|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.
|Generic, FDA Approved Contrast Agent Set to Hit the Market in Wake of Nationwide Shortage |
By Hanna Murphy | July 19, 2022
On July 18 Fresenius Kabi announced that they are rolling out a line of generic contrast media products, starting immediately with Iodixanol Injection USP.
Iodixanol Injection USP is bioequivalent and therapeutically equivalent to Visipaque, and can be used for a myriad of intra-arterial and intravenous diagnostic radiology procedures, including contrast-enhanced CT scans, urography, angiography and more.
The announcement comes on the heels of a nationwide contrast shortage that has impacted tens of thousands of imaging procedures since April. With some leaders in the imaging community hinting that the contrast shortage could linger into the fall, the availability of a new option should come as welcome news to patients and providers.
“Fresenius Kabi is pleased to help expand access to affordable, high-quality contrast media agents for the radiology community,” Fresenius Kabi USA president and CEO John Ducker said in a statement. “The approval and U.S. availability of Fresenius Kabi Iodixanol Injection USP is expected to provide immediate relief to the current shortage. As a company committed to the purpose of ‘caring for life,’ we’re honored to help patients receive the timely care they need.”
To read more, go to Health Imaging.
|An Increased Need for Specialists Boosted Radiologist Salaries by 12%, According to New Report |
By Hanna Murphy | July 19, 2022
A growing need for specialty physicians has resulted in salary increases for many providers, radiologists among them, according to the latest data from Merritt Hawkins’ 2022 Review of Physician and Advanced Practitioner Recruiting Incentives.
The report placed radiologists’ annual compensation 6th among the top 10 highest physician salaries, at $455,000 per year. This is up 12% from the 2020/2021 figure of $401,000.
Tom Florence, AMN Healthcare’s president of physician permanent placement, suggests that the widespread salary and compensation boosts can be attributed, in part, to an aging population that requires more specialist care and to the tremendous backlog of patients who had their care delayed due to the strain that COVID put on the healthcare system.
“Demand for physicians, and the salaries they are offered, have rebounded dramatically from the height of COVID-19,” Florence said in a statement. “Virtually every hospital and large medical group in the country is looking to add physicians.”
Radiologists appear to benefit from the growing demand for telemedicine and, compared to many specialties, they have an advantageous hand in terms of access and the ability to adapt the profession to a remote environment as needed. This was evident in the report’s search engagements—18% of searches pertaining to radiology were seeking teleradiologists specifically.
Additional insights from the review include increased inquiries from academic medical centers (up 20% from the year prior) and nurse and/or advanced practitioners, and a drop in primary care provider search engagements (down 18% from one year ago).
The detailed review can be downloaded for free here.
To read more, go to Health Imaging.
|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.
|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.