How do we provide hospital services in rural areas?

How does a society provide hospital care for people located in remote, sparsely-populated areas?  What role does government play in providing financial support to keep the doors open for small rural hospitals?  These are questions of long-standing concern to policy makers.  An approach has been the creation of special reimbursement categories for these hospitals under the Medicare program — such as the critical access hospital (CAH) designation, among others.  In this issue of The Journal of Rural Health, there are 3 articles looking at the financial performance and quality issues related to critical access hospitals.

Critical access hospitals are small facilities (less than 25 beds), located in rural areas, and have a short inpatient length of stay.  Because they are often the only hospital in the area, they receive Medicare reimbursement that is intended to be more supportive than the prospective payment system that is used to determine Medicare reimbursement for most hospitals.  Holmes et al. studied the financial condition of rural hospitals over the period 2004 to 2010 and concluded that if the Medicare CAH program were to be abolished, the percentage of critical access hospitals with negative total margins would jump up from the current 28 percent to 44 percent, which would likely lead to a wave of hospital closures.

Gautam, et al.  analyzed the performance of critical access hospitals in Missouri and found that CAHs were less efficient than other types of rural hospitals.  However, the researchers conclude that there are benefits based on the contribution to the local economy and the critical access hospitals’ role as the only health facility in the area that may outweigh any savings that might be derived from withdrawing their special cost-based reimbursement.

Finally, Casey, et al. took a look at existing quality measures to see which might be appropriate for reporting by critical access hospitals (not currently required to provide data to the Hospital Compare database).

Source:  Holmes, G.M., Pink, G.H., and Friedman, S.A.  The financial performance of rural hospitals and implications for elimination of the critical access hospital program; and, Gautam, S., and others.  Measuring the performance of critical access hospitals in Missouri using data envelopment analysis; and, Casey, M.M., and others.  Rural relevant quality measures for critical access hospitals.  The Journal of Rural Health;29(2):140-171, Spring 2013.  Click here for access to the publisher’s website: http://onlinelibrary.wiley.com/doi/10.1111/jrh.2013.29.issue-2/issuetoc  Posted by AHA Resource Center (312) 422-2050, rc@aha.org

What’s Caused the Recent Slowdown in Health Spending?

How much of the recent slowdown in health spending has been due to the economic downturn?

How much has been from structural changes in the health system?

Are we in a period of high or low “excess” health spending?

What may happen to health spending if the economy recovers?

A new analysis by researchers at the Kaiser Family Foundation and the Altarum Institute’s Center for Sustainable Health Spending attempts to answer these questions. While the analysis sheds some light on the issues, the researchers indicate it will not settle the debate about reasons for the recent spending slowdown.

A strong link was identified between national health spending and economic business cycles and inflation. About 77% of the decline in health spending was due to changes in the economy, while structural changes in the health system had a more modest impact.  The researchers predict that national health expenditures will increase as the economy continues to recover, but probably not at the earlier double-digit rates. An ongoing focus on health care cost containment will be needed to keep growth rates low for the future.

Source: Assessing the effects of the economy on the recent slowdown in health spending. Snapshots: Health Care Costs, Kaiser Family Foundation, Apr. 2013. http://www.kff.org/insurance/snapshot/chcm042213oth.cfm

Posted by AHA Resource Center (312) 422-2050, rc@aha.org

Hospital Trends: Emerging Health Care Delivery, Payment Models and Care Coordination Practices

This trend overview looks at medical homes and accountable care organizations as new health care delivery models. Based on the first analysis of FY2011 data collected as part of the AHA Annual Survey conducted during 2012, just 6% of responding hospitals were participating in an ACO, while 15% indicated they had an established medical home.

The overview also looks at how many hospitals reported involvement with bundled payment models; the extent that hospitals are engaged in care coordination/transition across care settings; and hospitals’ meaningful use of electronic health records.

Health Forum is further surveying hospitals on ACO adoption, with the data planned for release later this year.

Kenward K and Bostick N. Trends 2013: Emerging health care delivery, payment models and care coordination. Health Forum, an American Hospital Association affiliate, 2013. Available for sale as pdf download at http://ams.aha.org/EWEB/DynamicPage.aspx?WebCode=ProdDetailAdd&ivd_prc_prd_key=92b0ce53-d80b-43ef-9c7b-ec1a8211806e

NOTE: Also published as introduction in 2013 AHA Hospital Statistics. Health Forum, 2013. Available for sale at http://ams.aha.org/EWEB/DynamicPage.aspx?WebCode=ProdDetailAdd&ivd_prc_prd_key=f15837e6-7d5b-4beb-ba50-0c6c381ae53b

Posted by AHA Resource Center, (312) 422-2050, rc@aha.org

Private Equity and Non-Profit Hospitals: Strange Bedfellows or Saving Grace?

An article this week in Becker’s Hospital Review discusses a relatively new twist in the hospital/hospital system merger and acquisition arena  – the involvement of private equity firms. Several examples are listed:

• Acquisition of Caritas Christi Health System by Steward Health System, an entity of Cerberus Capital Management
• Purchase of Detroit Medical Center by Vanguard Health Systems, owned by Blackstone Group
• Catholic system Ascension Health formed a funding venture with Oak Hill Capital Partners

The articles briefly discusses the pros and cons for private equity involvement.

Source: McLaughlin J. Private equity and non-profit hospitals: strange bedfellows or saving grace. Becker’s Hospital Review, Mar. 26, 2013. http://www.beckershospitalreview.com/hospital-transactions-and-valuation/private-equity-and-non-profit-hospitals-strange-bedfellows-or-saving-grace.html

Related resources:

Page L. Private equity funds are changing the face of U.S. hospitals. Becker’s Hospital Review, May 2, 2011. http://www.beckershospitalreview.com/hospital-transactions-and-valuation/private-equity-funds-are-changing-the-face-of-us-hospitals.html

Saint Mary’s plans joint venture with private equity company. Catholic Health World, Apr. 15, 2011. http://www.chausa.org/Saint_Marys_plans_joint_venture_with_private_equity_company.aspx

Creswell J and Abelson. A giant hospital chain is blazing a profit trail [re: HCA now owned by 3 private equity firms]. New York Times, Aug. 14, 2012. http://www.nytimes.com/2012/08/15/business/hca-giant-hospital-chain-creates-a-windfall-for-private-equity.html?

Denning S. HCA: the unsustainable private equity bubble in US health care. Forbes, Aug. 15, 2012. http://www.forbes.com/sites/stevedenning/2012/08/15/private-equity-wont-fix-health-care-either/

Wechsler P. HCA plans biggest U.S. private equity IPO at $4.28 billion. Bloomberg.com, Feb. 22, 2011. http://www.bloomberg.com/news/2011-02-22/hca-offering-as-much-as-4-28-billion-in-shares-to-public.html

Evans M. Limited potential: private-equity deals come with conditions. Modern Healthcare, Jan. 28, 2012. http://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=5&cad=rja&ved=0CFMQFjAE&url=http%3A%2F%2Fwww.modernhealthcare.com%2Farticle%2F20120128%2FMAGAZINE%2F301289974&ei=V_VVUZjCIqWYyAGqj4H4DA&usg=AFQjCNFZJy9RjBAyFmhnac6Xi5OTRCVZVw&bvm=bv.44442042,d.aWc

Becker S and others. Private equity investing in healthcare — 13 hot and 4 cold areas. McGuireWoods LLP, Aug. 4, 2011. http://www.mcguirewoods.com/news-resources/publications/health_care/private-equity-investing-healthcare.pdf

Shinkman R. For hospitals, M&A market means more private equity, payer partnerships. FierceHealthCare, Jan. 29, 2013. http://www.fiercehealthfinance.com/story/hospitals-ma-market-means-more-private-equity-payer-partnerships/2013-01-29

Private equity firms: could they help save your hospital? REDW LLC, Sept. 11, 2011. https://www.redw.com/publication_full_story.php?Page=publications&Blog_Ref=213&UserRef=1&CategoryName=Healthcare+Publications 

Vaughan J. Private equity investment in health care services. Health Affairs, Sept. 2008. http://content.healthaffairs.org/content/27/5/1389.abstract

Posted by AHA Resource Center, (312) 422-2050, rc@aha.org

OR costs: $15-$20 per minute? Where does this come from?

The Becker’s item

I saw this intriguing factoid in a recent brief article and got interested in tracking it back to the source:

• “…there is little published, formal data on true OR costs…As a result, hospital administrators often deploy a ballpark to answer that question, ranging from $15 to $20 per minute for a basic surgical procedure, according to research from Stanford University School of Medicine.”

Source: Gamble, M.  6 cornerstones of operating room efficiency: best practices for each.  Becker’s Hospital Review;2013(2):42, 44, Feb. 2013.  Click here for full text: http://www.beckershospitalreview.com/or-efficiencies/6-cornerstones-of-operating-room-efficiency-best-practices-for-each.html 

The Stanford Article

The next step in the trail is this article that does come from a professor at the Stanford School of Medicine:

• “There are no published formal data on true OR costs.  Excluding physician costs, OR administrators may use a ballpark number such as $15 or $20 per OR minute for a basic surgical procedure, with at least half of that figure being fixed overhead costs.”
• But this quote is really based on an older article (see the Park & Dickerson article below)

Source: Macario, A.  What does one minute of operating room time cost?  Journal of Clinical Anesthesia;22:233-236, 2010.  Click here for full text: http://ether.stanford.edu/asc/documents/management2.pdf

The Park & Dickerson Article (2009) — affiliated with Ohio State

• This is the end of the trail for me — could not find a free full text copy of this article.  I’d be curious if you have access to it! 

Source: Park, K.W., and Dickerson, C.  Can efficient supply management in the operating room save millions?  Curr Opin Anaesthesiol;22:242-248, 2009.  Can purchased full text copy here: http://journals.lww.com/co-anesthesiology/Abstract/2009/04000/Can_efficient_supply_management_in_the_operating.17.aspx  Posted by AHA Resource Center, (312) 422-2050, rc@aha.org

How Many Hospitals Have Negative Margins?

Nearly a quarter [24%] of hospitals in the U.S. had negative total margins in fiscal year 2011, where total expenses exceeded total net revenue. Another 4.4% had negative operating margins. Over the past 20 years, the percentage of hospitals operating at a loss on total margin has fluctuated from a low of 19.4% in 1996 to highs over 32% in both 1999-2000 and again in 2008.

Source: Table 4.1: Aggregate total hospital margins, operating margins, and patient margins; Percentage of hospitals with negative total margins; and Aggregate non-operating gains as a percentage of total net revenue, 1991-2011. In: Trendwatch Chartbook 2013. American Hospital Association, Feb. 26, 2013. http://www.aha.org/research/reports/tw/chartbook/2013/table4-1.pdf  Chart: http://www.aha.org/research/reports/tw/chartbook/2013/chart4-1.pdf

Posted by AHA Resource Center, (312) 422-2050, rc@aha.org

Is readmissions penalty a burden on safety net hospitals?

Under Medicare’s Hospital Readmissions Reduction Program (HRRP), which began Oct. 1, 2012, hospitals with readmission rates for certain target conditions that are deemed excessive will lose a percentage of their Medicare reimbursement.  A surprisingly high two-thirds of eligible hospitals will be penalized this year, to the tune of  $280 million total.  These authors note that safety net hospitals and large teaching hospitals are more likely to be penalized, jeopardizing their ability to care for the neediest patients.  Steps that might be taken to adjust the formula so as not to unduly penalize these hospitals are discussed:

1. Adjust for socioeconomic status
2. Weight according to when the readmission occurs — within a few days or at the end of 4 weeks
3. Factor in the hospital mortality rate

Source: Joynt, K.E., and Jha, A.K.  A path forward on Medicare readmissions.  The New England Journal of Medicine, Mar. 6, 2011.  Click here for full text: http://www.nejm.org/doi/pdf/10.1056/NEJMp1300122 

For further study: Glass, D., Lisk, C., and Stensland, J.  Refining the Hospital Readmissions Reduction Program.  Washington, DC: Medicare Payment Assessment Commission, Sept. 7, 2012.  Click here for full text: http://www.medpac.gov/transcripts/readmissions%20Sept%2012%20presentation.pdf   Posted by AHA Resource Center, (312) 422-2050, rc@aha.org

 

How Hospital Costs Are Distributed by Payer Type

For fiscal year 2011, hospital costs were distributed among payers this way:

• Medicare: 39.3%
• Private payer: 34.6%
• Medicaid: 16.3%
• Uncompensated care: 5.9%
• Non-patient [cafeterias, parking lots, gift shops & other non-patient care services]: 2.1%
• Other government: 1.8%

The private payer share has declined from 41.8% in 1980.

Source: Chart 4.5: Distribution of hospital cost by payer type, 1980, 2000, and 2011. In: Trendwatch Chartbook 2013. American Hospital Association, Feb. 26, 2013. http://www.aha.org/research/reports/tw/chartbook/2013/chart4-5.pdf

Posted by AHA Resource Center, (312) 422-2050, rc@aha.org

Distribution of Hospital Inpatient vs. Outpatient Revenue, 1991-2011

In FY2011 inpatient care accounted for 57% of community hospitals’ gross patient revenue, while outpatients contributed 43%. Compare that to 1991 when the gross patient revenue mix was 76% inpatient  vs. 24% outpatient.

Source: Table 4.2: Distribution of inpatient vs. outpatient revenue, 1991-2011. In: Trendwatch Chartbook 2013. American Hospital Association, Feb. 26, 2013. http://www.aha.org/research/reports/tw/chartbook/2013/table4-2.pdf

Posted by AHA Resource Center, (312) 422-2050, rc@aha.org

National Trend Data on Hospital Uncompensated Care, FY1980-2011

The American Hospital Association has updated its annual trend data on hospital uncompensated care. In fiscal year 2011, hospitals provided $41.1 billion of uncompensated care, including both bad debt and charity care. This representeded 5.9% of overall hospital expenses.

Source: Uncompensated hospital care cost fact sheet. American Hospital Association, Jan. 2013. http://www.aha.org/content/13/1-2013-uncompensated-care-fs.pdf

Posted by AHA Resource Center, (312) 422-2050, rc@aha.org