Code Green

Charity Care Cuts - Is Your Hospital Ready?

By Kari Kemper, Provider Advantage

Below is an article written by Bob Groves, a staff writer for New Jersey.com pointing out that New Jersey hospitals may have to do more with less governmental reimbursement for services aqcuired by the uninsured:

Loss of charity aid will worsen hospital crisis

Wednesday, February 27, 2008

Proposed cuts to state health care funding deal a blow to both hospitals and to hundreds of thousands of New Jersey's most vulnerable citizens, advocates said.

Officials at the New Jersey Hospital Association predict a $108 million cut in charity care payments to hospitals will cause the financial crisis among hospitals to escalate. More hospitals will close, thousands of jobs will be lost and residents will have less access to health care, they said.

At least 29 hospitals have operating margins of 1 percent or less, and the cuts "will doom a number of those hospitals," said Betsy Ryan, president-elect of the association.

Other proposals that worry advocates include requiring Medicaid patients to make copayments and cuts to the state's FamilyCare program, which provides health care for low-income workers. Non-profits that provide community services wouldn't get a cost-of-living funding increase.

"We have heard so much about the need to invest in roads and bridges. But we have not heard nearly enough about the need to invest in people," said Debra L. Wentz of the New Jersey Association of Mental Health Agencies Inc.

Overall, the state Department of Health and Senior Services would take a 10 percent cut -- $180 million -- from its current $1.7 billion budget.

Hospitals bear the brunt of those cuts. Besides the $108 million decrease in payments to hospitals that care for indigent patients, funding cuts to cancer facilities, research and the state's medical program would decrease overall hospital funding by $143.5 million. In fiscal 2009, hospitals will receive $902 million, according to the proposed budget.

The proposed cuts were "very, very tough" but necessary, New Jersey Health Commissioner Heather Howard said Tuesday.

"We're doing more with less," Howard said in a phone interview. The state Health Department has lost 200 employees by attrition -- down to 1,950 workers -- since Corzine took office, she said.

"Our focus is protecting the vulnerable and preserving their access to health care," she said.

The state plans to distribute funding to hospitals it determines are essential and financially viable, Howard said. A new $15 million appropriation will support hospitals that plan to close facilities, through an asset transformation program, she said.

It will not be enough, hospital association officials said. While the state plans to spend $608 million in charity care funding, $1.3 billion in charity care services are being provided by the hospitals, said Gary Carter, president and chief executive officer of the association.

As if on cue, officials at Muhlenberg Regional Medical Center announced Tuesday that the hospital will likely shut down this year. The 130-year-old Plainfield hospital has been struggling, mainly due to what officials in the region say is inadequate state reimbursement for the uninsured patients it treats.

Present On Admission Deadline Nears

By Kay Jackson, Iatric Systems

Beginning April 1, 2008, if hospitals do not report a valid POA code for each diagnosis, the claim will be returned for correct submission. CMS expects to save $20 M a year based upon adoption of the POA indicator and that savings may in fact be understated.  Coding professionals will be central in the POA abstracting process and will need to work closely with hospital staff to create complete and accurate documentation. The CMS web site, listed below, provides all necessary information for hospitals reporting hospital-acquired conditions and present-on-admission indicators. The site outlines the background of the new present-on-admission regulation and explains what information hospitals need to submit as well as the proper codes. Two codes that need clarification are  U and W and CMS has not yet had a chance to tell hospitals if there will be a cap on the frequency with which they can use these two codes. To complicate the POA possible financial impact, these “never” events as they have been labeled, will also not be reimbursed by some commercial plans and the list is growing.  In fact, Massachusetts hospitals will adopt a no-charge policy for certain adverse patient events beginning this year.

POA CMS website:  http://www.cms.hhs.gov/HospitalAcqCond/

Present On Admission Workbook Produced by AHIMA: 
http://www.cms.hhs.gov/MLNMattersArticles/downloads/MM5499.pdf
http://www.cms.hhs.gov/Transmittals/downloads/R1240CP.pdf

Why Hospitals Fail and How to Avoid Financial Failure

Reported By Derek DeLia, The Record (Bergen County, New Jersey)

PASCACK VALLEY Hospital in Westwood will soon join a long and growing list of failed hospitals across New Jersey. Many are wondering why these hospitals are failing and what to do about it.

Hospitals fail for a variety of reasons. Some are poorly managed. Others become unnecessary if the local patient base declines.

But since hospitals must serve all patients with or without payment, even an essential, well-run facility can find itself in financial trouble. This is an obvious problem for hospitals with large numbers of uninsured patients.

Less obvious is the fact that hospitals can lose money even when their patients have insurance.

The Medicaid program often underpays for services.

Medicare and private insurance can pay very well or very poorly depending on the services.

Elective surgeries and other specialized procedures tend to be very profitable, while treatment for pneumonia, hip fractures and other conditions generate little if any profit. As a result, the financial health of a hospital depends greatly on having enough profitable patients to make up for the unprofitable ones.

Given its location in a relatively wealthy part of the state, Pascack Valley never faced a large burden of caring for uninsured and Medicaid patients.

But unlike in real estate, location is not all that matters.

Plunging operating margins

In 2003, the hospital's operating margin plunged, and it remained negative thereafter. The cause of the downturn appears to have been the hospital's inability to compete in a part of the state with a large concentration of other hospitals.

Prior reports appearing in The Record uncovered a series of poorly made managerial decisions during the time of Pascack Valley's financial decline. The closure of Pascack Valley may just be the result of market processes doing what they are supposed to do allowing stronger competitors to drive out weaker ones.

What comes next?

The larger question for area residents is, what comes next? In theory, patients from Pascack Valley will go to other nearby hospitals. However, the ability of these hospitals to take on a greater patient load is not guaranteed.

Despite being the largest hospital in the area, nearby Hackensack University Medical Center runs at very high occupancy and often places its emergency department on ambulance diversion putting out an alert that drivers should bring patients to the next closest hospital so they can catch up with a backlog of untreated patients.

Similar conditions across state

Recent analysis by the Rutgers Center for State Health Policy finds that these conditions are common across the state with ambulance diversion occurring once every hour statewide. The analysis also found that there were 47 days in 2005 when more than 95 percent of all maintained beds in the state were occupied.

As more hospitals close, the remaining facilities will face peak demand conditions more frequently, with serious implications for emergency care and disaster response.

What Can be Done to Avoid Financial Failure?

In this environment, several actions are needed to ensure adequate and affordable hospital capacity.

• First, address the uninsured to stabilize hospital finances. Achieving universal coverage will take considerable time, money and political effort. But in the short run, state government can work with hospitals and community health centers to better control the costs of charity care currently provided to the uninsured. Since two-thirds of these costs are driven by less than 10 percent of charity-care patients, the development of a targeted high-cost case management program for the uninsured would be very useful.
• Second, focus on avoidable utilization overall. New Jersey has much higher hospital admission rates and costs per admission than most other states. In addition, one-fifth of hospital admissions in the state are for conditions like congestive heart failure and asthma that may have been prevented through improved chronic care management.
• Third, hospital efficiency must be maximized. This is especially important in cases where an essential hospital requires public funding to avoid bankruptcy. While the funding may be necessary, public funds must not be used to subsidize a poorly run hospital even if it is vital to the community. Around the country, a number of failing hospitals have shown that they can rebound by increasing staff productivity and improving coordination across different departments. In some cases, a hospital may need only temporary financial assistance to facilitate these kinds of improvements.
• Fourth, initiate health care payment reform. We need to address the imbalances in payment that make some services much more profitable than others. Much of this will have to be done by the federal government, which runs Medicare. In the absence of federal action, the state will have to ensure that hospitals providing important but unprofitable services do not become insolvent as a result.

Putting Patients First at Griffin Hospital

By Dale Wolf, Cincom Systems

Hospitals are beginning to figure out what hotels have known all along – customer satisfaction is critical to market share and share of wallet. Yes there are nay-sayers who tell us that there is little evidence that customer satisfaction and creating customer advocates has a financial payoff. I see too many examples where companies that are dedicated to customer satisfaction are the best-in-class for growth.

Take Griffin Hospital that was once a struggling institution in the working-class Lower Naugatuck Valley of Connecticut. The board made a commitment to patient experience and now 20-years later – instead of closing their doors as was originally recommended – they are a shining light in the entire medical community. Griffin is financially successful, steadily expanding its programs, its buildings, and — a key metric for hospitals — its market share. It is the only hospital named by Fortune magazine as one of the “100 Best Companies to Work For” in America for seven consecutive years, ranking No. 4 in 2006.

Customer Satisfaction is ALWAYS Delivered by Employees

Research by Press Ganey shows a clear relationship between employee satisfaction, patient satisfaction, and quality of care as an interactive, reinforcing relationship. Not only do satisfied employees deliver better care—which results in better outcomes and higher patient satisfaction— but working for an organization that values patients and delivers quality drives employee satisfaction, retention, and loyalty.

Staff Interaction Leads to Patient Satisfaction

One such Press Ganey survey of 139,380 former patients of 225 hospitals revealed that none of the top 15 patient satisfaction factors had anything to do with the patient's health outcome. Instead the main factor was staff interaction, and there was a strong correlation between staff interaction and employee satisfaction.

Four Drivers

Analysis of data in the Press Ganey Employee Perspectives database has identified four key drivers of employee satisfaction:

1. Overall organization impression

2. Participation

3. Senior leadership

4. Recognition

Facilities where employees evaluate these dimensions positively experience improvements in employee satisfaction, patient satisfaction, physician satisfaction, clinical quality, and other critical outcomes.

Putting Patients First

According to Susan Frampton, Laura Gilpin and Patrick Charmel in their book: Putting Patients First, listening to patients or answering their questions costs nothing. "It can be argued that negative interactions—alienating patients, being non-responsive to their needs or limiting their sense of control—can be very costly. Angry, frustrated or frightened patients may be combative, withdrawn and less cooperative—requiring far more time than it would have taken to interact with them initially in a positive way.”

What Makes this so Hard?

“Perhaps the simplest and most profound of all human interactions is KINDNESS. But if it is so simple, it is surprising how frequently it is absent from our healthcare environments. Many staff members report verbal ‘abuse’ by physicians, managers and coworkers.”

Griffin Hospital -- The First Five-Star Hospital

As reported in “Strategy + Business” … While most hospitals are hacking and trimming in desperate efforts to survive, the executives at Griffin and other “five-star hospitals” have taken a different tack. They’re attempting to build health-care centers with the customer-friendliness of Nordstrom, the reliability of FedEx, and the transactional accuracy and simplicity of American Express. They believe that making hospital stays more pleasant will pump up market share and revenues, boost the quality of clinical care, create less stress for the staff, and generally turn their business around. They are transforming themselves to better serve the consumer.

Griffin Makes Radical Change

Griffin’s revolutionary childbirth center opened in 1987. Griffin’s maternity business — a profit center for any hospital — doubled in just four years from fewer than 500 births per year to more than 1,000. An extraordinary one-third of its “customers” came from outside the Naugatuck Valley. Patient and staff satisfaction surveys resulted in perfect scores. Then they rebuilt the medical/surgical patient facilities. They replaced the harsh fluorescent lights with indirect incandescent lamps, installed carpeting to absorb sound, and constructed family rooms and kitchens stocked with snacks. Volunteers came in to bake muffins and cookies for patients and staff, filling the corridors with comforting, homey smells. Musicians were brought in to play live music, and visiting hour restrictions were eliminated.

Griffin’s Efforts are Paying Off

In recent years, inpatient admissions have leaped 25 percent (from 5,866 in 1997 to 7,349 in 2004), and its outpatient services have grown even faster (from 94,567 in 1997 to 160,427 in 2004, an increase of 70 percent). This is three times the average growth rate for the state. Many of Griffin’s doctors have been able to expand their practices, bringing in other doctors.” At the same time, Griffin’s work-force turnover has dropped. “We under-compensate our employees,” CEO Patrick Charmel admits, “and we probably work them harder [than do other hospitals]. But they become much prouder of what they do.” Griffin has also become a model for other institutions. More than 500 medical centers — 10 percent of the hospitals in the U.S. — have sought out Griffin for benchmarking tours. Griffin is no longer everyone’s last choice in health care.

How much do you boost your hospital’s bottom line?

Interview from Today's Hospitalist with Dr. Ron Greeno and Dr. Russell Holman, Cogent Healthcare

How can you make the case to administrators that your program provides an exceptional return on investment?

The ability to make that case is increasingly important as programs look to CFOs and other senior management to fund staffing or pay raises for physicians already on board. Yet many hospitalist services find it hard to quantify what they bring to the table, not only in terms of savings but in other critical measures such as increased bed capacity.

In a recent presentation on the Web, Ron Greeno, MD, and Russell Holman, MD, two principals with Cogent Healthcare, a national hospitalist management company based in Nashville, Tenn., explained that hospitalists need to develop a methodology to track critical measures in several categories, including cost reduction and revenue generation.

Hospitalists should use these metrics to calculate their return on investment in both “hard” and “soft” dollars. (Hard dollars refer to actual money brought in or saved, while soft dollars are more indirect revenue and savings generated by having hospitalists on staff.) Both types of returns, they said, should figure into the value equation when hospitalists make their case.

According to Dr. Holman, Cogent’s chief operating officer, that’s particularly true in those hospitals that still think that hospitalist programs cost them instead of bringing value. “I would encourage you to focus the discussion on value, rather than on pure cost,” he said. “Small increments of performance applied to large numbers of patients yield big value.”

Cost reduction: direct variable cost per case

As long as hospitals can provide accurate, severity-adjusted data, cost reduction is the easiest metric to calculate, said Dr. Greeno, Cogent’s chief medical officer. It’s also the measure that hospital administrators put the most stock in.

“Reduced costs are the ‘hardest’ dollars,” Dr. Greeno said. “When you talk to hospital CFOs, they place more value on this metric than on any other.”

When discussing direct variable costs per case, you should pick a benchmark against which to compare hospitalist performance. Say, for instance, that a hospitalist program manages 3,000 cases per year. When compared to non-hospitalist physicians practicing at the same hospital, the hospitalist program may have a severity-adjusted direct variable cost that is $700 less per case. That’s a savings of $2.1 million for the year.

If you don’t have costs per case data for practicing non-hospitalists, you can compare hospitalists’ direct variable costs per case to pre-program or historical baselines, or some type of external benchmark, Dr. Greeno said. (You can choose from a variety of external cost-per-case benchmarks, such as actuarial data from a company such as Milliman or large health plan databases like Kaiser Permanente’s or Cigna’s.)

Some hospitalist programs go even further to break down variable cost savings into specific areas. According to Dr. Greeno, one program found that hospitalists used 1.46 fewer medications per case than non-hospitalists, which yielded a savings of more than $100 per case. When those savings were applied to all 3,787 cases the hospitalists cared for that year, the hospital’s drug costs dropped by $378,000.

Dr. Greeno also authored the section on measuring value in hospitalist programs in the recently published “Comprehensive Hospital Medicine: An Evidence-Based Approach,” a new book that Dr. Holman co-edited. (See “New reference takes aim at all of hospital medicine.”)

Revenue generation

In addition to reducing costs, hospitalist programs also generate revenue by increasing bed capacity and reduced emergency room diversions, Dr. Greeno pointed out.

“Very simple calculations can be done to determine that potential, and I highlight the word ‘potential,’ ” he said. He added, however, that some hospital chief financial officers consider revenue generation to be soft dollars. That’s because it’s difficult to say exactly which factors account for increased patient revenue.

Here’s a look at several formulas Dr. Greeno outlined to calculate new potential revenue.

Open bed days.

This particular metric, he explained, “is most applicable to hospitals that are near or at capacity.” If a hospital has lots of extra capacity, there is less potential for open bed days to drive revenue.”

To calculate open bed days, find the difference between the average lengths of stay produced by both the hospitalist program and non-hospitalists. Multiply that difference by the number of admissions that hospitalists care for over the course of a year, and that’s the number of open bed days the hospitalists create by reducing length of stay.

Divide that number by the hospital’s average length of stay, and you have the number of new admissions—or “new admissions capacity”—that could be generated by the hospitalists. “If you then multiply that number by the average hospital revenue per case,” Dr. Greeno pointed out, “that gives you the incremental potential revenue that this increased capacity can create.”

Here’s the example he gave: Hospitalists at one small hospital averaged 3.9 days per-case length of stay compared to non-hospitalist cases of 5.5 days, a 1.6-day difference. During their first year, hospitalists handled 1,381 admissions. By multiplying 1,381 admissions by the 1.6 day difference, the
hospitalists created 2,209 open bed days.

“If those open bed days were filled with patients, even with the longer length of stay posted by the non-hospitalists, that would allow for more than 400 new admissions that year, with no additional building, staffing or equipment costs,” Dr. Greeno pointed out. With the hospital’s average revenue running about $8,500 per case, that increased capacity could translate into $3.4 million in additional annual revenues.

In year two, the number of admissions increased to nearly 3,200, while the hospitalists’ average length of stay declined further to 3.7 days, compared to the 5.5-day non-hospitalist baseline. The number of open bed days increased to 5,700, allowing more than 1,000 new admissions—and $8.8 million in additional potential revenue.

Another point to keep in mind, Dr. Greeno said: When a hospital is full, what kinds of patients are not being admitted? “Those are elective cases,” he said, “which tend to have the highest margin in terms of hospital stays.”

Decreased ED diversions.

Creating open bed days also helps generate revenue by decreasing ED diversions.

According to Dr. Holman, the entire issue of hospital throughput and ED diversions is very complex. While he acknowledged that hospitalists cannot claim full credit for reducing ED diversions, he urged hospitalists to at least be appropriately recognized for “playing a critical role” in heading off diversions by boosting bed capacity.

He gave this hypothetical example, encouraging hospitalists to plug in numbers from their own facility: Say a hospital’s ED is on divert 5% of the time, and assume that 33% of ED visits lead to a hospital admission.

Being on diversion, then, costs a hospital that has 15,000 ED visits a year approximately 750 ED visits and 250 inpatient admissions. Based on an average revenue per admission of $8,500, the hospital could lose more than $2.1 million by diverting ED patients.

Dr. Holman also pointed to another cost of ED diversions: a negative public image of the hospital. With many EDs on diversion between 5% and 30% of the time, “What kind of image does that project about how we’re serving the community?” he asked. “This is not only a financial discussion, but it’s a patient safety and patient service problem. What value does your hospital place on those messages?”

Driving market share.

Another component in generating potential soft-dollar revenue is helping to drive a hospital’s local market share.

According to Dr. Holman, “A hospital medicine program is one of, if not the most, under-marketed and under-leveraged resources to drive volume to the hospital.” Hospitalists who do leverage their service to increase referrals need to track that metric as well.

If expanded referrals lead to 10 new admissions a month, that adds up, at an average per-case revenue of $8,500, to about $1 million a year in new revenue. Plus, Dr. Holman pointed out, admissions from specialists for either medical or procedural cases “tend to be from a higher, more favorable payer mix.”

Pay-for-performance and improved documentation.

One emerging area of potential revenue: Payers may increasingly tie reimbursement to performance on quality measures.

One proposed pay-for-performance program for Medicare patients, for example, would involve a three-tiered reimbursement model, Dr. Holman said. Depending on hospital-wide performance, one hypothetical model would pay the highest tier 2% above baseline, while those at baseline would see no change in reimbursement and a third tier would be paid at 2% below baseline.

That possible scenario could put 4% of Medicare reimbursement at risk. For a hospital that has 5,000 Medicare admissions a year and an average revenue of $8,500 per case, that 4% spread equals $1.7 million.

Finally, many hospitalist programs should be able to point to increased revenue in the here and now related to improved documentation practices. Dr. Holman gave this example: Through better coding and documentation, hospitalists improved their average per-case collections from $6,292 during their benchmark year to $7,351 their second year, an improvement of roughly $1,000 per case. Multiply that improvement by 3,000 cases, and you get a total of $3 million.

“That is not just $3 million in increased revenue,” Dr. Greeno pointed out. “This is $3 million in increased reimbursement and profit.”

Jay Greene is a freelance writer specializing in health care. He is based in St. Paul, Minn.

5 keys to effective hospital revenue management

By Dale Wolf, Cincom Systems

Technology and training are driving patient access improvement today. Although revenue cycle leaders face many of the same challenges they have dealt with in the past, technology is enabling them to work far more efficiently. Staff education boosts performance, and new training techniques use technology. Healthcare providers can increase their ROI and enhance benefit sustainability by applying five keys to effectively implementing technology that supports and enhances revenue cycle processes:

1. Let process improvement drive IT design decisions.
2. Invest ample time in staff training.
3. Communicate support for revenue cycle process changes from the top.
4. Link technology requirements with business needs.
5. Quantify system benefits.

Internal auditing of the revenue cycle begins with the collection of data regarding areas of risk, including: Rework. Rejected claims. Multiple "touches" to submit a clean claim. Lost revenue. Patient complaints. Poor or incomplete documentation.

Routine Use of Patient Insurance Eligibility Verification Significantly Improves Validation, Paid Account Rates: Study

Providers who routinely verify patient insurance eligibility and benefits through electronic or other means experience higher rates of paid accounts. That is the key finding from a newly released study conducted by CAQH, a nonprofit alliance of health plans and trade associations.

The CORE Phase II Patient Identification Study was conducted by CAQH as part of its Committee on Operating Rules for Information Exchange (CORE) initiative. CAQH launched CORE to develop a set of universal operating rules aimed at simplifying communication and administrative processes between providers and health plans.

The study, which included inpatient facilities and ambulatory physician practices in California and New York, will be used to help create CORE Phase III operating rules aimed at improving patient identification. The goal is to develop rules for more flexible matching criteria, which will enhance automated, real-time processing of eligibility inquiries and responses.

Source:  HFMA News

Bush Calls for Big Medicare and Medicaid Reductions

In his new budget, President Bush will call for large cuts in the growth of Medicare, far exceeding what he proposed last year, and he will again seek major savings in Medicaid, according to administration officials and budget documents.

Overall, the 2009 budget is likely to be the first $3 trillion spending request by a president. Healthcare savings are a crucial part of Mr. Bush's plan to put the nation on track to achieve a budget surplus by 2012.

To read the full story in The New York Times, click here.