Becker's Hospital Review

16 Sign up for the COMPLIMENTARY Becker's Hospital Review CEO Report & CFO Report E-Weeklies at www.BeckersHospitalReview.com or call (800) 417-2035 millions of dollars in extra federal Medicaid reimbursements for hospitals, especially those that serve large Medicaid populations. Although provider taxes are nothing new, they remain at the forefront to raise extra hospital Medicaid revenue. A more recent development involves a provision of the PPACA. CMS recently announced it will increase Medicaid payments for certain primary care physicians to Medicare rates over the next two years, beginning Jan. 1, 2013. All primary care physicians in the specialties of family medicine, general internal medicine or pediatric medicine (and related subspecialties) qualify, which will help primary care physicians and hospitals with employed primary care physicians in the short-term. 4. Financial accountability for quality As the healthcare industry moves toward pay-for-performance, hospitals may encounter this new payment model in CMS-based initiatives, such as the Value-Based Purchasing Program and the Readmissions Reduction Program, or in arrangements with private payors. In October, CMS' Hospital VBP program began, which pays hospitals based on performance on quality measures. Hospitals are sure to feel its impact throughout 2013 and beyond. Under VBP, hospitals' diagnosisrelated group payments from Medicare will be reduced 1 percent to create a pool of incentive payments. Hospitals that meet performance standards in clinical processes of care, patient experiences and outcomes will receive a portion of the incentive payments. To improve quality and gain a higher percentage of incentive payments, hospitals have implemented new programs designed to standardize care and enhance the patient experience. For example, many hospitals are requiring all physicians and clinicians to follow evidence-based protocols when treating patients. Hospitals are also providing "navigators" to guide patients through their hospital stay and are focusing on a patient-centered design of facilities, such as the use of soothing colors. The Readmissions Reduction Program also began in October. The program cuts a portion of hospitals' Medicare reimbursement for high readmission rates for heart attack, heart failure and pneumonia. To prevent readmissions, hospitals are looking beyond the four walls of their facility to post-acute care providers and other providers in the community, such as urgent care clinics and retail clinics. Many hospitals are implementing postdischarge programs to follow-up with patients after their discharge and ensure their health does not deteriorate and require a readmission. Arrangements with private payors may also include pay-for-performance elements. Companies like Blue Cross Blue Shield, Aetna and Cigna are partnering with physicians and hospitals, and rewarding them for meeting quality standards. These arrangements can come in the form of accountable care organizations, patient-centered medical homes or more informal relationships that provide financial incentives for quality. 5. Competition for physicians coupled with shortages Competition for physicians will be fierce throughout 2013. A recent study in the Annals of Family Medicine showed that the shortage is expected to grow to 52,000 by 2025, driven by an aging population, population growth and the expansion of insurance coverage under the PPACA. On top of the shortage is the growth of CMS and commercial accountable care organizations, which require participating hospitals and health systems to integrate with physician practices and, in many cases, employ new physicians. CMS accepted applications for new Medicare ACOs through September 2012 and announced they will accept applications for new members every year. On the commercial side, payors like Cigna, Blue Cross Blue Shield and Aetna continue to create ACOs as well. The increased number of integrated organizations will lead to more competition for physicians. Physicians may be more willing to sell their practices and become employed by hospitals, giving hospitals the opportunity to increase their market share and expand clinical integration. Physicians are selling because of business expenses, electronic medical record requirements and the prevalence of managed care. More physicians are also looking for the economic stability of employment during the transition from fee-for-service to performancebased pay. Hospitals can take advantage of the situation and find independent physician groups that are ready to sell their practices and become employed. The shortage and increased competition for physicians present obvious challenges for physician recruitment. But with challenges come opportunities. Hospitals and health systems can use this time to evaluate their physician recruitment strategies and make improvements in order to attract physicians. This is also a time for hospitals to experiment with new models of healthcare delivery that are attractive to younger physicians, who desire a work-life balance. There is also an opportunity to save money by hiring more non-physician providers, such as nurse practitioners and physician assistants, who can provide primary care on a smaller salary than an employed primary care physician. 6. Managing patient populations, not just individual patients One of the triple aims of healthcare reform is to enhance population health. Improving population health can prevent the need for costly interventions and hospital admissions. To manage population health, hospitals need to collect data on the population, including data on ethnicity, age, payor mix, socioeconomic status, education and chronic disease rates. Using this data, hospitals can proactively identify patients who are at risk for health problems, and develop outreach programs to help manage these patients' health. For example, populations with a high percentage of obese patients may need nutritional and exercise guidance. Hospitals can provide education, screenings and other services to prevent serious conditions, such as heart disease and stroke, which obesity is linked to. Hospitals can also use data on their patient populations to identify gaps in care services and determine solutions. Many hospitals are establishing clinics or outpatient facilities closer to where patients live to increase access to care. To practice or test strategies for managing population health, many hospitals are providing incentives to their employees covered under their health plan. Hospitals are providing reduced costs or incentive payments to encourage employees to use preventive care and wellness services and seek care in the appropriate setting. 7. Taking on risk To stay abreast with competition, many hospitals are adopting a hybrid approach as they continue to operate on fee-for-service principles while taking on more risk in performance-based contracts — for example, bundled payments, accountable care and other arrangements — with health insurers. This trend is likely to persist throughout 2013, as more hospitals consider and implement strategies to redefine their relationships with payors. Demands for improved outcomes, efficiency and reduced costs are driving hospitals to act more like insurers, or work with insurers in more innovative ways. While certain systems like Oakland, Calif.-based Kaiser Permanente and Detroit-based Henry Ford Health System have offered health plans and insurance capabilities for years, other systems are beginning to follow suit. In a 2011 survey from The Advisory Board Company, 20 percent of 100 hospital leaders said they were exploring insurance products. Some organizations, like Great Neck, N.Y.-based North Shore-Long Island Jewish Health System, moved beyond the exploration phase in 2012 and began laying the groundwork to offer health plans. If not offering health plans, providers are still finding new ways to align themselves with payors. For example, Anthem Blue Cross and University of California Health tightened

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