News/Blog

David Ledersnaider, Ph.D.

Plenty of blame to go around for high health costs

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Health care costs remain a leading issue ahead of this year’s midterms, and voters have plenty of blame to go around, according to the Kaiser Family Foundation’s (KFF) latest tracking poll.

KFF health tracking poll of 1,201 US adults (Aug/2018) asked whether certain factors are a “major reason” health care costs are rising.

  • Blame for the potential political culprits — the ACA and the Trump administration — was split about evenly
  • But there’s a broader bipartisan agreement that industry is to blame: > 70% faulted drug companies, hospitals, and insurers
  • Doctors caught a break, at 49%
  • Partisanship reigns, though, on the question of whether President Trump will help
  • 13% of Democrats are at least somewhat confident that Americans will pay less for prescription drugs under the Trump administration, compared with a whopping 83% of Republicans. Independents generally share Democrats’ skepticism
  • Roughly a quarter of Democrats and roughly two-thirds of Republicans think Trump’s public criticism of drug companies will help bring down prices
  • Surprise hospital bills haven’t attracted the same political uproar as prescription drug costs, but the Kaiser poll provides more reason to believe they could be the next big controversy
  • 67% said they’re “very worried” or “somewhat worried” about being unable to pay a surprise medical bill
  • 53% fear they won’t be able to pay their deductible
  • 45% are afraid of the tab for their prescription drugs
  • 39% experienced a surprise bill in the past year

 

A little-known windfall for some hospitals, now facing big cuts

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Research corroborates that hospitals aren’t using the 340B program as intended.

  • The 340B program may have raised costs by encouraging care in 340B-eligible hospitals that could have been provided less expensively elsewhere
  • The program also encourages providers to use more expensive drugs
  • Medicare lowered the prices it pays for 340B drugs by 27%. But it does little to address how much insurers and individuals pay for prescription drugs or the value they obtain from them

How to tame healthcare spending? Look for 1% solutions

Posted by | Health News, Hospital Finance | No Comments

A working paper published Monday proposes one possible fix. In the 1980s, Congress carved out a small group of hospitals from its normal rules for payment. These “long-term care hospitals,” which treated patients with tuberculosis and chronic diseases, could earn far more money than traditional hospitals and nursing homes if they cared for patients who stayed with them for an average of 25 days. Since then, the number of these hospitals has mushroomed, from a few dozens to more than 400, most run by two for-profit chains.

For years, analysts and policymakers have wondered about the value of these hospitals, which tend to treat very sick patients who need a lot of care, such as mechanical ventilation or dialysis. Several analyses have suggested that Medicare may be overpaying for their services. And Congress has made some small changes to limit the number of patients who are eligible for such care.

The new paper, from researchers at the Massachusetts Institute of Technology, Stanford University, and the University of Chicago, took a close look at what happened to patients as new long-term care hospitals opened around the country in places that had none.

The study, covering 1990 to 2014, found that when such a hospital opened, the odds increased that very sick patients leaving a normal hospital would end up going next to a long-term care hospital, generating a growing bill for both Medicare and the patients themselves. But the researchers found no benefit when it came to patients’ chances of dying or going home within 90 days.

The researchers concluded that the healthcare system could probably save a lot of money — around $5 billion a year — by paying the long-term care hospitals the same prices that are paid to skilled nursing facilities, the places that most long-term patients end up in when there is no long-term care hospital nearby.

Hospitals heavily increased prices from 2015 to 2016

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Axios combed through and combined spreadsheets of hospital charges and Medicare payments, which the Centers for Medicare & Medicaid Services posts annually and found:

  • For joint replacements, like hip and knee surgeries, prices are still all over the map. However, Medicare pays less than $13,000 on average for a joint replacement.
  • For-profit companies own (or used to own in 2016) nine out of the 10 hospitals with the highest list prices for joint replacement surgeries.
  • Memorial Hospital of Salem County, a small hospital in New Jersey owned by the publicly traded Community Health Systems, had the highest joint replacement price in the country in 2016 at $267,726.
  • HCA Healthcare, another for-profit hospital chain, owns two facilities that each charged more than $200,000 for joint replacements in 2016.
  • Many well-known not-for-profit hospital systems, like Cedars-Sinai in Los Angeles, also rank among the highest-charging hospitals for joint replacements.

Aside from the wide distribution in what hospitals charge for joint replacements, many hospitals also heavily increased prices from 2015 to 2016.

 

 

  • St. Francis Medical Center in New Jersey raised prices for joint replacement surgeries the most of any hospital in the country in 2016 — a 77% hike to more than $135,000.
  • More than 400 hospitals raised joint replacement prices by at least 10% in 2016.

Hospitals set prices at whatever level they want, well above what Medicare pays. While those prices often aren’t what patients pay, they still dictate what society at large pays for health care.

The large variation in hospital pricing gained awareness in 2013 when a Time article about hospital charges led the federal government to released data on hospital and physician payments. In addition, new studies show how market concentration factors into pricing. Hospitals have argued that charges are misleading because private and public health insurers don’t pay those amounts, but they still matter a lot. List prices are starting points, with no relation to cost, that is used in negotiations with private insurers. They also are the baseline for uninsured patients and people who have to deal with out-of-network bills — like this infamous case of a teacher in Texas.

 

 

 

To change nursing assignments and transform workforce management, hospitals need to plan differently!

Posted by | Healthcare Cost Savings, Hospital Finance, Innovation | No Comments

Massachusetts, New Jersey, Ohio, and Pennsylvania are getting ready to vote on legislation to mandate nurse-patient ratios like California did.

We learned from California that without a sound workforce planning methodology that can be consistently executed, hospitals won’t obtain the benefits of the increased staff [1].

The Nash Group SDM20/20™ planning methodology is proven to:

  • reduce labor cost $2M-$8M
  • dismantle consumption of premium dollars
  • advance patient placement and aggregation
  • improve patient disposition and reduce length of stay
  • increase staff retention 20%-40% and improve recruitment cycles
  • make workforce operations and schedules sustainable

[1] Petsunee Thungjaroenkul, Greta G. Cummings, Amanda Embleton, “The Impact of Nurse Staffing on Hospital Costs and Patient Length of Stay: A Systematic Review”, NURSING ECONOMIC$/Sep-Oct 2007, Vol. 25, No. 5

To lower cost, healthcare providers need to plan differently!

Posted by | Hospital Finance, Innovation, Nursing Staff, SDM20/20TM | No Comments

Unrealistic workforce management plans cost healthcare organizations millions of dollars in labor. As this cost continues to be pass to consumers through increases in insurance premiums, they are demanding sustainable changes.
Execution cost that normally accounts for 20% of the bottom-line of hospitals and 35% of outpatient facilities is where sizeable labor changes need to be acquired.
A workforce management planning methodology (see below) that can be consistently executed and that delivers between $2M and $8M in labor savings is mandatory to meet sustainable labor operations.

Think drug costs are bad? Try hospital and professional service prices!

Posted by | Hospital Finance, Uncategorized | No Comments

Some pharmaceutical companies said they’ll delay some of their price increases under pressure from the government. But hospitals and care professionals have made no such concessions, even though they make up a much larger share of total health care spending. Hospitals and care professionals are not going to hold off on price increases!

Drug makers pledges to hold price increases are political bandages with little real effect on patients’ pocketbooks, but hospitals and care professionals cost increases hit them harder! Hospitals prices have grown somewhat slowly over the past few years, but slow growth of high prices leaves high prices.

Some hospitals and health systems argue that they are limiting increases to below 3% annually, but the net effect is well over 5%. And the cost isn’t going up because we’re using more health care, but because of the prices we pay for those services.

The next big battle in healthcare will almost certainly be about costs!

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Mounting frustration from employers and employees will put cost controls on the table faster than you might think, making the next big battle in healthcare almost certainly about costs!

Right now frustration over healthcare costs is starting to percolate, particularly over the concern that the industry already maxed out the existing tools for cost control.

California, for example, has proposed moving the state to an all-payer system, to give the state more control over doctors and hospitals insurance plan charges (only Maryland has an all-payer system). Are we really going to have a debate about all-payer? Is this one of those times when California is the wacky outlier state, or one of those times when it’s a trendsetter?

Once employers reach the end of their rope on healthcare costs, the cost-control debate is going to ratchet into a higher gear. That is the prelude to a debate over all-payer in every state, but government intervention will probably be on the table, at least in some states. The cost-containment debate is coming because policymakers are not going to put too much new revenue on the table, and that means that both the private sector and Medicare will be paying the most.

Costs have risen modestly over the past few years, and private insurance has responded, in large part, by shifting more of those costs onto consumers through higher copays, deductibles, and coinsurance. But we’re at the end of what the market will bear on cost-sharing.

This is a scary position for providers. If employees are at their breaking point on cost-sharing, and employers reach their breaking point on cost growth, expect political systems to get serious about cutting those costs themselves. The question remains … are healthcare organizations and doctors ready for real changes in reimbursement?

 

The dramatic increase in deductibles, especially within employer-based coverage

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In employer-based health plans, the average deductible for a SINGLE person is over $1,500, according to Kaiser — 3 times higher than it was a decade ago. The trend toward increasingly high deductibles means families struggle to afford their care, even with insurance.

Now, experts are starting to reconsider whether high cost-sharing — once conceived as a way to turn employees into more discerning healthcare consumers — is working.

“High-deductible plans do reduce health-care costs, but they don’t seem to be doing it in smart ways,” USC professor Neeraj Sood told Bloomberg.

This frustration with existing cost-shifting tools — and the growing sense that we’ve basically maxed out their utility — is contributing to the renewed focus on underlying health care prices.

  • Many employers don’t feel they can shift any more costs onto their workers, but that’s largely how they’ve kept premiums in check for the past several years. And they certainly don’t want to shoulder higher bills themselves.
  • As that frustration mounts, expect to see a greater political appetite for real cost controls.

The Coverage Gap: Uninsured Poor Adults in States that Do Not Expand Medicaid

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While the Medicaid expansion was intended to be national, the June 2012 Supreme Court ruling essentially made it optional for states. As of June 2018, 17 states had not expanded their programs.

Medicaid eligibility for adults in states that did not expand their programs is quite limited: the median income limit for parents in these states is just 43% of poverty, or an annual income of $8,935 a year for a family of three in 2018, and in nearly all states not expanding, childless adults remain ineligible. Further, because the ACA envisioned low-income people receiving coverage through Medicaid, it does not provide financial assistance to people below poverty for other coverage options. As a result, in states that do not expand Medicaid, many adults fall into a “coverage gap” of having incomes above Medicaid eligibility limits but below the lower limit for Marketplace premium tax credits (Figure 1).

This KFF brief presents estimates of the number of people in non-expansion states who could have been reached by Medicaid but instead fall into the coverage gap, describes who they are, and discusses the implications of them being left out of ACA coverage expansions. An overview of the methodology underlying the analysis can be found in the Methods box at the end of the report, and more detail is available in the Technical Appendices available here.