Becker's Hospital Review

Finance, Revenue Cycle & ICD-10 32 advantage of government programs — like the Medicare Shared Savings Program and CMS' Bundled Payments for Care Improvement initiative — or researching commercial options like the ones described earlier. "If you are not negotiating with payers around Medicare, Medicaid, commercial and exchange strategies, it's not a good place to be," Ms. WellePowell says. "Value-based contracts fit within the largest context of population health management. If we're going to manage a population, we want to create a global contracting platform to bring all providers to the table." For most systems, it will take an "all-of-the-above" approach, Ms. Welle-Powell says. For example, SCL Health System's Denver facilities have built up their managed care and capitation strategies. Managed care in Denver now represents 67 percent of the market, including Medicare Advantage, which she says is a growing line for many providers. CMS also awarded SCL Health System a bundled contract for two diagnosis-related groups — major hip and knee replacements — under BPCI. (The system also had one of the four original hospitals within the Acute Care Episode demonstration in cardiology.) When it comes to the health insurance exchanges, SCL Health System has hospitals in four different states, two of which will have federally facilitated exchanges. Ms. Welle-Powell says in one state, the system is working "with those various carriers that are developing a high-performance network." While juggling different payer strategies may seem like a challenge for many systems, executives can find success by understanding their limitations, their market and their infrastructure. "It's about building a portfolio of value-based contracts," Ms. Welle-Powell says. "It's not all capitation, bundled payment, commercial ACO or Medicare Shared Savings Program. It's important to identify who you are as an organization, your values, your willingness to assume risk — and how to effectively meet the needs of your market." The safety-net and independent hospital perspective Sinai Health System is one of the primary safety-net providers in Chicago. Medicaid makes up roughly 60 percent of Sinai's inpatient payer mix, while Medicare makes up 20 percent. Uncompensated and self-pay represents 13 percent, and commercial payers like Blue Cross Blue Shield make up a scant 7 percent. While many larger hospitals and health systems are focusing on establishing new value-based contracts with commercial payers, standalone hospi- tals and safety-net organizations often have to make sure their primary payers — Medicare and Medicaid — can still keep the institutions afloat. Chuck Weis, CFO of Sinai Health System, says government payers are vital for his organization and must continue to be a key part of financial strategy at other similar hospitals. "We are really focusing our attention on these populations and the structural changes thereto — movement to managed care — because they are so significant for Sinai," Mr. Weis says. "At this moment, that's a much larger population than trying to capture all commercial payers, many of which already have established relationships out there." Mr. Weis says there is one other major area safety-net hospitals and independent hospitals have to evaluate: the insurance exchanges. As mentioned by Ms. Welle-Powell of SCL Health System, the exchanges are giving providers a fleet of new previously uninsured or underinsured patients with commercial coverage. Combined with Medicaid expansion, Mr. Weis says roughly 300,000 people in Sinai's service area will gain coverage under the Patient Protection and Affordable Care Act. Executives must reach out to health insurers that have actively said they will participate in the exchanges because those will be a source of enhanced revenue — and perhaps more intricate accountable care management afterward. "We're talking to every payer who has indicated a desire to be on the insurance exchange," Mr. Weis says. "We're looking at participating in those plans that will want to share risk with providers such as Sinai as time progresses." n MORE ONLINE: Want more information on how hospitals are interacting with payers? See the following articles available at www. BeckersHospitalReview.com: n How One Payer is Working to Make Patient-Centered " Medical Homes Thrive" (August, 2013) n Where Commercial and Employer Bundled Payments " Stand in Healthcare Right Now" (July, 2013) n Providers Becoming Payers: Should Hospitals Start " Their Own Health Plans?" (January, 2013) S&P: Hospitals Had Stable 2012, But Financial Ratios Likely to Weaken in 2013 By Bob Herman A lthough many nonprofit hospitals and health systems recorded steady finances in fiscal year 2012, the same may not be said at this time next year, according to the newest median reports from Standard & Poor's Ratings Services. S&P released median ratios for health systems and standalone hospitals. S&P rates 144 health systems, which it defines as organizations with at least three hospitals, and 409 standalone hospitals. Among all health systems, S&P found net patient revenue increased 6 percent from 2011 to 2012, with the median at $1.47 billion. S&P at- tributed the growth to the rise in employed physicians, the Medicare rural floor payment settlement, meaningful use incentives and Medicaid provider fees, but the rating agency said patient utilization remained flat. S&P said the relatively strong hospital and health system median ratios in 2011 and 2012 indicate CEOs and CFOs are focusing on maintaining the balance sheet and strong liquidity, but 2013 medians are likely to plateau or drop off altogether. Standalone providers similarly saw strong revenue growth, despite lagging volumes and small reimbursement increases, for the same reasons as health systems. However, S&P analysts said standalone hospitals in particular will undergo steepening challenges, such as declines in patient admissions, higher investment costs for physician recruitment and technology and pressures associated with pensions. "The 2012 medians reflect a continuation of the peak in metrics reached in 2011, but we expect ratios to soften gradually in the next one to two years as incremental pressures persist and even intensify amid industry changes related to healthcare reform," said Kenneth Gacka, an S&P credit analyst, in a news release. n

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