Blog

What We Can Learn About Hospital Finance from the First Space Pirate

5 November 2019
Cleverley
No comments
Categories: Blog

Hospital Finance from the First Space Pirate

Recently, NASA verified that they are investigating what might be the first crime in space. The short version is that Anne McClain accessed her ex-wife’s bank account while stationed aboard the International Space Station. It should be noted that Ms. McClain denies any wrongdoing, but the incident has raised some interesting questions about crime in space.

Specifically, what do we do about crimes in space?

In case you’re curious, the short answer here is that the offender would be subject to the laws of the country from which they originated. The five nations involved in the ISS have also set up laws dealing with any cross over, including extradition.

So what does this teach us about hospital finance? Well, as you can read in the above paragraph, NASA, and indeed all the space agencies, weren’t caught completely off guard by this event. A group of people placed, literally, under pressure in a tiny space was going to produce chaotic results at some point. NASA has long expected some kind of ill intent in space, and conversations about it date back to long before the agency was even called NASA. This type of forward thinking, trying to anticipate issues and planning fixes ahead of time, is exactly the kind of thing we should be doing in our own organizations.

Hospital finance strategy, data acquisition and storage, bundled payment impact testing, competition from non-hospital institutions, employer group challenges, constantly shifting healthcare law, can all be nebulous obstacles with a variety of consequences. It is always worth the time and effort to sit down and try to plot out the possible pitfalls of any new situation or complication.

If this is something you think we can help with, give us a call at [X]. (Unfortunately, at this time, our international space consultations are extremely limited.)

Wage Index Changes

5 June 2019
Cleverley
No comments
Categories: Blog

FY 2020 IPPS Proposed Rule: Wage Index Changes

The FY 2020 IPPS Proposed rule introduces a new approach to the hospital wage index to address payment differences between low and high wage index hospitals.  CMS proposes to increase the wage index for hospitals with a wage index value below the 25thpercentile (.8482 for FY 2020) and decrease the wage index for hospitals with a wage index value above the 75thpercentile (1.0351 for FY 2020) as well as changing the calculation of the rural floor.  CMS also proposes these policy changes be effective for at least 4 years.

To what extent is Wage Index changing from FY 2019 to FY 2020?

Data Source: CMS, FY 2019 IPPS Final Rule Impact File & FY 2020 IPPS Proposed Rule Table 2.
Data Source: CMS, FY 2019 IPPS Final Rule Impact File & FY 2020 IPPS Proposed Rule Table.

Regardless of whether the proposed quartile policies are implemented or not, the clear majority of hospitals will expereince an increase or decrease less than 5% or no change at all (86%and 92%).  CMS states in the proposed rule that addressing the wage index disparities at the high and low ends ensures those hospitals in the middle do not have their wage index values affected by this proposed policy.    

Why should hospitals be aware?

Although the proposal to address wage index disparities between high and low wage index hospitals is intended to be budget neutral, the effect to the overall change in payment to an individual hospital could be significant. 

Case Hospital Example:  Urban California Teaching Hospital with Wage Index > 75thPercentile

Reviewing an example hospital illustrates a change in payment from 2019 to 2020 using the proposed FY 2020 wage index and the FY 2020 wage index prior to the policy change. In this example, the volume and case mix index remain static to isolate wage index changes.  The other key ingredients to payment include the labor-related operating base rate and the wage index.

  • FY 2020 Proposed Wage Index = 1.8263
  • FY 2020 Wage Index (Prior to Proposed Policy Change) = 1.8619
  • FY 2019 Wage Index = 1.7827

The increase in the labor-related operating base rate as well as the increase in wage index from FY 2019 to FY 2020 drives an overall increase in payment for this facility.  However, payment is $4.3M less than it would have been prior to adjustments to the FY 2020 wage index.

Interested to comment to CMS on the IPPS Proposed Rule?

Be sure to review Table 2 of the proposed rule to see where your facility stands regarding wage index changes.  Comments must be received no later than 5 p.m. EDT on June 24th, 2019.  CMS encourages electronic submission of comments to https://www.regulations.gov.  Follow the instructions under the “submit a comment” tab.

Data Sample: Hospital Charge Index®

29 March 2019
Cleverley
No comments
Categories: Blog

Data Sample: Hospital Charge Index®

 

Pricing is certainly a hot topic right now with the disclosure requirement becoming effective on January 1, 2019.  The Hospital Charge Index® helps hospitals understand how high or low they are relative to peers for both inpatient and outpatient charges.  The metric utilizes total claim charges and is adjusted for resource intensity and cost of living.  Because the new requirement includes a provision to display average charges by MSDRG, the Hospital Charge Index® can help busy executives evaluate encounter-level charge comparisons for their hospital to any other in the country in one central place.  As seen in the data display, there are several low-charge states and MSAs in the New England area.  Maryland – and the Baltimore MSA – continue to be the lowest charge benchmarks nationally as the state has strict price and payment regulations.  Still, these low charges don’t always translate to lower payments as Maryland and Massachusetts are two of the top three highest payment states as measured by Net Patient Revenue per Equivalent Discharge™.  The State of the Hospital Industry publication highlights several other interesting points about relative charge positions nationally.  Among them, higher charge hospitals tend to be larger, urban facilities that also tend to have a less favorable payer mix which creates upward price pressure to recover payment deficiencies.  Proprietary facilities, as a group, also have higher median charge levels than other organization types.  And, finally, while many in the industry question the connection between gross charges and net revenue, there are significant charge differences between high and low operating margin groups.   

To see more detail on the data above and more than 80 other metrics of hospital performance, click here for the 2018 – State of the Hospital Industry”

Data Sample: 2-Year Change in Discharges

2 October 2018
Cleverley
No comments
Categories: Blog

Equivalent discharges™, our replacement measure for “adjusted discharges,” continues to gain acceptance as the new standard for volume measurement as it isn’t influenced by pricing changes and calculates a volume value specific to inpatient and outpatient areas.  The latest research shows that positive growth occurred in all but three states/territories (HI, MD, PR).  The national average has continued to increase, as well; climbing from 1.5% growth in our 2015 study to 5.8% in our current study.  Our top five states are primarily in the West, which as a region saw the highest growth.  Metro areas among the top five appear to be among areas that have seen population growth.  Still, while volume growth could be good economically for hospitals with fee-for-service reimbursement, areas that have been able to contain equivalent discharge growth might be better positioned in value-based structures.  If payment moves in that direction, we could see more emphasis on restricting volume growth.

To download the pdf click here.

Focused On Pricing Transparency

22 August 2018
Cleverley
No comments
Categories: Blog

Are Hospitals Still Focused On Pricing Transparency?

Pricing transparency has been the topic and trend in healthcare for the past few years.  The industry has responded with numerous research articles, solutions and products.  Hospitals have made prices more publicly available, reduced charges and restructured pricing methodology.  However, with pricing transparency being all the buzz, where has that left the focus on costs in healthcare?

Recently, at HFMA’s Annual Conference in Las Vegas, we asked respondents in a random poll: “What is your hospital currently concerned about?”  We found out that more than half (~55%), were currently concerned about costs, while only 20% were currently concerned about pricing.  Obviously the two are always going to be inextricably linked as they both impact profitability. Therefore, you can never be solely focused on pricing without considering the cost and vice versa. However, with all the attention pricing transparency has been getting we were a little surprised about the high concern with costs.

So let’s examine the Hospital Cost Index™ and what changes we have seen across the nation in the last few years.  For trending purposes, we will be looking at two specific metrics that make up the Hospital Cost Index™, Average Cost per Medicare Discharge case mix and wage index adjusted and Average Cost per Visit case mix and wage index adjusted.  The table below presents the 25th, 50th, and 75thquartile from 2014 – 2016 and is derived from public use files.

From the data we can see consistent growth in inpatient costs but virtually no change in outpatient costs. This may result from intense competitive pressure from free standing providers in surgery and imaging.

If you would like know how your hospital has trended give us a call at 888.779.5663.