the physician staffing company Staff Care has honored a Country Doctor of the Year. The award is given to one physician each year, but it could easily be awarded to thousands of dedicated physicians serving rural America.
The award recognizes what is right in rural healthcare delivery. It also inadvertently shows us much of what is wrong.
On the one hand, the Country Doctor of the Year personifies the self-sacrifice of rural physicians. Many of the winners are in their 50s or older and have spend their entire careers serving generations of neighbors in small communities, often working 50 or 60 hours a week or more, in addition to on-call duties.
And that's the problem. Rural healthcare delivery has placed a staggering burden on these physicians, even if they aren't complaining about it. Many haven't had a vacation in years. It speaks volumes that the grand prize for winning the award is a two-week vacation, during which time Staff Care will supply a temporary physician.
The Country Doctor of the Year winners I've interviewed over the years say they do what they do because they recognize the need—that if they don't provide healthcare, it won't get provided. That is a big part of what keeps them going. They genuinely love their work and they get great satisfaction from it. At the same time, many of these docs see themselves as relics and say they don't blame younger physicians for wanting a better life-work balance.
The 2013 Country Doctor of the Year winner is right out of central casting for the Hallmark Channel.
Robert Bosl, MD, a decorated combat medic during the Vietnam War, has for the past 33 years served about 2,500 patients around the town of Starbuck, MN, which he describes as a real-life Lake Wobegon. According to Staff Care, Bosl, 66, a family physician, gets up at 5 a.m. every day to round his patients at Stevens Community Medical Center 20 miles away. He is usually on call seven days a week, 24 hours a day and provides a range of care, from obstetrics to geriatrics, making house calls during winters in a car with over 200,000 miles.
When the Starbuck hospital shuttered in 2005, Bosl took out a personal loan on his house and invested his life savings to build a modern clinic so that Starbuck's citizens would continue to have local care.
Did you get that? It bears repeating. When the hospital closed, he built a clinic to provide care for Starbuck's citizens, many of whom are elderly and on Medicare.
"I am kind of a dinosaur. I am not a saint but I might be something of a martyr," he says with a chuckle. "I was on call over the Thanksgiving weekend. I delivered a baby. I did a D&C. I did a colonoscopy. I did an appendectomy. I saw all sorts of extra patients just by being on call. It is something that all needed to get done. After the weekend you take a deep breath and say, 'Oomph! There must have been a full moon out.' But you just go on and it's one patient at a time, and whatever needs to get done gets done."
Bosl takes great satisfaction and pride in his work, but he also understands that not every physician is cut out for it. Not only are the hours demanding, global changes in care delivery beyond physicians' control are making times even more challenging for rural providers.
"There are outside forces that really make it difficult to do what I have done," he says. "For somebody coming out of residency, they cannot anymore go to the bank and say, 'Hey, I am a doctor. Loan me all the money you got so I can start a clinic!' That doesn't work. Logistically it is hard and a lot of the younger guys and gals coming out don't have an interest in that any longer. All they want to do is practice medicine—and yes, they do look more at an 8-to-5 job than some of us old fogies."
To encourage young physicians to practice in rural America, Bosl says the first thing he'd tell them is that they don't have to be like him and expect to be on call 24/7. What's harder, he says, is conveying his enthusiasm for practicing medicine in a rural environment. "There is no profession that is more challenging. You never know what is behind door number two. The intellectual stimulation is always going to be there," he says. "I don't recall ever leaving an exam room and feeling that I had no impact on the patient, or feeling that I didn't enjoy the encounter. Yes, there are times when a patient can be difficult. … But to actually practice medicine one-on-one with a patient is so rewarding intellectually and emotionally."
"The long hours aren't going to burn us out. Seeing many, many patients isn't going to burn us out," he says. "The problems come in with governmental intervention or more often insurance company interventions that require physicians to waste time dealing with prior authorization or medication changes—a lot of things that physicians really have the expertise to make some of these decisions. To make them take the time out from actually seeing patients to convince somebody with much less training at an insurance company to switch a medication seems counterproductive."
Bosl says he expect to continue practicing medicine until he feels he no longer can. "Especially as I am aging, people start wondering about it. 'Doc, we know you aren't going to be around forever, but how long are you going to keep doing this?' I feel like until my mad cow disease or old timer's disease kicks in and I can still do a good job, I will stick with it. When the day comes that I feel like I am losing something, that I am not as sharp as I used to be, then I will need to back off."
Bosl says he has no regrets about his chosen career, despite what others in healthcare might think.
"The prestige sometimes is fascinating. Sometimes the family doc is looked down upon as low man on the totem pole who maybe wasn't smart enough to become a neurosurgeon," he says. "Personally it doesn't bother me. I wouldn't want to be a neurosurgeon. Operating on the brain all day would become pretty boring. I wanted a new challenge every day. Financially, I do okay. I don't make what a radiologist or an orthopedist makes but I make an adequate living, and yes, I work a lot but I make time for myself. Wednesday nights I play men's league basketball. In the summer I try to get out golfing once a week. I live on a lake and I have a boat. Life is good. Every day is good."
Leaders of 250 safety net hospitals protest that the statutory cuts to Medicaid disproportionate share hospital funding—more than $18 billion through 2019—are unjustifiable since about half the states have rejected Medicaid coverage expansion.
The nation's safety net hospitals this week launched another long-shot bid to halt "crippling" disproportionate share payments.
In a letter Monday to House and Senate leaders, 102 executives representing 250 safety net hospitals across the nation protested that the statutory cuts to Medicaid disproportionate share hospital funding—more than $18 billion through 2019—"simply cannot be justified," now that about half the states have rejected Medicaid coverage expansion.
The safety net executives, members of the America's Essential Hospitals organization, reminded Congress that when the Patient Protection and Affordable Care Act was written, lawmakers assumed that a full national expansion of Medicaid would reduce the need for DSH funding. The U.S. Supreme Court upset that balance by allowing states to opt out of expansion.
"Nationwide, hospitals provide more than $40 billion in uncompensated and under-compensated care each year. Medicaid DSH is a lifeline of support that helps to offset just some of that cost," the hospital executives said in the letter to the chairs and ranking members of the Senate Finance and House Energy and Commerce committees. Now, the executives said, there is "no connection between the cuts and the number of uninsured or amount of uncompensated care across the country."
Jim Nathan, CEO at Lee Memorial Health System
In addition to providing access to care for vulnerable and poor people, the safety net executives said Medicaid DSH paymentsalso allow "our hospitals to provide services that are vital to our communities, including top-level trauma care, burn care, and neonatal intensive care. If these crippling cuts are not stopped, our hospitals will be forced to curtail essential services, ultimately limiting access to care and cutting jobs."
Jim Nathan, CEO at Lee Memorial Health System in Fort Myers, FL, and one of the executives who signed the letter, says DSH payment cuts are just one funding reduction that will hurt the mission of safety net hospitals and other not-for-profit providers.
"It's the accumulation or the cumulative effect of all the cuts coming from every direction and DSH payments are just one of them," Nathan told HealthLeaders Media.
He estimates that Lee Memorial, which operates five hospitals with a total of 1,423 beds, will lose about $50 million a year in various cuts from sources that include DSH reductions and sequester-mandated cuts to Medicare.
"People say, 'What services are you going to cut?' The reality is it is not so much cutting services. It is slowing the train down on providing services," Nathan says. "That would mean longer delays in the emergency department. It means less staffing. It means facilities getting older. It means in a growth area like ours not having sufficient beds to keep up with the growth. It means not being able to do as much for outreach that we would like to do for prevention. It means not having the funds available to make the changes to value-based purchasing at the pace that we would like to make."
Florida's legislature has rejected the Medicaid expansion dollars and Nathan says there is nothing to indicate that state lawmakers will change their minds anytime soon.
"So much of those cuts that we are expecting to see happen were supposed to be repackaged in dollars that would be sent back to Florida for the insurance expansion. Some of our legislators have said to me, 'You are foolish to think the federal government would do that,' and I say, 'Wait a minute. The federal government is doing what they said they would do. It's the Florida Legislature that is not accepting the money to come back.'"
"Here we are the state with the second-highest percentage of uninsured in the nation and we are thumbing our nose at the federal government trying to help not only these poor people but also to help everybody because we shift that cost to the insured. It is not free to the shrinking population of commercially insured patients. We are destroying employer-sponsored health insurance with this massive hidden tax to care for the uninsured."
Nathan concedes that a plea to Congress or the federal government to save DSH payments will likely be denied, especially when the requests come from hospital executives in states that rejected the Medicaid expansion.
"It is a legitimate question of the feds to ask, 'Why should we do anything for Florida when you haven't done anything for yourself? We have a great program for you,'" he says. "We are getting almost no response from our own legislators. They don't want to talk about it either. But we really don't have much choice but to raise the issue."
"The other question is if Florida is not going to play in the Medicaid expansion, is there some other creative way that we can leverage those dollars back to the state—because they're really Florida dollars?," he says. "I believe we are in the best position right now that we may ever be in to negotiate a deal with the feds. They want us to be successful. They have already left the door open to do something outside of traditional Medicaid, where you might be able to use the money to buy insurance for these people. That is a good thing."
Nathan believes that 2014 will be a challenging but manageable year at Lee Memorial because the health system has spent the last three years trimming about $125 million in various costs. The impact of DSH cuts will be felt in the years after.
"In 2015 and 2016, it starts to become very a big wild card for us with the changes in insurance and the shift to value-based reimbursements and the big insurance companies needing to do something dramatically different because of the laws they are under," he says. "The unknowns of the exchanges, the unknowns of the expansion, shifting all of Florida to Medicaid managed care virtually overnight—even though we haven't proven yet that it works—will make 2015 and 2016 really major transition years. It is not going to happen like a light bulb on and off instantly, but it could be pretty rapid because three years is really no time when you put it in that context."
