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Universal Health CEO talks about behavioral health, bundled payments


This Modern Healthcare article with Alan Miller, chairman and CEO of the big for-profit hospital chain Universal Health Services, is well worth reading. His comments on behavioral health we found particularly interesting.

“One thing that was very helpful is that three years ago, we managed to buy the second-largest {behavioral-health} company, Psychiatric Solutions, when some of its leaders tried to take the company private and the board said no. …We had about 100 hospitals and they had about 100 hospitals. By putting them together, we got about 200 hospitals, and our company became the dominant entity in the free-standing psych business. We consolidated a good number of the free-standing psychiatric hospitals in the country.”

He was asked if  the political talk about expanding and improving behavioral health and substance-abuse treatment is going to benefit  his company.

He answered:  “Definitely, definitely. We provide excellent care, and there seems to be more of a need now, a better focus. A study just came out on the increase in suicides in the U.S. You have people with bipolar disorders, schizophrenia and depression, which leads to these suicides. These people are not taking their lives lightly. They’re suffering greatly. So there should be more treatment open to them. There are great stresses in our society, and I think sometimes drugs and alcohol are a reaction to that. Families, at one time, used to be ashamed or would hide mental illness. Now we realize that mental ailments are a sickness like physical ailments that can be treated, and there’s nothing to be ashamed of.”

And he said his company is open to new markets. “Since we are pre-eminent in mental healthcare, a number of acute-care people are talking to us about joining them and providing that expertise to build or manage their capability in mental health, which they don’t feel secure in because it’s not their direct business. The future appears to be having a network that can take on financial risk and deal with the whole continuum of care, including mental health.”

Modern Healthcare asked him about the push for bundled payments to replace fee for service.

He answered:  “It’s slow. We’re involved in the demonstrations, but it’s not widespread. There’s a lot of conjecture that this ultimately might be where we’re going, that fee-for-service will go away, there’ll be bundled payments, and providers will take some risk.”


Behind the latest wave of mergers


Becker’s Hospital Review looks at the big mergers announced on April 28. Some of its observations:

1. “Some of the leading deals include Abbott’s proposed purchase of St. Jude Medical for $25 billion, a move intended to expand the former’s presence in the cardiovascular device sphere. To gain an edge in the prostate cancer treatment market, Sanofi made a bid to buy Medivation for about $9.3 billion. AbbVie signed a $5.8 billion deal to acquire Stemcentrxm to drive into oncology treatments….”

2. “The frenzy of deals is linked to new regulations, new payment models and the perceived need to keep pace with the record consolidation occurring within the industry — healthcare company executives see no option other than to scale up. …”

3. The introduction of mandatory bundled payment through the Comprehensive Care for Joint Replacement Model is one of the new regulations pushing healthcare companies to team up. With the goal of making healthcare less expensive and more efficient, organizations that solidify their positions as leading providers of a product or service will be the most attractive partners for hospitals and insurers in bundled deals, while smaller firms are more likely to be skipped over.”


3 principles for better bundled payments

In this HealthAffairs article,    Robert Dubois and Michael Ciarametaro present three principles to maximize benefits and minimize negative consequences of bundled payments:

  • “Bundled payments should be adequate for the care needed to achieve optimal patient outcomes. This includes setting an appropriate time frame, providing sufficient reimbursement for services and technology, and targeting a homogenous population.
  • “Evidence-based treatment variability should be incorporated into the bundled payment, including risk adjustment as needed and allowances for patient choice.
  • “Quality metrics should be used to ensure appropriate care in a bundled payment program. Quality metrics should encourage appropriate care regardless of health status and should have financial implications.”

Webinar: How to design bundled-payment systems for maximum clinical and financial success


In this audio/video webinar, “Physicians Design Success With Bundles,’’ George Beauregard, D.O., Chief Physician Executive of St. Luke’s Health Partners/Idaho, previously Chief Clinical Officer, Pinnacle Health, Harrisburg, Penn.; Jack Frankeny, M.D., CEO of the Orthopedic Institute of Pennsylvania, Harrisburg, and Bob Harrington, a director and senior adviser at Cambridge Management Group (, discuss how physicians and healthcare organizations can prosper in the bundled-payment world through collaboration-driven, physician-enabled change to meet new reimbursement challenges posed by public- and private-sector payers.

CMG has been heavily involved in assisting hospitals and physicians to redesign their bundled episodes of health services to hold and then grow market share.

This webinar demonstrates how physicians and hospitals can avoid being hurt in a race to the bottom of pricing in a newly commoditized market and how to meet the challenges posed to regional healthcare players by the entry of national brands, the shift to outpatient work and winner-take-all faceoffs.

The webinar shows how, among other things:

  • Physicians and hospitals can work together for common goals.
  • Orthopedic surgeons can play nice on a teamJ
  • Perfecting parts of bundles is not good enough.
  • Success depends on managing interactions among the parts of healthcare episodes.
  • Patient experience is at the center.
  • Effective physician leadership depends on activated colleagues.
  • To realign incentives and restore physicians’ enthusiasm.

Readers should push the arrow at the lower left to start the show, which we think you will enjoy.

Organizing data for bundled payments

This HealthAffairs piece says that the ”most effective step CMS could take toward helping hospitals prepare for bundled payments would be to make historical Medicare episode payment data for their patient populations available to each acute care hospital. The data could be organized into three levels, each progressively more detailed, to allow hospitals to select and analyze populations with high episode payments:

  1. “Total price-standardized and risk-adjusted payments for episodes, defined by clinical groupings of DRGs, compared to regional and national benchmarks.
  2. “Payments for categories of services in each of the diagnosis-related-group-defined episodes, including the index hospitalization and specific types of post-discharge services, compared to regional and national benchmarks.
  3. “Detailed claims within each service category of the episode, to facilitate the analysis of factors that contributed to higher payments and development of strategies (e.g., developing partnerships with key post-acute care providers) and interventions to improve performance.”

For different roads to bundled payments


Healthcare economist Jeffrey C.  Bauer, Ph.D., in a Hospitals & Health Networks  piece, pushes bundled payments but also urges flexibility in how they are implemented. Among his remarks:

“Indeed, the need to move away from volume-based payment is a rare area of general agreement between Republicans and Democrats in an era of relatively low economic growth. Regardless of how much Obamacare is weakened as a result of upcoming elections and Supreme Court decisions, it’s almost impossible for me to imagine any change in Congress that would increase appropriations for medical expenditures in the foreseeable future. Bundled payment is not the only way Congress can constrain spending on health care, but it is the one most likely to survive battles over budgets and regulations.”

“Leaders of hospitals and health networks should not be discouraged by the lack of a consistent definition of bundled payment. I actually find the variability encouraging because I strongly oppose one-size-fits-all approaches to solving the problems of our medical marketplace. …”

“Remarkable differences in their organization, leadership and operations prove there are several ways to provide world-class healthcare in the United States. I am consequently energized by the opportunity for innovative health systems to customize bundled payment to the unique characteristics of their own circumstances.”

”These bundled-payment mechanisms will all incorporate fixed payments for managing chronic diseases and caring for episodes of acute illness or injury, but they will be implemented in different ways. Successful efforts will take several years to evolve, and they will require multi-stakeholder partnerships between purchasers, payers and patients.”

“Leading the shift from fee-for-service to bundled payment would be a significant step in the better direction {for U.S. healthcare}. ”

Universal Health Services may quit CMS bundled-payments test


In a sign of the uncertain  viability of the bundled-payment  hopes   of the Centers for Medicare & Medicaid Services,  Universal Health Services, a hospital and behavioral-health company, may quit Medicare’s voluntary test of bundled payments “until some of the kinks are worked out,” Steve Filton, the company’s chief financial officer, told Modern Healthcare.

Universal Health Services’ enthusiasm for Medicare payment bundles has faded as the company has struggled to get useful data from federal officials, Mr.  Filton said.
The King of Prussia, Pa.-based company is trying to decide whether to withdrawn  all its 25 acute-care hospitals from Medicare’s Bundled Payments for Care Improvement Initiative, which as of last August included about about 2,100 acute-care hospitals, medical groups and other  healthcare facilities.

The Universal Health news came a month before Medicare is due to start its first mandatory test of bundled payments across 67 markets.

Modern Healthcare notes bundled-payment programs  “are central to the CMS’s push to increase the number of Medicare agreements that reward hospitals for quality improvement and better cost control.”’



Bundled-payment program may face post-acute partner shortage


For bundled payments for Medicare-financed knee and hip replacements , hospitals will need to recruit high-quality post-acute partners, and that may be difficult in some markets, reports Modern Healthcare.
The publication noted that “Medicare will give hundreds of hospitals more flexibility in letting patients recover from such procedures in brief nursing home stays, which are significantly less expensive than hospital care. But only nursing homes that rank average or better on national quality scores will qualify for a waiver. That will exclude 1 out of 3 nursing homes in the 67 chosen areas from getting referrals for services covered in the payment bundles, according to an analysis of the markets, and the latest scores on Medicare’s five-star quality ratings. In some areas, as many as 80 percent of nursing homes will be disqualified. ”


Many hospitals are cost-cutting in wrong places


Navigant Healthcare Managing Director Bruce Hallowell says in a recent interview in  RevCycleIntelligence  that too many hospitals and healthcare systems overlook where there is management duplication. He says that they may be focusing on the wrong places.

He  asserts, that, among other things:

When hospitals do cost reductions, they look at cost, not outcomes. This takes their bottom line away. There is a bad habit in healthcare of treating everybody like a Medicare patient, so Medicare pays on DRG (diagnosis-related group) and we don’t get paid based on things like length of stay. There’s a huge effort to cut length of stay. When I’m cutting cost, I need to cut costs in the appropriate area.”

He says the best overall way for hospitals to consider costs is: “You have to look at it from the holistic approach. What are the costs that are actually costing me something in my different payer levels? Is it a utilization or a variation? How do I get rid of variation and not worry about the number of days?”

His view of  changes from  new payment methodologies:

If you have two underperforming units at two different hospitals that are five miles apart, if we moved them to one facility, they would be a high-performing function, but we don’t want to make those tough decisions. The new payment methodologies will force the healthcare industry to make tough decisions, such as do I really need four OB units within ten miles of each other or do I need one? ACOs (Accountable Care Organizations) – basically capitation with no control – are starting to look at risk components, making sure we get continuing of care from beginning to end provides an idea of how cost is structured.”

On ICD-10’s effects on  hospitals’ revenue and reimbursement situations:

ICD-10 is going to have a bigger impact on hospitals from a revenue and cash standpoint than anything else that’s coming right now. I have to get past that before I can deal with ACOs  and bundled payments. ICD-10 is the biggest threat to any income. ” (For laypersons: ICD-10 is the 10th revision of the International Statistical Classification of Diseases and Related Health Problems.)

“People who are not taking it seriously understand it from a technical standpoint and not a process standpoint. The threat is impending change that has a direct impact on reimbursement and that’s where my cash and investment comes from….”


Providers seek new reimbursement tools


KPMG suggests that only 15 percent of healthcare providers’ finance departments have the “very sophisticated” capabilities needed to support capitation, bundled payments and quality-based payments that account for an ever-larger part of revenue, 

The findings also showed, reports Becker’s Hospital Review, that:

“1. Sixty-one percent of respondents said their finance departments are gathering tools and conducting analysis about getting their finance function ready for new payment models.”

“2. Thirteen percent of respondents described their finance function as ‘undeveloped’ for managing risk and accounting for these new payment mechanisms.”

“3. Many healthcare providers are well aware of the challenges of adapting to value-based payments…..”

“4. When asked how CMS’s objectives of linking 90 percent of reimbursements to value or quality-based measures by fiscal year 2018 influenced their organization the most, only 26 percent of those surveyed said their strategic approach to migrating and preparing for value-based payments has not changed.”

“5. Twenty percent  percent of survey respondents said they are measuring risk and accounting for it in their fees and another 23 percent are using data and analytics to measure and improve efficiency and quality. Other respondents said they are revamping finance/accounting functions or updating their contracts.”

“6. {P}redictive modeling (30 percent) and analytic tools (27 percent) were where organizations needed the most help, surpassing organizational culture, measuring clinical variability, showing the connection between quality and incentives and improving reporting transparency to stakeholders.”


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