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Report: Top 10 Issues Facing the Health Care Industry

Price Waterhouse Cooper’s Health Research Institute recently released its annual report on the top 10 issues facing the U.S. health sector this year, including the need to adjust to empowered consumers, rapid innovation and increasing competition from nontraditional players.

The report noted that much of the health care industry has accepted that reform is here to stay—and forward-looking executives are making decisions based on a post-Affordable Care Act landscape that has altered the provision of insurance and the delivery of care. The top 10 issues facing the health care industry, as identified by HRI, are:

1. Price transparency is growing as purchasers—consumers and employers—are demanding and receiving more information on cost and quality.

2. Employers are exploring new health insurance options through private exchanges.

3. New regulation aims to eliminate counterfeit medications in the drug supply chain.

4. States are turning to managed care to help contain Medicaid long-term care costs.

5. All health care companies need to rethink their roles and business models in the new health economy.

6. Health care companies will need to change their rules on innovation—embrace “fail fast” approaches.

7. Social, mobile, analytics and cloud technologies are driving new health industry business models.

8. Corporate venture capital is picking up the slack as traditional venture funding slows for pharmaceutical start-ups.

9. Technology is redefining the health care job market.

10. Drug makers must rethink their clinical trial research methods, embracing alternative approaches.

 

“While health insurance exchange implementation is driving headlines today, in reality the next 12 months will be marked by how well the industry addresses a range of core business challenges. Our annual top issues report identifies the main concerns facing the health industry in 2014,” said Kelly Barnes, PwC’s U.S. health industries leader. “Businesses must address rapid innovation and competition from nontraditional players, but above all they must respond to empowered consumers as customer-centric transformation sweeps health care.”

The full report is available at http://pwc.to/18H0CwI.

Affordable Care Act Pushes Providers to Cut Costs and Care Quality

To the millions of previously uninsured Americans who have recently been extended the opportunity to gain health coverage; the time has arrived to schedule surgeries and other necessary medical procedures that have been put off for some time. 

Because of this, the health care industry currently appears to be poised to grow so as to meet greater demands that are commonly viewed as inevitable.  Why then, is it, that in a time that seems to offer such a boon for health care providers, some hospitals are currently seeking to partner up with others while still other hospitals are being listed for sale?

One of the factors causing this is that the health care law encourages hospitals to reduce costs and offer more value due to new rules that reward more for the quality of care that is delivered than the number of patients seen.  Therefore, hospitals are forced to adapt to the new health care landscape and work within the new parameters to stay competitive and ultimately survive.

The health care law signed by President Obama in March of 2010 made noteworthy cuts in hospital reimbursements for Medicare between 2010 and 2020.  This will amount to about $155 billion dollars nationwide.  The law will also affect hospitals that report exorbitant readmission rates viewed as avoidable within 30 days of discharge for heart failure, heart attack and pneumonia patients.  Medicare payments will be reduced at such facilities.  In the coming year, reimbursements will also be reduced at hospitals where patients get an infection if it lengthens their stay.

Obamacare also encourages providers and hospitals to form ‘accountable care organizations’; which are basically networks of providers, such as primary care doctors, specialists, and hospitals.  These networks are encouraged to work together, coordinating health care for their patients.  This is definitely a very different model than the typical fee-for-service system currently seen in the United States.

The ‘accountable care organization’ model coordinates patient care between primary care providers, specialists, and hospitals and even pharmacies.  The experience this creates for the patient tends to improve their quality of care while also allowing them to search for ways to reduce costs and be more efficient. 

The concept is designed to offer care to a large amount of patients on an outpatient basis; thus reducing the necessity for the hospitalization of patients.  Under this ACO model, patients will gain access to a primary care physician which will mean lower-cost treatment at earlier stages of illness, which should prevent a trip to the emergency room.

Obamacare also encourages individual states to expand their Medicaid programs, to offer coverage for any uninsured resident who does not currently have enough income to purchase a health insurance plan.

In California, a hospital system, known as the Daughters of Charity, has recently moved to sell off six of their hospitals because they are known to treat a disproportionate amount of low-income Medicare patients.  Since Medi-Cal (California’s version of Medicare) payment rates are notoriously low, many hospitals have had great difficulty.

Meanwhile, many in the health care field are pointing out that the new health care law should act as a catalyst to accelerate the trend of moving medical care from large hospital systems to less expensive facilities. 

CEO of Mnet Financial, David Hamilton, recently said “it stands to reason that, in light of the new health care law, medical care would move from larger, more expensive hospital systems to smaller, less expensive facilities such as outpatient hospitals and ambulatory surgery centers.”  He further added “these facilities typically are equipped with the latest in technology which also helps reduce the necessity for procedures on an inpatient basis.”

As the health care environment continues to change, it appears that the attitude of viewing the large hospital system as the focal point of the health care system is quickly becoming a thing of the past.

HFMA Releases Patient Financial Communications Best Practices

The Healthcare Financial Management Association (HFMA) recently released new guidelines for improving and standardizing how health care organizations communicate with patients about their financial responsibilities.

The Patient Financial Communications Best Practices are meant to bring consistency, clarity and transparency to the process, the association noted.  The best practices call for annual training for point-of-service staff—including patient access, financial counseling and consumer service—around patient financial communications.

The best practices also detail preferred patient financial communications in several settings—before service, in the emergency department and in other care settings.  The best practices were developed by the HFMA in conjunction with the American Hospital Association, America’s Health Insurance Plans, the American Academy of Family Physicians and the National Patient Advocate Foundation.

The complete best practices document is available on HFMA’s website, http://www.hfma.org.  The HFMA has also been working with ACA International on a separate set of best practices focused on medical debt collection.

CareCredit to Pay 34 Million Due to Claims Product Didn't Provide Details of Hidden High Interest Fees

The Capital division of General Electric has agreed to refund as much as $34.1 million dollars to bring a resolution to recent allegations of misleading consumers regarding terms for their CareCredit product offered by many medical facilities to pay for medical procedures and surgeries.

The settlement between CareCredit parent company GE and the Consumer Financial Protection Bureau is the first action to be taken by the CFPB involving medical credit cards. These cards are widely used by dentists and doctors throughout the country to pay for procedures that are not covered by insurance or to cover the self-pay portion of the patient's bill.

This settlement has come forth in tandem with a new initiative by the CFPB to scrutinize deferred interest financing that allows borrowers to refrain from paying interest for a set time period but would later adjust to extremely high rates. The CFPB has pointed out that this deferred interest plan could eventually result in much higher rates than their traditional credit card offerings.

The CFPB alleges that CareCredit signed borrowers to financing plans without the benefit of an explanation of the terms of the contract by the medical staff who facilitated the sale of the plan. They further alleged that many of the consumers who had signed up for the plan believed that they were not paying any interest at all, even though the reality was that they were paying as much as 27% interest at the end of the interest free cycle. 

Officials at the CFPB also have claimed that they have received numerous complaints about the product. To avoid paying fines, GE Capital was required to offer refunds to product consumers and to cooperate with the investigation of the CFPB. 1.2 million consumers must now be notified that they can file a reimbursement claim for fees and interest. In the future, CareCredit must contact new consumers directly within 72 hours of application of the product to fully explain the loan to them.

“Mnet Financial offers 'in service' training for clients and consultation to help them deal with the expected rise in out-of-pocket expenses being incurred by patients. Even though the reason for these expenses is often a high deductible insurance plan or the co-insurance portion of the patient's health plan; the patient often tends to vent their frustration with the medical provider and their billing process. We want the patients of our clients to be very well informed about our financial products” said Mnet Financial CEO David Hamilton.

The refund deal that GE's CareCredit has allowed the company to neither admit or deny CFPB allegations. A spokesperson for the company says that GE Capital has cooperated with the CFPB investigation and has pledged to provide more education to health care providers and their patients.

More Americans Select High-Deductible Health Plans

The percentage of Americans enrolled in a high-deductible health plan (HDHP) increased in the first quarter of 2013, according to recently released data from the National Center for Health Statistics (http://1.usa.gov/H8CtXV).

As of March, 32.5 percent of people under age 65 with private health insurance were enrolled in a HDHP, including nearly 11 percent who had a consumer-driven health plan (CDHP). The report defines a CDHP as a HDHP that is paired with a health savings account (HSA).

The percentage of Americans with a HDHP of any kind is up 1.4 percent from 2012 and up 13.3 percent from 2008. The percentage of Americans with a CDHP has also increased during both time frames. Employers have increased their high deductible offerings in recent years as well, and CDHPs could become the most common form of coverage offered by large and midsize employers in the next three to five years, according to a separate study (http://bit.ly/19YOY3b).

Though HDHPs and CDHPs are increasing in popularity, a growing number of consumers who choose high deductible plans are finding that they are unable to pay their medical bills, Kaiser Health News reported recently (http://bit.ly/19RK3ND).

Report: Insurance Exchanges Could Hurt Not-for-Profit Hospitals

The new health insurance exchanges that launched Oct. 1 as part of the Affordable Care Act could have a “modestly negative” financial effect on not-for-profit hospitals, according to a recent report from Moody’s (http://bit.ly/H8BUxs).

Risks to these hospitals include the shift of patients from commercial plans to exchange plans, which are likely to have lower reimbursement rates, and the uncertain terms and contracts between exchange plans and hospitals, as well as a growth in bad debt.

“The exchange-related risks center on two primary issues that will largely negate the benefits of a declining uninsured population in 2014. These issues are the level and composition of enrollment, and how insurance exchanges exacerbate revenue pressures on hospitals,” said Moody’s Associate Managing Director Lisa Goldstein.

Goldstein added, “Providers are reporting that negotiations with exchange plans range from Medicaid rates, usually the lowest rate-per-service a hospital receives and does not cover costs, to a discount off of commercial rates, typically the highest rate a hospital receives. Commercial rates subsidize losses incurred with Medicaid and Medicare and drive profitability for most hospitals.”

If exchange plans have lower reimbursement rates than commercial plans, it could reduce hospitals’ revenue growth in 2014. This analysis comes on top of an already murky economic outlook for hospitals. One recent report (http://bit.ly/1cPMjtm) indicated that expenses grew faster than revenues in 2012, while another report (http://bit.ly/1dc5Tm0) predicted future financial challenges as patient demand decreases and reimbursement cuts continue.

Premium Rate Increases Lowest in a Decade, But Expected to Spike in 2014

U.S. companies and their employees this year saw the lowest health care premium rate increases in more than a decade, according to a recent analysis from Aon Hewitt. After plan design changes and vendor negotiations, the average health care premium rate increase for large employers in 2013 was 3.3 percent, down from 4.9 percent in 2012 and 8.5 percent in 2011.

In 2014, however, average health care premium increases are projected to move back to the 6 percent to 7 percent range. The analysis showed that the average health care cost per employee was $10,471 in 2013, up from $10,131 in 2012. The portion of the total health care premium that employees were asked to contribute toward this premium cost was $2,303 in 2013, compared to $2,200 in 2012.

Meanwhile, average employee out-of-pocket costs, such as copayments, coinsurance and deductibles, increased 12.8 percent ($2,239) in 2013, compared to just 6.2 percent in 2012 ($1,984). In 2014, average health care costs are projected to increase to $11,176 per employee. Employees will be asked to contribute 22.4 percent of the total health care premium, which equates to $2,499.

Average employee out-of-pocket costs are expected to increase to $2,470. These projections mean that over the last decade, employees’ share of health care costs—including employee contributions and out-of-pocket costs—will have increased almost 150 percent from $2,011 in 2004 to $4,969 in 2014.

“There are many factors that contributed to the lower rate of premium increases we saw over the past two years that we don’t expect to continue in the long-term,” said Tim Nimmer, chief health care actuary at Aon Hewitt.“These include the lagged effect from the economic recession on health care spending, and continued adjustments as employers and insurers phase out the conservatism that was reflected in earlier premiums due to uncertainty around economic conditions and health care reform.”

Health Plans with Higher Deductibles Increase Necessity of Patient Financial Services

Obamacare is currently receiving a hefty amount of criticism throughout the country, with much of the melee surrounding the release of the new health care exchange and the technological issues that continue to arise from it.But even though the roll-out of the health care law has been anything but seamless, hospitals and surgery centers in the U.S. are finding they are faced with the reality that lower-cost insurance coverage with higher deductibles is likely to be the coverage of choice for a large cross-section of the country in the very near future.

A recent study implies that of those who are insured, one in five are likely to have problems paying their medical bills. But those percentages are expected to increase as more employees also turn to high deductible plans because many employers have shifted more health care insurance costs onto their employees. This shift is likely to result in employees choosing plans with higher deductibles to reduce their monthly expenses. 

Knowing what current studies now suggest, revenue cycle professionals should expect that about 20 percent of their patients will experience issues in paying for their medical bills. Maintaining a financially healthy hospital or medical practice will logically rely on the expertise of the medical center’s collection department or collection vendor and their effectiveness at collecting patient revenue in a timely manner.

To continue to remain financially sound, a medical center should strive to be as proactive as possible by reaching out to the patient shortly after treatment. Additionally, a provider should also choose solutions that allow them to screen patients regarding their ability to pay for services.

Patient predictive payment tools are not designed to be used to prevent patients with lower scores from gaining access to health care. However, by estimating the patient’s likelihood of paying their bill, the facility is better equipped to direct the patient toward mutually beneficial payment options.

“An array of payment options for the patient to choose from is extremely important for the financial health of a provider,” said Mnet Financial CEO David Hamilton. “Fortunately, the reality is that most patients have the ability to pay something toward their services, so it’s likely that we will have a viable solution to get the patient’s medical debt resolved,” said Hamilton.

Credit based health care financing, payment plan management systems, and call center accessibility are all important tools available to the health care provider of today. “At Mnet Financial, our MedDraft payment plan system secures a payment contract with the patient prior to service so the bill gets paid,” said Hamilton. “And if the patient defaults on their pay plan contract, the account is then forwarded to Mnet’s collection department to help get the patient back on track,” Hamilton said.

While it appears certain that the high cost of health insurance as well as new health care legislation will eventually cause self-pay portions of patient’s medical bills to rise, many options are still available to health care providers. By making proper use of the tools made available by a reputable financial services and collection vendor, providers can continue to thrive.

Private Health Insurance Coverage Decreased Nearly 4 Percent During Downturn

Most states saw private health insurance coverage decrease during the economic downturn between 2008 and 2010; then stabilize between 2010 and 2012, according to a recent Census Bureau report (http://1.usa.gov/15mc3bv).

Between 2008 and 2010, 45 states and Washington, D.C., had decreases in the percentage of residents under the age of 65 who had private insurance. In 32 of these 45 states, the loss of private insurance outpaced the gains in public coverage (which includes Medicaid and other medical assistance programs), resulting in an increase in the uninsured rate.

Nationwide, the percentage of Americans under the age of 65 who had private insurance decreased from 66.1 percent in 2008 to 62.5 percent in 2010. “In periods of economic downturn, the ability of individuals to access and afford private health insurance becomes more limited,” the report noted.

Between 2010 and 2012, the percentage of Americans with private insurance decreased by only 0.4 points as the economy began to improve. Most states (32) and D.C. did not have a statistically significant change in the percentage of residents who had private insurance.

Of these 32 states and D.C., 17 had increases in the public insurance rate, which in most cases caused a reduction in the uninsured rate. Nationwide, the uninsured rate increased by 1.2 percent between 2008 and 2010; then decreased by 0.8 percent between 2010 and 2012.

Between 2011 and 2012, the total number of Americans who had health insurance of any kind increased from 260.2 million to 263.2 million, according to a separate Census Bureau report released in September.

Study: Many Hospitals Slow to Prepare for Coverage Expansion

Most health systems have been slow in preparing for implementation of the new health insurance exchanges, and the newly eligible pose an enrollment challenge, according to a recent study. The study, “Health Exchanges: Open for Business,” released in September by PwC’s Health Research Institute, included feedback from more than 150 hospitals across 25 states, as well as national hospital associations and patient advocacy groups.

It found that few hospitals have developed comprehensive strategies to identify, educate and help enroll people in health plans sold through the new exchanges that opened to consumers last month as part of the Affordable Care Act. Coverage under these plans begins as early as Jan. 1, 2014.

Other key findings of the study include:

• Many providers have been slow to promote the expanded coverage options. Health systems attribute delays in their enrollment efforts to multiple factors, including: “Reform fatigue;” the need to finalize contracts with insurers; the slow trickle of information from regulators; and the desire for additional regulatory guidance, especially in the area of outreach designations and certification requirements.

• The newly eligible pose an enrollment challenge. If individuals do not understand which plan best fits their needs, it could impact the health of the patient as well as the revenue and reputation of the hospital. Many Americans do not fully understand the basics of health coverage, and exchanges will add another layer of complexity as 86 percent of individuals who purchase a health plan on the exchange will receive some government subsidy.

• Narrow networks could leave some hospitals out. Some health plans include only select hospitals and physician groups in their exchange offerings in an effort to hold down costs. This enables health plans to offer lower premiums, but also may lead to higher out-of-pocket expenses.

The full study is available at http://bit.ly/15Pwh0L.

3 Million More Americans Get Health Insurance in 2012, Census Bureau Finds

The number and percentage of Americans with health insurance increased in 2012, according to U.S. Census Bureau data released recently. The Census Bureau reported the following:

• The number of people with health insurance increased to 263.2 million in 2012 from 260.2 million in 2011, as did the percentage of people with health insurance (84.6 percent in 2012, 84.3 percent in 2011).

• The percentage of people covered by private health insurance in 2012 was not statistically different from 2011, at 63.9 percent. This was the second consecutive year that the percentage of people covered by private health insurance coverage was not statistically different from the previous year’s estimate. The percentage covered by employment based health insurance in 2012 was not statistically different from 2011, at 54.9 percent.

• The percentage of people covered by government health insurance increased to 32.6 percent in 2012, from 32.2 percent. The percentage covered by Medicaid in 2012 was not statistically different from 2011, at 16.4 percent. The percentage covered by Medicare rose over the period, from 15.2 percent in 2011 to 15.7 percent in 2012. Since 2009, Medicaid has covered more people than Medicare (50.9 million compared with 48.9 million in 2012).

• The percentage of children younger than 18 without health insurance declined to 8.9 percent (6.6 million) in 2012 from 9.4 percent (7.0 million) in 2011. The uninsured rates did not show a statistical change for all other age groups: 19 to 25, 26 to 34, 35 to 44, 45 to 64, and people 65 and older.

• The uninsured rate for children in poverty (12.9 percent) was higher than the rate for children not in poverty (7.7 percent).

• In 2012, the uninsured rates decreased as household income increased, from 24.9 percent for those in households with annual income less than $25,000 to 7.9 percent in households with income of $75,000 or more.

The full Census Bureau report is available at http://1.usa.gov/14zSZZR.

Report: Coverage Expansion to Spur Health Spending Growth in 2014

Health care prices have been growing slowly this year, but the growth rate is expected to increase in 2014 with the full implementation of the Affordable Care Act. Expected growth for 2014 is 6.1 percent, according to a report (http://bit.ly/18PnRZK) from the Centers for Medicare and Medicaid Services published in the September issue of the journal Health Affairs. That rate is about 2 percentage points higher than the projected growth rate for this year.

Much of next year’s projected increase will be due to major coverage expansions through the Affordable Care Act, the report noted. Over the long term, the growth rate is expected to be sustained more by the improving economy and an aging population requiring more care, with the health care law being less of a factor.

Between 2012 and 2022, national health spending is projected to grow at an average annual rate of 5.8 percent. During that same time, the Affordable Care Act is expected to only add about 0.1 percent to average annual health spending growth.

Another recent report also projected that the current lull in health care spending is unlikely to last. The report (http://bit.ly/19xmHx5), released in September by the Brookings Institute, found that health care sector spending is expected to continue to grow 1.2 percent above real GDP growth in coming decades.

That’s a slower rate than the recent average of 2.4 percent growth, but even exceeding GDP growth by 1.2 percent means that the health care sector will be close to 25 percent of GDP in 20 years. This means the health care cost curve is unlikely to “bend” dramatically in the near future, according to the report.

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