At the Margins

Our latest insight into health care margin improvement efforts

3 ways to make 2017 the year of financial-clinical integration

John Johnston, CPA, MHA February 9, 2017

While there is a big question mark around the future of health care reform, hospitals can be sure of one thing: We must prepare to live with further cuts to payment.

In this environment, hospitals must be prepared to undertake more radical efforts to control costs, and many health care finance professionals acknowledge there are major dollars tangled up in clinical care from inappropriate admissions, inefficiencies, and duplicative services. 

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With so much uncertainty, how do you build your hospital's budget?

John Johnston, CPA, MHA January 17, 2017

Many hospital CFOs have been in the planning mode going into the new year, putting the finishing touches on their budgets. And some are hoping 2017 will be different from recent years. Despite average margins being up overall, some hospitals have found it harder to hit their annual budgets.

For example, one midwestern health system recently ended its first quarter with a $10 million negative variance to budget. The system has enough cash flow to maintain overall profitability for now, but certainly cannot withstand that same deficit over multiple quarters. This reflects a recent and precarious trend we are seeing: hospitals that are profitable yet are missing budget targets.

One of my colleagues, Sean Angert, recently shared with me his perspective on this trend, which he has gained during his years working with hospitals on efforts to balance revenues with expenses. Angert's insights speak to the concerns of today's health care CFO regarding margin sustainability and planning for 2017.

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What finance leaders need to know about the Episode Payment Models final rule

Megan Tooley January 11, 2017

On December 20, 2016, CMS released the Advancing Care Coordination through Episode Payment Models final rule, establishing mandatory bundles for coronary artery bypass graft (CABG) and acute myocardial infarction (AMI) in 98 metropolitan service areas, a cardiac rehab incentive payment model, and expanding the Comprehensive Care for Joint Replacement Model (CJR) to include surgical hip/femur fracture treatment (SHFFT).

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Overall Hospital Quality Star Ratings: Answers to your frequently asked questions

by Jordan Kreke December 16, 2016

The release earlier this year of Overall Hospital Quality Star Ratings for 3,662 providers sparked numerous questions from hospitals across the country: Which metrics affect overall star ratings? How are overall star ratings related to other CMS initiatives? Do overall star ratings impact reimbursement?

While detailed information is available online from CMS itself, we thought we would answer some common questions here.

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Experiencing MS-DRG volatility post ICD-10? You're probably not alone.

by Jordan Kreke December 7, 2016

While the ICD-10 transition is in the rearview mirror for most organizations, several of our members have reached out to us asking if we have heard instances of year-over-year volatility in certain MS-DRG volumes—and whether any fluctuations in certain DRG volumes could be related to post ICD-10 transition issues.

In response, we sifted through the recent CMS final inpatient regulations, along with some recently available claims data to try and answer the question. While our analysis did reveal some instances of MS-DRG volatility, the picture is not fully conclusive without a full set of FY 2016 claims detail. If your organization suspects any seemingly inexplicable shifts in volume that may be related to coding changes under ICD-10, we would love to hear about where you are seeing such impacts.

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Don't believe the headlines: Why you shouldn't look at VBP results in a vacuum

by Cameron Ferrey November 29, 2016

With the recent release of the final adjustments for CMS's Hospital Value-Based Purchasing (VBP) Program, we now have results for two out of three of CMS's inpatient pay-for-performance programs—the other being the Hospital Readmissions Reduction Program (HRRP).

Much of the media discussion has focused on the "half win, half lose" VBP story, but that narrative misses the broader picture: In reality, when program results are stacked together, more hospitals will find themselves facing reduced Medicare payments when all is said and done.

As has become custom, readmissions data are typically released in August each year while the VBP and Hospital-Acquired Condition (HAC) results follow in Q4. In each of the last two years, the VBP and HAC results were simultaneously announced in mid-December, but this year VBP results were released earlier, on November 1. HAC penalties remain unannounced for the time being.

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Rethinking the definition of "unfunded care"

John Johnston, CPA, MHA November 17, 2016

We all know the definition of charity care and the moral obligation to provide services to those who cannot afford to pay for their health care. We also know the magnitude of bad debts that hospitals write off every month. The sum of these two realities is a burden all hospitals carry.

But there is another layer of unfunded care that can impose an even greater financial burden on a hospital, without in any way furthering the hospital's mission-related efforts—stemming from inpatients whose length of stay (LOS) exceeds the Medicare Geometric Mean Length of Stay (GMLOS). These patients incur care delivery costs that extend beyond the time period Medicare uses to set DRG weights, which drive payment levels. It is important for hospital leaders to help their clinical teams understand the financial magnitude of this gap and then direct improvement programs to optimize care delivery within this patient population.

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CY 2017 Outpatient Final Rule: Early impressions of the site-neutral payment provision

Kenna Hawes November 2, 2016

Late yesterday, CMS released its much-anticipated Hospital Outpatient Prospective Payment System Final Rule for calendar year (CY) 2017. Tune into our webconference on November 16 to learn more about the biggest developments from the 1,377-page regulation.

The final rule provides a positive payment rate update for hospital outpatient departments (1.7%), with total payments expected to increase by $773M in 2017.

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