CMS Publishes Hospital-Specific Medicare Charge Data for 100 Common Procedures

CMS has released data showing that U.S. hospitals charge widely varying amounts for the same services, and also illustrating the significant variation in how much Medicare pays for those services. The database includes hospital charges for 100 most frequently billed discharges by the more than 3,000 hospitals reimbursed under the inpatient prospective payment system. The numbers reflect $66.7 billion in Medicare spending during fiscal 2011 and represent 7 million discharges.

Hospitals determine what they will charge for items and services provided to patients and these charges are the amount the hospital bills for an item or service. The Total Payment amount includes the MS-DRG amount, bill total per diem, beneficiary primary payer claim payment amount, beneficiary Part A coinsurance amount, beneficiary deductible amount, beneficiary blood deducible amount and DRG outlier amount.

One of the most concerning aspects of the data is the wide variation in what Medicare pays hospitals for treating the same conditions, which does not seem to be driven by the provider's status as a teaching hospital or higher capital costs of some facilities. CMS speculates that the reason for such disparity is the wide variations in the average morbidity of patients and local costs at different hospitals. Specifically, hospitals with sicker patients receive health status outlier payments and add-on payments based on the geographic location.

Providers Are Preparing for Bundled Payments

This article from Hospital & Health Networks provides a summary of the issues surrounding the implementation of a bundled payment program including insights from a variety of specific health markets. Among the considerations hospitals and other providers must analyze when designing and testing bundled payments are: alignment of financial incentives, the need for and importance of data, and the importance of recognizing bundled payments require culture change. Also included are references to resources to be used in preparing for bundled payments, including materials created by the Health Care Incentives Improvement Institute (HCI3), and organization closely aligned with NBCH.  In addition, Booz & Co. has published a white paper describing the consumer perspective on bundled payments.

Hospital Begins Publishing Detailed Patient Safety Information

According to the Boston Globe, Brigham and Women's Hospital has begun an ambitious effort to openly recount patient safety mistakes, and the improvements they led to, in a monthly online newsletter for its 16,000 employees. Brigham leaders started the publication to encourage staff to talk openly about their mistakes and propose solutions, and help make sure errors are not repeated.

While many hospitals post information on their websites about patient infections and falls, they rarely provide details of medical errors or candidly discuss with their entire staff how medical mistakes harmed patients. Executives fear the public will find out, sparking lawsuits and scaring off patients. This reluctance, patient safety advocates warn, may be hampering the push to reduce medical errors because there is not wide discussion of how mistakes happen and can be prevented.

The Brigham doesn’t make the newsletters readily available to the public — but it doesn’t hide them either; it gave the Globe all issues. The Brigham began publishing “Safety Matters” online in January 2011 on its employee intranet and will start distributing paper copies in staff lounges, conference rooms, and other gathering spots later this spring — a move that some hospital administrators initially opposed because they worried about scaring patients. Most issues tell a story of medical care gone awry through interviews with caregivers and often with patients, and describe the hospital’s response. Patients are not named, to protect their privacy. Caregivers also are anonymous because hospital leaders do not want to discourage them from reporting problems.

Treasury Department Publishes Proposed Rules on Community Health Needs Assessments for Charitable Hospitals

The Affordable Care Act requires charitable hospitals to take an active role in improving the health of the communities they serve. The Department of the Treasury has taken the next step in refining new policies already in place that hold charitable hospitals to a higher standard when it comes to addressing the health needs in their communities. The proposed rules add details on how hospitals should conduct community health needs assessments and define how the IRS will enforce any violations of the new standards.

The ACA requires charitable (tax-exempt) hospitals to:

• Limit charges. The hospital may not charge individuals eligible for financial assistance more for emergency or other medically necessary care than the amounts generally billed to patients with Medicare or private commercial insurance.

• Establish and Disclose Financial Assistance Policies. Each hospital must establish and widely disclose a financial assistance policy that clearly describes the eligibility criteria for financial assistance and the method for applying for financial assistance. 

• Abide by reasonable billing and collection requirements. A hospital is prohibited from engaging in certain collection methods (for example, sending a debt to a credit agency or garnishing wages) until it makes reasonable efforts to determine whether an individual is eligible for assistance under the hospital’s financial assistance policy. 

• Perform a community health needs assessment. Each charitable hospital must conduct and publish a community health needs assessment at least once every three years – and disclose annually on its tax form the steps it is taking to address the health needs identified in the assessment. 

Charitable hospitals are more than half of the nation’s hospitals. These hospitals receive many benefits, including tax-free earnings and receipt of tax-deductible contributions. Coalitions may want to consider looking to charitable hospitals, and the community health needs assessment programs as a potential funding source for coalition activities that are focused on population health improvement.

Hospital Value-Based Purchasing Conundrum

Investors Business Daily reports on an interesting juxtaposition that is resulting from two separate provisions of the ACA. The Hospital Value-Based Purchasing (HVBP) program in the ACA has identified hospitals that provide patients with the most value. The program rewards hospitals that meet certain quality standards with a small percentage increase in their Medicare payments. Those that fall short face small Medicare payment percentage cuts. Nine of the top 10 hospitals in the first round of HVBP were physician-owned. In fact, doctor-owned hospitals accounted for 48 of the 100 top spots, according to data from the Centers for Medicare and Medicaid Services. More than 3,400 hospitals were included in the program. However, a separate provision in the ACA places limits on existing physician-owned hospitals, and establishes significant barriers to the establishment of new physician-owned hospitals. 

According to the physician-owned hospitals, the ACA has impeded the expansion of the hospitals that may provide patients with the most value, hindering beneficiaries' access to high-quality care. Critics say that the HVBP program measures are dominated by heart care and orthopedic care, which is where physician-owned hospitals are likely to excel; most physician-owned hospitals tend to specialize in one field, such as cardiac or orthopedic surgery. Additionally, hospitals that are newer and smaller do better on patient satisfaction measures, and those differences make it more challenging for general, acute-care hospitals to score as well as their physician-owned counterparts.

While CMS will certainly be monitoring this in future years of the HVBP program, one lesson that emerges is that value-based purchasing programs must be carefully designed to balance the competing interests of all of those involved.

Modest Payment Redistribution Means That Hospital Quality Program Is Working, Not Failing

In this Health Affairs blog post, Blair Childs, Senior VP for Public Affairs at Premier, Inc., argues that CMS' Hospital Value Based Purchasing program is working as CMS intended, despite an article by Rachel Werner and R. Adams Dudley’s on Medicare’s hospital value-based purchasing (VBP) program in the September Health Affairs concluding that the program is likely to have only a small impact on hospital payments. While it is true that relatively little money is likely to be redistributed from bottom-performing hospitals to those at the top, this is no reason to conclude that the program is not working as intended. Quite the contrary, it’s performing exactly as intended so far.

This should come as no surprise. After all, the Centers for Medicare & Medicaid Services (CMS) has said all along it did not expect any hospital to attain or lose more than 1 percent of its net Medicare revenues when the program goes into effect on October 1, 2012.

But the limited dollars at risk for any individual hospital for both payment incentives and penalties is no reason to conclude that the program won’t achieve its desired goal. Hospital VBP was designed by lawmakers not as a penalty program but as a means to drive faster performance improvement by tying performance to payment.

The program measures hospitals on 12 processes of care, and their patients’ experience of care. CMS sets targets based on a very high performance level in a baseline period. If hospitals are able to catch up to those levels, then they will avoid a penalty. So, as more hospitals improve the care they provide to patients, less money will be generated by penalties to redistribute to high performers. In other words, if the amount of financial redistribution is small, the program is achieving its goal of driving higher performance on quality and outcomes.

This is exactly what is happening. Premier’s early estimates predicted a significantly greater redistribution than now appears likely. As the program has approached, more hospitals have been meeting the targets.

There are ample incentives to drive continuous improvement. Because the rest of the field is constantly innovating and improving, there will always be an upward pressure on hospitals. Moreover, new domains and measures will be added to the program each year, forcing hospitals to continuously improve across many conditions and facets of care.

Childs goes on to say that the Hospital VBP program with its "carrot and stick" approach is far preferable to CMS' Hospital Readmissions Reduction program, which is a payment penalty only, with no positive incentive or reward for performing well. As employers have known for years, VBP requires more than just penalties; successful VBP programs are those that can balance the interests of all involved to achieve desired outcomes, foremost of which is a healthier population.

California Attorney General Probes Provider Consolidation

The L.A. Times reports that a wave of consolidation among hospitals and physician groups has drawn scrutiny from the California attorney general's office amid concerns that these alliances could boost medical prices. Some hospital chains and insurance companies in the state said they have received civil subpoenas from the attorney general's office seeking information about market concentration among medical providers and the effect on healthcare pricing.

The Affordable Care Act creates strong incentives for medical providers to collaborate more on patient care in hopes that that will reduce costs in a fragmented industry. That has driven much of the acquisition activity across California and nationwide as hospitals and large medical groups merge. Some health care experts, however, worry that this consolidation will raise costs as competition lessens in certain markets. It could also cause setbacks in the small amount of progress gained thus far in achieving greater price/cost transparency.

Hospital Cuts Costs and Passes Savings on to Self-Pay Patients

Modern Healthcare reports that hospitals' glacier-like movement toward joining the rest of the business world in actually telling customers how much they'll have to pay for their services may have reached a milestone this past April in a small town in southeast Texas.

Cleveland (Texas) Regional Medical Center, which is about 40 miles north of Houston, took the unusual step of announcing in a news release that it had reduced costs for a large number of its services by 15% and was passing those savings along to its self-pay patients. The hospital announced it was cutting prices for the following divisions: cardiopulmonary, dietary, emergency and trauma, intensive care, labor and delivery, medical and surgical, obstetrics, operating room/ post anesthesia and respiratory. Fees associated with medical supplies also were cut.

Despite those changes, 55-bed Cleveland Regional, like most hospitals, is still far from what would be called a price-transparent operation. Cleveland Regional doesn't have a price list it can give to patients or offer that information on its website. But the mere act of acknowledging their prices to the public and sharply reducing them as well are unusual steps.

The idea to cut prices came from the hospital's business staff and was an internally focused collaborative effort. Nonetheless, the change makes Cleveland Regional a part of two broader trends: the move to provide more disclosure about patients' out-of-pocket costs, and efforts to give self-pay, uninsured patients a better deal than they have received historically.

The heightened transparency from providers is coming in part because of the growth of high-deductible health plans in which patients pay most, if not all, of the upfront costs of care until they meet a substantial deductible. That growth is producing increased price sensitivity for certain types of care. For example, imaging is an area where price sensitivity is becoming more prominent, but for acute inpatient care it's still rare.

Hospitals are working hard to cut expenses in anticipation of slower growth in reimbursement, tied in part to the elements of the Patient Protection and Affordable Care Act, but also because of the industry shift toward providing value-based care.
  

Hospitals as Employers Using Wellness Programs Find Benefits Beyond a Healthy Workforce

Hospitals are emphasizing employee health, in part to give them credibility when they pitch wellness programs to other companies. Hospital executives increasingly agree that employee wellness programs show a hospital can manage population health and can help the facility stand out as an employer in competitive markets. According to Becker's Hospital Review, employee health management is an opportunity for hospitals to put their money where their mouths are. When a large employer asks how a hospital plans to manage population health, a successful organization should be able to illustrate that answer by referring to its own workforce.

Somewhat ironically, some say the hospital industry is a bit behind the curve in its approach to employee health. Other large employers outside of the healthcare industry have aggressively managed the health and wellness of their employees for years. General Mills, Walt Disney Parks & Resorts and Perdue are just a few major corporations with employed CMOs in addition to robust wellness programs including fitness centers, healthy food options, on-site health screenings and annual runs and walks.

With the delivery system reforms coming in the near future, such as ACOs and medical homes, which require input and participation from all stakeholders in a community, employers experienced in wellness program administration and population health management have a unique opportunity to partner with hospitals, both as employers and as providers, to leverage the benefits of a healthy and productive workforce.

Quality Matters "Hospital at Home" Programs Improve Outcomes, Lower Costs But Face Resistance from Providers and Payers

Hospital at home programs that enable patients to receive acute care at home have proven effective in reducing complications while cutting the cost of care by 30 percent or more, leading to entrepreneurial efforts to promote their use. But widespread adoption of the model in the U.S. has been hampered by physicians’ concerns about patient safety, as well as legal risk, and by the reluctance of payers, including Medicare, to reimburse providers for delivering services in home settings. Read the full post...