In a session at the Becker’s Hospital Review Annual Meeting in Chicago on May 18, Ken Perez, senior vice president of marketing and director of healthcare policy at MedeAnalytics, discussed key developments in Medicare reimbursement and strategies to deal with pending changes.
Mr. Perez began the discussion by referring to the Titanic. "2012 is the 100th anniversary of the maiden voyage and sinking of the Titanic. For many years, many people have asked why the Titanic sank wanting to know what really occurred," Mr. Perez said. "A recent article in the Smithsonian showed that the night the Titanic sank there was an optical phenomenon. The phenomenon prevented the Titanic's commander from seeing the iceberg because the iceberg was basically invisible to the naked eye. The inability to clearly see what lay ahead, doomed the Titanic."
Mr. Perez spent time on this metaphor because the healthcare industry, payment models and Medicare reimbursements are similar to the Titanic. They are big, complex and have relatively low nimbleness. "It takes years for healthcare to move and shift, much like it took hours for the Titanic," said Mr. Perez.
With that comparison in mind, Mr. Perez discussed the societal, legislative and market context for Medicare reimbursement. The U.S. federal debt is $15 trillion, which is equal to 100 percent of the U.S. annual gross domestic product. Annual national health expenditures are around $2.7 trillion or 18 percent of GDP. "Healthcare reform is a tapeworm in America — one that cuts our competitiveness far more than taxes do."
There are also 48 million Medicare beneficiaries, and total gross Medicare spending in fiscal year 2011 was $555 billion. "That is 14 percent of the federal budget, 20 percent of total national health expenditures and 4 percent of the gross domestic product," said Mr. Perez.
Additionally, more than 7 million Medicare beneficiaries experienced more than 12.4 million inpatient hospitalizations in 2009, and Medicare finances four out of 10 hospital visits. Medicare beneficiaries are using healthcare services frequently, but 61 percent of hospitals are losing money on Medicare.
Mr. Perez recommended hospitals focus on six strategies to improve their Medicare margins and delivery of care.
1. Form a financial-clinical partnership. Recognizing the need for more cost-effective care delivery, hospital CFOs should initiate meetings with CMOs and others on the clinical leadership team to forge or reinforce a financial-clinical partnership. Key agenda items in these meetings should include a candid assessment of the current financial condition of the hospital; an explanation and discussion of the impending increased financial pressures and their likely impact; and a solicitation of support and assistance from the clinical leadership team.
2. Perform detailed margin analysis. Hospitals should analyze the MS-DRGs or service line margins down to the physician and patient level, with attention on the five service lines with the highest volume, the highest profitability and the greatest losses. Mr. Perez said this margin analysis should be ongoing with review by service line managers, physicians and the hospital's senior management team.
3. Engage with service line managers and physicians. Hospitals must create a performance improvement action team, analyze the reason for Medicare clinical denial and create a clinical documentation improvement program.
4. Revamp care coordination. Hospital management teams should then evaluate and improve care coordination policies, reduce costly avoidable readmissions by improving the discharge process and establish a regional health information exchange.
5. Ensure efficient operating room utilization. Hospitals can achieve efficiencies by improving scheduling and aligning surgeons and surgeries. A standardization of processes and operational reporting can decrease gaps and delays, reduce costs and enhance care delivery, Mr. Perez said.
6. Improve emergency room operations. Hospitals must make sure that space and staffing challenges faced by the ER are well-documented. In addition, conduct a thorough data analysis and review of the ER's supply and drug utilization, ancillary testing and inappropriate usage.
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