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Whither the hospital merger wave?

Herewith a review of the continuing wave of hospital mergers, which, of course, raises serious concerns about competition, or the lack thereof, and  thus huge systems’ pricing power.

Consider that just last week,  Tenet Healthcare announced the sale of three acute- care hospitals to HCA Holdings and Community Health Systems completed the sale of nine hospitals.

And as Healthcare Dive notes: “While some industry experts have posited actionable items to enhance competition, a flurry of regulatory actions and regional influences could increase consolidation even more, leading to even less competition.”

“Rising expenses and declining admissions alongside flattening reimbursements – as well as alternative care settings competing for the one-and-done low acuity patient visits – make for an unfortunate financial reality for some hospitals. Some have found it best to put up a ‘For Sale’ sign.”

“Healthcare and hospital prices will ascend to the level a market can take on. If a provider has a large monopoly in a market/region, prices can actually rise to offset rising expenses and declining patient volume since they have greater power at the negotiating table over insurers.”

Meanwhile, the publication said,  Martin Gaynor, Farzad Mostashari and Paul B. Ginsburg  recently advanced, in a Brookings Institution report, some suggestions on how to encourage competition in the industry, including, in Healthcare Dive’s shorthand:

  • “Increasing scrutiny on mergers.
  • “Stop paying more for the same outpatient services.
  • “Encouraging provider competition.
  • “Improving transparency.
  • “Ending anti-competitive practices, such as anti-tiering and anti-steering.
  • “Allowing lower-risk Medicare ACO contract options for independent provider groups.”

To read the Healthcare Dive report, please hit this link.

To read the Brookings report, please hit this link.

 


Some Fla. hospitals battle state’s bid to cut Medicaid reimbursement for outpatient care

 

Some hospitals across Florida have filed administrative challenges against the state over reimbursement rates for outpatient care of Medicaid beneficiaries.

Florida’s Agency for Health Care Administration proposed changes in 2016 to cut outpatient payment rates for care for  Medicaid beneficiaries. The hospitals assert that because the AHCA  exceeded its authority the proposed rule is invalid.

One of the hospitals challenging the proposed payment cut, Fort Myers-based Lee Health,  estimates that its Medicaid reimbursement will fall by $4.9 million if the proposed changes are implemented.

Others challenging the proposed reimbursement cut include hospitals owned by Dallas-based Tenet Healthcare and hospitals in Nashville, Tenn.-based HCA’s network.

To read a News-Press article on the dispute, please hit this link.


2 ex-Tenet units admit Medicaid fraud scheme

northfulton

North Fulton Hospital, in Georgia.

Two  former  Tenet Healthcare Corp.’s subsidiaries admitted to conspiring to defraud Medicaid by using referral contracts for translation services to funnel pregnant patients to the hospitals. Tenet agreed to pay a $514 settlement to end the case, which again reminded people that  for-profit hospitals tend to have more cases of such corruption because of pressure from senior executives to boost revenue and profit — and stock price.

Atlanta Medical Center and North Fulton Hospital in Georgia each pleaded guilty to one count of conspiracy to violate federal anti-kickback laws and defraud the United States, Tenet said.

In 2014, the U.S. Justice Department joined a whistleblower lawsuit accusing Tenet and four of its hospitals of allegedly making illegal payments to clinics run by Clinica de la Mama and Hispanic Medical Management in exchange for Medicaid patient referrals. Such referrals violate the federal anti-kickback statute and Stark law.

Modern Healthcare reported that the federal government alleged  that Tenet made payments to Hispanic Medical Management under the ruse of commissioning translation, marketing and Medicaid-eligibility determination services.

“The federal government acknowledged that individuals at the hospitals withheld information from Tenet about the agreements and circumvented Tenet’s policies and procedures to prevent such illegal conduct,” the publication reported.

To read the Modern Healthcare article, please hit this link.

3 big things in healthcare valuation

 

Scott Becker, a partner at McGuireWoods and publisher of Becker’s Healthcare, asked speakers at a confab to discuss the most interesting issues in healthcare valuation they’re seeing. Here are some of the issues the speakers identified.

1. Emergence of quality provisions. In Becker’s words: “Physicians are increasingly being compensated for providing high-quality care, and quality provisions have begun working their way into physician contracts. …. good quantitative information available to show what physicians earn for producing quality outcomes, said Jim Carr, partner at HealthCare Appraisers.”

2. Rise in unusual partnerships. “On the transaction side, what has been interesting is a trend for really unlikely parties joint venturing,” said Greg Koonsman, senior managing director and founder of VMG Health.

He cited  the partnership between nonprofit Baylor Scott & White Health and for-profit Tenet Healthcare. “In the Baylor-Tenet deal, that transaction had to be at fair market value or at a range of fair market value because Baylor, being tax exempt, has to approach the valuation of the JV appropriately to protect its tax exempt status,” said Mr. Koonsman.

3. Use of benchmarks.  In Becker’s words, “Assuming it is not efficient to do a valuation for every physician that is hired, hospital compliance officers increasingly want information they can benchmark off of. Although this may work for many physician compensation arrangements, it is not the best method to use in all cases, according to Jonathan Helm, managing director in the professional service agreements division at VMG Health. ‘If someone is an outlier you would probably want a separate valuation,’ he said.


Texas venture is aimed at improving population health

 

Baylor Scott & White Health and Tenet Healthcare, both based in Dallas, have a joint venture to own five Texas hospitals. The parties say the mission of the venture is to improve population health.

The  joint venture will own:

  • Centennial Medical Center (Frisco).
  • Doctors Hospital at White Rock Lake (Dallas).
  • Lake Pointe Medical Center (Rowlett).
  • Texas Regional Medical Center at Sunnyvale (Texas).
  • Baylor Scott & White Medical Center – Garland (Texas).

Becker’s Hospital Review reported that all the hospitals “will have Baylor Scott & White Health branding as early as this spring. Additionally, physicians, advanced practice providers and other employees of Tenet’s North Texas physician group will transition to Baylor Scott & White Health’s physician group HealthTexas Provider Network.”

Tenet Chairman and CEO Trevor Fetter said: “We have already made meaningful progress in advancing population health through our physicians’ participation in the Baylor Scott & White Quality Alliance, a leading local Accountable Care Organization, and the completion of this joint venture is an important next step in coordinating top-quality, value-based care in North Texas.”


An ACA payment reform success story

By JAY HANCOCK for Kaiser Health News

 

To understand how the health law is supposed to fix the mediocre, overpriced, absurd medical system, you could read wonky research papers on bundled payments and accountable care organizations.

Or you could look at what’s going on at Baptist Health System in San Antonio.

Under the potent lure of profit, doctors, nurses and managers at Baptist’s five hospitals have joined forces to cut costs for hip and knee replacements, getting patients on their feet sooner and saving taxpayers money.

“Everybody was aligned on this,” said Michael Zucker, Baptist’s chief development officer. “What we’ve seen is just incredible from a cost savings standpoint.”

Baptist made money doing what used to be industry heresy: reducing patients’ use of the medical system.

The hospital group made a deal with Medicare as part of an ambitious array of experiments authorized by the Affordable Care Act.

Medicare let Baptist take responsibility for the whole process of replacing knees and hips, from admission to surgery to rehab and anything else that happened within a month. (Traditionally the system, essentially tied with Methodist Health System as the region’s biggest, managed only what happens within its doors.)

Then Medicare lowered the average amount of what it pays for all that care by 3 percent, giving Baptist a lump sum for each patient getting the procedures. If the system and its orthopedic surgeons reduced costs below that price, they could keep the difference and divvy it up so long as quality didn’t suffer. If costs went up, Baptist was on the hook.

This is a purified form of the health law’s recipe to save healthcare: Get hospitals, doctors and other providers to work together. Cap their costs. Offer incentives to save and penalties for breaking the budget. Repeat.

A preliminary study of the tests at Baptist and elsewhere, overseen by the health law’s Center for Medicare & Medicaid Innovation, found substantial savings along with shorter patient stays in the hospital and lower use of expensive nursing facilities afterward.

Experts caution that even the focused program at Baptist may be hard to reproduce elsewhere. Successfully applying the model to other diseases and the entire healthcare system is an even longer shot.

Even so, policymakers have bet heavily on such arrangements as the solution to the medical-cost spiral. Medicare aims to make half its reimbursements through such “alternative payment” methods by 2018, officials said this year.

At Baptist, which is owned by Tenet Healthcare, the first step was basic financial education. Doctors are famously clueless about what taxpayers, employers and consumers have to pay for the care they prescribe.

“The public is like, ‘Wow, you guys have no idea what that costs.’ We never really did,” admitted Dr. Sergio Viroslav, a participating orthopedic surgeon.

Baptist surgeons, who select which artificial joint to use, were shocked to find out how much more some devices cost than others. Once they had a stake in the total bill, they became more discriminating shoppers.

Metal hip and knee prices started plummeting “the second the flashlight got lit on the implant makers,” Viroslav said. No manufacturer wanted to be the most expensive.

Surgeons were also surprised to learn that almost half the expense of joint replacement can come from physical therapy, home nurse visits and temporary nursing home stays after the surgery.

Dr. David Fox never paid much notice to the birthday cards that rehab nursing homes sent him. Now that the knee-and-hip surgeon knows what they were making on his referrals, “it’s no damn wonder” they were so nice, he said.

These days, Baptist doctors are likely to order home therapy rather than a nursing home stay unless it’s clearly needed. For the nursing homes they do use, they’re more likely to stay in touch, coordinate care and reduce expensive readmissions, they say.

Simply getting independent surgeons to work with their own hospital system and give it financial control took some doing.

“Hospitals and doctors don’t trust each other,” said Fox. “There’s not an orthopedic surgeon out there that trusts his hospital. You can’t find one. If you do, he’s lying.”

But at Baptist the parties met, sometimes reluctantly, to discuss how to cut costs, help patients recover quickly and apply science-based rules to recuperation.

Is Warfarin the best blood thinner for a particular patient? How much? What kind of compression stockings should be ordered to stop swelling and clots? Is a cane needed? One rubber tip? Or four?

Doctors and nurses had always asked those questions but never in such a disciplined way.

Compensating diverse caregivers to work together on an episode of treatment such as knee replacement is called bundled payment. Baptist has been through two bundled-payment experiments with Medicare.

One began before the health law was passed and focused only on costs inside the hospital, not on what happened later. That saved $284 per patient.

Zucker declined to give detailed figures on the new test. But adding savings incentives for joint-replacement and post-hospital care saved more than $1 million the first year, he said. At the same time, patients recovered more quickly, with fewer complications and resulting readmissions to the hospital, he added.

Such results mean hospitals and doctors “are thinking much more holistically” about care, not just focusing on their own roles, said Rob Lazerow, a practice manager at the Advisory Board Company who consults with hospitals on payment reform.

Baptist keeps part of the savings and shares part with the orthopedic surgeons — a bonus of up to half their surgery fee if they maintain the highest quality measures and their patients do well. The loss to the nursing homes and other post-discharge providers was their gain.

A typical surgery fee is $1,200 per knee, so hitting all the goals could generate as much as $600 more for a doctor.

“If I do 35 patients a month, all of a sudden it’s real money to me,” said Fox — potentially $21,000 a month, although no doctor maxes out the incentive on every patient.

Such “shared savings” with medical providers who were once oblivious to costs are key, said Dr. David Nash, dean of Thomas Jefferson University’s School of Population Health.

“If you change the economic incentives you will change physicians’ practice behavior,” he said.

Knee and hip replacements are relatively easy to manage. They can be scheduled. Doctors have a pretty good idea of what will happen. A more ambitious attempt at reform is trying capped, bundled payments with heart attacks, pneumonia and other conditions that might come with more wild cards.

Even more aspiring is the accountable care organization. Providers in ACO’s receive incentives — from Medicare, commercial insurers or perhaps employers — to keep large populations healthy and reduce the cost of care for every kind of ailment.

That’s a much taller order, and results have been mixed.

But what’s going on at Baptist shows what might be possible, experts said.

Standardizing procedures, avoiding overpriced hardware and coordinating care always did make sense for hip and knee replacements. Now, four decades after such surgery became routine, some hospitals and doctors seem to agree.

“That was really good that we did that,” said Viroslav. “It really helps doctors get better. It kind of forced them to look at their practice.”


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