|3 Areas that Will Impact Provider Profit Margins Post-COVID
By Jacqueline LaPointe | July 20, 2022
Healthcare providers faced a rough couple of years as the COVID-19 pandemic dampened financial growth, but the post-pandemic future should create a favorable environment for provider profit margins, according to a new report.
The report authored by partners at McKinsey & Company estimates a 6 percent growth in healthcare industry Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITA) between 2021 and 2025. That would add about $31 billion in profits for healthcare providers and payers during that post-pandemic time period, the report states.
Providers could also face a $326 billion increase in profits in 2025, the report adds. Authors estimate a 7 percent compound annual growth rate (CAGR) for healthcare providers at that time as they face significant shifts in three care delivery trends.
First, healthcare providers should see patient volume increases in the post-pandemic period. The aging population—those 65 years or older—is expected to increase by 3 percent between 2021 and 2025, the report states. In contrast, the general population is only slated to grow by 0.5 percent.
Older adults require more services compared to younger populations, which tend to be healthier. Research shows that over half of Medicare beneficiaries have at least two chronic conditions and more than a third have four or more.
Speaking of chronic conditions, the report estimates that care delays during the pandemic will increase total cost of care. Exacerbation of chronic conditions, as well as natural disease progression, is slated to boost cost of care by about $7 billion by 2025.
However, shifts in payer mix and sites of care delivery could help to offset rising costs of care, the report indicates.
The second area impacting provider profit margins is where reimbursements will come from, the report finds. Providers are likely to receive more Medicare reimbursements as the aging population increases at such a rapid pace. Since Medicare pays below total of care, providers are expected to see a 0.5 percent decrease in absolute EBITDA dollars.
The overall reduction in reimbursement from more Medicare patients is likely to be balanced by a movement of people from Medicaid coverage to commercial insurance. The report estimated that the percentage of Americans on Medicaid will decrease from 25 percent in 2021 to about 22 percent in 2025 due to redetermination of eligibility.
Finally, a shift in acute sites of care is likely to impact provider profit margins and total cost of care. The report describes this factor as “a less obvious development,” but the report’s authors argue that more care will be delivered outside of the hospital during the post-pandemic period.
To read more, go to RevCycle Intelligence.
| Health Systems Face ‘Perfect Storm’ of Financial Challenges
By Alex Kacik | July 19, 2022
Inpatient admissions and emergency department visits are still well below pre-pandemic levels—and patients who are coming into the hospital are staying longer, driving up costs. Even as demand slowly rebounds, providers have been limited by worker shortages that have led to double-digit percentage increases in labor expenses.
These headwinds have fueled a perfect storm that will dent hospitals’ financial performance for at least two years, providers said. While health systems will fare differently based on their size and business diversification, organizations of all types will continue to retool their revenue streams and staffing strategies.
“If you add the challenges of the COVID-19 pandemic with the macroeconomic challenges of the world, it will take at least a couple of years for the healthcare industry to stabilize and turn around,” said Dr. Luis Garcia, president of the clinic division of Sanford Health, a not-for-profit integrated system. “We’ll be dealing with these challenges for years to come—a lot of what we are seeing right now has become the new normal.”
Nationally, at the end of March, inpatient admissions were 15% lower than they were in March 2019, and ED visits were down 17%, according to Collective Medical data from more than 1,000 hospitals in nine states across the country provided by Glenn Melnick, a health policy and economics professor at the University of Southern California.
“I expected 2022 hospital volumes to be close to normal. They are not,” Melnick said. “At the same time, there appears to be more structural wage cost pressure. That cost pressure on labor and supplies will stretch out in the healthcare sector.”
Outpatient admissions, which are reimbursed at lower rates than inpatient admissions, have rebounded much more quickly than ED visits and inpatient admissions. But the uptick isn’t expected to offset the revenue gap, and all hospital departments—as well as their skilled-nursing and long-term care referral partners—are constrained by worker shortages.
While inpatient admissions at Seattle-based Virginia Mason Franciscan Health are moving in the right direction, they have yet to return to pre-pandemic levels, said Ketul Patel, CEO of the not-for-profit health system and president of CommonSpirit Health’s Pacific Northwest division.
“We are never going to be where we were before the pandemic, but we expect it to normalize over the next six months,” he said. “The challenge is staffing.”
To read more, go to Modern Healthcare.
|Providers Ask for Higher Payments in OPPS Proposed Rule
By Amy Baxter | July 19, 2022
The Centers for Medicare and Medicaid Services (CMS) released its Medicare Hospital Outpatient Prospective Payment System (OPPS) and Ambulatory Surgical Center Payment System proposed rule––and the payment increase included isn’t enough.
That’s what healthcare associations are saying in wake of the proposed rule, which affects 3,411 hospitals and approximately 5,500 ambulatory surgical centers (ASCs). CMS proposed a 2.7% payment rate increase for hospitals that meet applicable quality reporting requirements, based on the projected hospital market basket percentage increase of 3.1%, reduced by 0.4 percentage point for the productivity adjustment.
However, hospitals and health systems need a bigger increase in the face of current economic challenges and ongoing impacts from the COVID-19 pandemic, according to medical groups.
“We are deeply concerned about CMS’ proposed payment updated of only 2.7%, given the extraordinary inflationary environment and continued labor and supply cost pressures hospitals and health systems face. Hospitals and health systems – and their caregivers – have been on the front lines of the COVID-19 pandemic for over two years now,” Stacey Hughes, executive vice president of the American Hospital Association, said in a statement. “While we have made great progress in the fight against the virus, our members continue to face a range of challenges that threaten their ability to continue caring for patients and providing essential services for their communities. A much higher update is warranted, and we will be closely analyzing CMS’ proposed market basket, as well as its proposed productivity offset.”
The cuts come as healthcare providers are facing a 2% payment cut from previous sequestration cuts that were temporarily paused for the last two years during the pandemic. Now, as those cuts have resumed, hospitals and health systems are also still facing resource strain and workforce challenges from the pandemic. Additionally, inflation has reached 40-year highs, meaning hospital costs are still rising.
In the proposed rule, rural emergency hospitals (REHs), which were established as their own provider type in 2021, will receive an additional 5% payment for covered outpatient department services, and REHs will receive a monthly facility payment. This new payment model also includes conditions of participation (CoPs) similar to critical access hospitals’ (CAHs) CoPs.
To read more, go to Health Exec.
|Anesthesiologist Pay Jumps Nearly 9%
By Patsy Newitt | July 18, 2022
Anesthesiologist pay jumped 8.9 percent in the last year, according to Merritt Hawkins and AMN Healthcare’s 2022 “Review of Physician and Advanced Practitioner Recruiting Incentives.”
The report is based on 2,695 physician and advanced practitioner search engagements conducted from April 1, 2021, to March 31.
Here is the average anesthesiologist pay in the last five years:
To read more, go to Beckers ASC.
|ASA Endorses Medical Controlled Substances Transportation Act of 2022
July 13, 2022
The American Society of Anesthesiologists (ASA) has formally announced its support of the H.R. 7259, the Medical Controlled Substances Transportation Act of 2022, authored by Congressman Pete Sessions (R-TX-17). The bill would enable physicians to more easily transport controlled substances safely and legally across state lines. ASA sent a formal communication to Representative Sessions thanking him for his leadership on this issue.
If enacted, the legislation would represent an important step in permitting office-based anesthesiologists to administer medications at multiple practice locations. Current Drug Enforcement Administration (DEA) regulations require that a separate registration be obtained for each principal place of business or professional practice where controlled substances are manufactured, distributed, or dispensed with some exceptions. H.R. 7259 would provide clarity on this rule and ease the increasingly common practice of using controlled substances in multiple practice locations.
To read more, go to ASA’s website.
|Anesthesiologists Face Additional Payment Cuts as CMS releases its 2023 MPFS and QPP Proposed Rule
July 8, 2022
On July 7, 2022, the Centers for Medicare & Medicaid Services (CMS) has released its CY 2023 Medicare Physician Fee Schedule (MPFS) Proposed Rule, which includes proposals related to Medicare physician payment and the Quality Payment Program (QPP). Within the fee schedule, CMS proposed Medicare payment cuts to the Anesthesia Conversion Factor and the bundling of certain procedure codes that will only compound the financial strain that anesthesia groups are already facing. The proposed rule has a 60-day comment period and is expected to be published in the federal register on July 11, 2022. Final regulations will be issued on or around November 1 and unless otherwise noted, policies will be effective January 1, 2023.
ASA opposes these additional Medicare payment cuts included in the CY 2023 PFS proposed rule. The proposed rule underscores how the Medicare payment system is broken, especially during a time when anesthesia groups are faced with inflation pressures and the COVID-19 pandemic. ASA has urged and will continue to advocate to legislative stakeholders and regulatory agencies to minimize and reverse these cuts that negatively impact anesthesiologists.
Fee Schedule Provisions:
The 2023 proposed anesthesia conversion factor (CF) is 20.7191, representing a decrease of 3.91% from the 2022 anesthesia CF of $21.5623. The 2023 proposed RBRVS CF is 33.0775. This represents a decrease of 4.42% from the 2022 CF of 34.6062. The CFs are proposed to decrease because of two factors:
There is a 0% update scheduled for the PFS in CY 2023. The Medicare Access and CHIP Reauthorization Act of 2015 established a 0% update for PFS services through 2025. Beginning in 2026, clinicians identified as qualified participants in an Advanced Alternative Payment Model will receive an annual 0.75% update, and all other clinicians will receive a 0.25% annual update.
This negative adjustment also results from a statutorily mandated budget neutrality adjustment to account for changes in work RVUs. This means spending in one year needs to be balanced by reductions and CMS cannot increase or decrease expenditures by more than $20 million without triggering automatic budget neutrality adjustments. A funding patch passed by Congress at the end of CY 2021 expires at the end of CY 2022. This patch delayed a 3% cut to physician payment which was driven largely by updates to evaluation and management (E/M) services that were implemented in 2021.
To read more, got to ASA’s website.
|CMS Releases 2023 Medicare Physician Fee Proposed Rule
July 7, 2022
On July 7, 2022, the Centers for Medicare & Medicaid Services (CMS) issued a proposed rule that announces and solicits public comments on proposed policy changes for Medicare payments under the Physician Fee Schedule (PFS), and other Medicare Part B issues, effective on or after January 1, 2023. Zotec will publish an in-depth summary next week.
Read the Fact Sheet on CMS.gov.
|Report: These Are the Factors Impacting Individual, Small Group Premiums in 2023
By Paige Minemyer | July 5, 2022
The lingering effects of COVID-19, the end of enhanced subsidies for exchange plans and global inflation are among the key trends impacting premiums in 2023, according to a new report.
The American Academy of Actuaries issued its annual look (PDF) at the landscape for premiums on the individual and small group markets, and analysts said the enhanced subsidies and record enrollment that followed changed the risk pool for plans on the Affordable Care Act’s exchanges, and the end of those tax breaks likely portends a hike in premiums.
Should the subsidies, which were bolstered as part of the American Rescue Plan, fall off, people will leave the market, the actuaries said. Many of those who were lured into the market due to the expanded subsidies were healthier, and if they leave the risk pool costs will go up.
Barb Klever, vice chairperson of the academy’s Health Practice Council, said during a webinar that the timing around the subsidies’ expiration makes it hard for insurers to account for them in rate filing should they be renewed. Some states, she said, are asking plans to submit rate documents that reflect both scenarios.
Other states are asking insurers to include the potential impact of these subsidies on premiums, which could make updates to rates easier, Klever said. However, accounting for the subsidies is not universal across the country, she said.
“Improvement in the risk pool leads to lower gross premiums,” Klever said. “The impact on gross premiums is more incremental, and is directly tied to the health of the risk pool as a whole.”
In addition, Medicaid eligibility redeterminations, which will resume when the public health emergency ends, could also impact the risk pool by bringing in healthier people. This could drive premiums down overall, according to the report, but the effects will vary state by state depending on how quickly they begin the redetermination process.
Inflation’s impact on the healthcare industry is likely to extend to individual and small group premiums as well, the actuaries said. Inflation impacts providers in particular in their supply chain needs, and those challenges will likely bleed into negotiations over rate agreements with health plans. Of note, the actuaries said, is that these reimbursement deals are usually negotiated over the course of several years, so that impact of inflation may be felt for some time.
To read more, go to Fierce Healthcare.
|Price Transparency Rule Leads to Insurer Confusion
By Nona Tepper | July 5, 2022
Health insurance companies may not be ready to fully comply with new price transparency rules, but the government is ready to issue the fines.
At the start of July, federal regulators began enforcing a requirement that health insurers disclose the negotiated rates they pay to in-network providers and the potential out-of-network billable amounts patients may owe. Insurance carriers must present these data in a publicly available, machine-readable format online. Along with a related rule mandating hospitals disclose prices, the policy aims to help patients understand their costs and seek lower prices.
The regulation is vague and underwent changes late in the process, which makes it difficult for insurers to understand just what it means to be in compliance, said Dan Kuperstein, a senior vice president of compliance at consultancy Corporate Synergies and an attorney who specializes in employee benefits law. That’s even more true for smaller carriers, employers and third-party administrators, he said.
“The rule was written in very ‘legalese’ terms,” Kuperstein said. “It’s my job to break the legalese down, and even I found this one tough compared to other regulations I have been looking at.”
A week before the regulations took effect, the Centers for Medicare and Medicaid Services clarified that self-funded employers lacking consumer-facing websites could post the prices negotiated with providers on their third-party administrators’ websites.
But many other details about how to comply remain unclear. For example, businesses that use recruitment services to find job candidates are unclear about whether it’s sufficient to only post negotiated rates on third-party careers websites, Kuperstein said. Insurers that rent provider networks from other carriers are also unsure whether they are responsible for posting rates on their own websites, or if it’s enough for the other health insurance company to make the prices publicly available, he said.
And starting Jan. 1, insurers will be required to disclose out-of-pocket costs for 500 common, covered services via online, self-service tools. In 2024, health insurers will need to include personalized information for all medical services.
To read more, go to Modern Healthcare.