At the Margins

Our latest insight into health care margin improvement efforts

Community hospitals: Are your finances on solid ground?

John Johnston, CPA, MHA December 6, 2017

John Johnston, CPA, MHA

Following months of uncertainty regarding health care reform and anxiety about provider margins, Moody's August report confirmed the assumptions of many hospital executives: Not-for-profit operating margins declined in FY16, and for the first time in several years, annual expense growth significantly outpaced revenue gains.

Moody's forecast for tighter margins for the not-for-profit hospital sector going forward is troubling news for all, but especially for community hospitals, which typically have lower margins and fewer resources to fall back on than their large-system peers. Industry analysts have responded by emphasizing the structural challenges facing the industry, and some have noted the growing difficulty for independent hospitals to go it alone, while speculating on a possible uptick in mergers.

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The 3-pronged strategy you need for cost reduction

Eric Fontana , Robin Brand November 22, 2017

Health systems' costs are quickly outgrowing revenue, and payers are looking for every opportunity to spend less for care and target high-cost acute services.

That means a Band-Aid strategy of slashing one-time costs will not suffice. The most successful organizations will pursue a three-pronged strategy of an all-hands-on-deck tactical agenda, fixed cost restructuring, and clinical variation reduction.

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3 trends in contract management—and how to solve them

by Braden Decker, Senior Director, Partner Services November 7, 2017

Over the past 15 years, I've seen managed care leaders face new and constantly evolving challenges. But one theme stays constant: They must find ways to negotiate better contracts and receive the associated reimbursement. Recently, I've been struck by three trends in the managed care space that providers must address to remain successful in today's margin-constrained environment. With the right contract management technology in place, organizations will successfully navigate these new complexities.

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A $1.6B cut to 340B payments, plus outpatient TKA: Our key takeaways on the 2018 Outpatient Final Rule

Eric Fontana November 2, 2017

Late yesterday, CMS released its Final Rule regulating outpatient payment in CY 2018. The biggest news includes two major changes that could significantly affect many hospitals' margins:

  • CMS will reduce the reimbursement for drugs acquired with discounts under the 340B program to average sale price (ASP) minus 22.5%
  • CMS will remove total knee arthroplasty (TKA) from the inpatient-only list, a change that will likely trigger a shift of cases to outpatient settings starting next year

Read on for more information about these changes, or register to hear a full analysis of the details in our upcoming webconference on the Outpatient Final Rule on November 10.

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MedPAC mulls reforming the hospital inpatient quality landscape: 5 key takeaways

Eric Fontana , Tony Panjamapirom, PhD October 26, 2017

We recently attended the Oct. 6 meeting of the Medicare Payment Advisory Commission (MedPAC), where the agency presented the first draft of a plan to simplify and consolidate Medicare's array of inpatient value incentive programs.

As a refresher: MedPAC is an independent agency that advises Congress on issues affecting the Medicare program. MedPAC consists of staff researchers and a 17-member commission representing different areas of the health care industry.

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Are you really reducing care variation costs?

John Johnston, CPA, MHA October 12, 2017

John Johnston, CPA, MHA

With hospitals facing slow revenue growth, health system leaders must confront mounting pressure to rein in spending. As leaders look to achieve significant—and lasting—savings, many are placing more emphasis on reducing unwarranted care variation. In fact, a recent survey found that CFOs consider it the single largest source—roughly 40%—of cost savings opportunities.

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Members Ask: How many Medicare TKA cases could shift outpatient?

Eric Fontana October 2, 2017

We've received a number of questions about CMS's recent proposal to remove total knee arthroplasty (TKA) from the inpatient-only list. If finalized, the proposal would allow TKA procedures to be covered by Medicare in the hospital outpatient department in CY 2018.

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Optimizing total joint performance in an era of uncertainty

by Sean Angert, MBA, National Partner September 15, 2017

Sean Angert, MBA

In its July 13 proposal to take total knee replacements off the inpatient only list, CMS has effectively opened the door for total knee arthroplasty to become an outpatient service.

Potential implications of such a shift include a significant payment rate reduction, given the much lower reimbursement for procedures in the outpatient setting, well as an interactive effect on volumes eligible for CMS's Comprehensive Care for Joint Replacement (CJR) bundled payment model. In addition, competition for those procedures deemed clinically appropriate to remain in the inpatient setting likely would intensify.

The uncertainty about the future direction of payment for total joint procedures creates a complicated—and evolving—strategic challenge for health systems. That said, the changes will not happen overnight. Following the removal of partial knee arthroplasty in 2005 from the inpatient only list, the shift to outpatient has been steady but slow; in 2015, 48% of all Medicare cases involving partial knee arthroplasty were performed on an outpatient basis.

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