Medicare Improvements for Patients and Providers

The Medicare Improvements for Patients and Providers Act of 2008 enacted July 15, 2008 created changes to the Medicare program. These changes have been communicated to affected parties (such as - physicians, therapy services, DMEs).

As a result of the new law, the mid-year 2008 Medicare Physician Fee Schedule (MPFS) rate reduction of -10.6% is retrospectively replaced with the fee schedule rates in effect from Jan - June 2008, which reflected a 0.5 percent update from 2007 rates. Additionally, MPFS payment rates are being revised to increase the fee schedule amounts for certain mental health services. More information on physician pay issues is available at Centers for Medicare & Medicaid Services (CMS).

Under the Medicare statute, Medicare pays the lower of submitted charges or the Medicare fee schedule amount. Claims with dates of service July 1 and later billed with a submitted charge at least at the level of the January 1- June 30, 2008, fee schedule amount will be automatically reprocessed. Any lesser amount will require providers to contact their local contractor for direction on obtaining adjustments. Non-participating physicians who submitted unassigned claims at the reduced nonparticipation amount also will need to request an adjustment.

CMS will be implementing other provision of the legislation in the coming months and will announce additional information as it becomes available.

A Need for MAR Funding

"I have a wonderful opportunity to provide additional services (or products) for my patients, but I have no financial ability to fund the build-out needed to accomplish that task." If you have said that, or even thought it, you have a major symptom indicating a need for MAR funding.

The way for any medical provider to increase profitability is to provide services or products for his/her patients that previously were outsourced or referred out. Not many medical providers realize that they have a cash bucket available for such expansion. The laziest asset any business has is its accounts receivable.

Medical providers, depending on their practice-type and size can have as much as a million dollars (or more) in medical claims awaiting payment at any given time. What a great source for financing expansion or growth. MAR funding will give the provider the financial tool needed for such expansion and will not eliminate or reduce his/her cash flow.

Pekin Hospital in Good Financial Health

Despite indications of financial troubles in the spring, the new CFO of Pekin Hospital says they are doing just fine.

The hospital plans to make use of an internal physician recruiter to replace physicians in normal staff turnover and new positions as one of the ways to keep their hospital competitive and profitable.

One of the hospital's biggest challenges is that of maintaining a positive image. Patient satisfaction is critical to the hospital's success; therefore, Pekin is looking for new ways to attract top notch physicians to help maintain this standard.

By using Medical Accounts Receivable (MAR) Funding as a source to generate working capital, Pekin hospital can use the immediate cash to upgrade technology and keep the hospital looking attractive for physicians and patients alike.

Large Increase in Number of Companies At Risk of Defaulting On Their Debt

The August 19, 2008 issue of The American Bankruptcy Institute Update reviewed comments from credit rating agencies which indicates that the number of companies most at risk of defaulting on their debt has soared this summer due to a decrease in consumer spending and the on-going credit crisis.

• In a recent report, Moody's Investors Service stated that 63 companies had the weakest liquidity rating and were in danger of defaulting on their debt. This is an increase of almost 19% in just one month.
• Recently, Standard & Poors listed 156 companies as most at risk of default...its highest total since May 2003. S&P went on to state that these companies are at risk of defaulting of $352 billion which is three times the last month's total.
• S&P also reported that as of August 11th, 52 companies have defaulted on debt worth $41 billion.

The financial community expects the current credit crisis to continue for some period of time. It is expected that the number of companies which will actually default on debt to increase substantially in the coming months as they struggle with low liquidity. It should be noted that many of these companies are not using one of their best assets, their accounts receivable, as a source of working capital as they face default. Many companies could reduce the risk of defaulting on their debt by selling their accounts receivables.

Healthcare companies can also benefit from a specialized form of A/R funding called MAR Funding. MAR Funding enables healthcare companies to sell their third party claims and receive cash right away instead of waiting 30, 60 or 90 days for reimbursement.

HEALTHCARE REFORM TO HIT THE AIRWAVES

Viewers watching the upcoming nominating conventions will see a new advertising campaign advocating for healthcare reform, as reported in AHA News. Backed by some major healthcare associations, the effort is meant to provide impetus and urgency to tackle this major component [as much as 15% of GDP] of this country's economy.

Providers, suppliers, financial services companies, as well as consumers all have a stake in finding a new approach to making quality healthcare affordable and accessible throughout the country. The vested interests for maintaining the status quo might finally be challenged so that "business as usual" will no longer be the case when the next administration comes into office.

Record shattering deficits, an ill conceived war sapping our energy and resources, trade imbalances, a weak dollar, the crisis in the financial markets, global warming, energy independence, social security reform, are all huge problems that will advocate for time and money in the corridors of power in Washington. The healthcare industry will have to compete with all these issues to get the priority level and financial support needed in Washington to deliver our industry's services much more efficiently and effectively to a growing population that lives longer and places more demands on the industry.

Hopefully, the ad campaign will focus on heightening the awareness of and urgency to find better ways of delivering healthcare. Now is not the time to advocate any single approach as that will only enable the entrenched interests to divide and conquer and maintain the status quo.

When Does a Healthcare Provider Need MAR Funding?

Since the introduction of electronic billing capabilities, medical practitioners have seen their cash flow improve significantly. However, in many cases, the improvement has just moved the problem from horrid to bad.

Electronic billing works well if all the entries are correct and additional medical information is not required by the carrier. Given any of these two events, reimbursements once again become protracted. What is the indication then, which alerts the medical provider to seek MAR funding? The most common symptoms are the following:

1. Struggling to make payroll
2. Being forced to delay payments to vendors
3. Using a personal credit card for business expenses
4. Feverishly opening envelopes to find checks for working capital

Experiencing any of these symptoms is a sure indication that your cash flow is not what it could be. MAR funding gives predictable, steady cash flow and is the only form of finance that grows and coincides with your billing cycle. So, if you see approximately that same number of patients in a day, you can almost guarantee your cash flow for that day with the use of MAR funding.

New Law to Help Warn of Hospital Financial Crises

A new law enacted in New Jersey will require that an early-warning system is in place to help spot financially troubled hospitals before it's too late.

This year alone, four hospitals in New Jersey have closed due to financial woes. A fifth hospital will close its doors on Wednesday.

The new law will give the NJ Department of Health and Senior Services the authority and access to information necessary to monitor hospital finances. The department will then be able to identify financially troubled hospitals long before a crisis occurs.

Hospitals across the country facing similar financial crunches should strongly consider adding Medical Accounts Receivable (MAR) Funding to their financial portfolio. MAR Funding provides an immediate infusion of cash which can be used especially when a hospital or healthcare provider is under fiscal stress.

HEALTHCARE IN A LOUSY ECONOMY

Jeff Lutz describes 6 lessons to be learned about the healthcare industry in a lousy economy in the August 14, 2008 issue of H&HN magazine .

1. Healthcare isn't immune to economic cycles - witness the auction bond market


2. The payer mix changes - co-pays and deductibles are up and fewer people are covered by commercial insurance


3. As the self-pay portion of the bill rises, bad debts increase


4. Hospital volume drops off, especially the "good stuff" - as insurance costs increase and unemployment increases, families use less health care and more ER facilities


5. Everybody is expanding geographically to capture market share - increasing marketing and advertising costs to meet the increased competition


6. Mergers happen more quickly - because hospitals lack the financial muscle to ride out the economic downturns

On an upbeat note, Lutz does note that while hospitals are not happy with their profit margins, those with strong balance sheets are able to invest in physicians, services and technologies and position themselves for the future when the economy turns.

Many healthcare and financial commentators also notes those healthcare organizations that have strong balance sheets are better able to survive the fluctuations in the financial markets. A key to a strong balance sheet is managing debt and controlling your financial ratios. One tool healthcare executives use is a Medical Accounts Receivable funding program from Sun Capital HealthCare Inc.

The cash infusion that you receive from Sun Capital is debt-free and without the restrictions normally associated with bank loans and lines of credit. As Lutz indicates, by having a strong balance sheet, healthcare organizations in a lousy economy can improve their performance and more readily survive the financial fluctuations of a lousy economy.

California Freezes Medi-Cal Payments

California freezes Medi-Cal payments to thousands of healthcare facilities in July.

Medical providers who care for low-income Californians are scrambling to find funds to keep their doors open, as the failure of lawmakers to pass a budget forces the state to halt payments to them.

Most of the facilities have no immediate plans to turn away patients, the providers warn that a budget stalemate that drags on through the summer will affect care. In the meantime, they are turning to banks, foundations and their own reserves for emergency cash to pay the bills.

During last year's budget standoff, many providers reported paying astronomical interest rates for temporary credit. This year promises to be just as tough. Banks are financially squeezed and reluctant to offer bridge loans. Medical Accounts Receivable (MAR) funding may be the answer for some.

A Financial Tool That Protects Your Business From Fluctuations in Revenue Cycle

Fluctuations in revenue cycle is a common dilemma for healthcare providers as they strive to maintain inventory, pay overhead, expand, and even make a profit.

To address this issue of "fluctuations in revenue cycle", you must ascertain whether the financing tools available move concurrently with your revenue stream, since cash flow is determined by your revenue cycle, not your billing cycle.

Loans, including lines of credit and asset based lines, have a common limitation to solving the dilemma. Dollar availability is fixed and cannot be reused until some portion (or all) is paid back.

Selling stock is another financing tool. However equity financing addresses long term financial questions and is not typically used as a solution for short-term cash flow problems resulting from revenue cycle fluctuations.

A financial tool that directly follows the revenue cycle is Medical Accounts Receivable (MAR) Funding. It provides a cash-flow solution to your working capital needs. Simply put, you deliver your product or service and get paid within 24-48 hours. There are virtually no limits on the amount of funding available and no requirements before you can receive additional funding.

Hospital Borrows and Loses Millions

Carilion Clinic is losing and borrowing millions as it converts from a hospital to a clinic system.

Construction and recruiting physicians to support the changes has taken a toll on Carilion's bottom line. That, combined with other expansion projects, a down economy and a volatile market, has Southwest Virginia's largest hospital system reporting a $39.7 million loss for the first six months of the fiscal year.

Hospital revenue bonds worth $50 million and $110 million were issued July 1 for Carilion. Of the $160 million, Carilion has already spent $52 million, according to a bond prospectus dated July 8.

Another source of obtaining working capital to fund Carilion's capital improvement projects is Medical Accounts Receivable (MAR) Funding. MAR funding is a customized funding program for healthcare providers/suppliers. By using the funds generated from MAR Funding, no debt is incurred allowing for a healthier balance sheet and an opportunity to improve credit rating when additional bond issues are under consideration.

Hospital Closings - So Who Cares?

Emily Friedman has written a blistering article in the August 6th issue of H&HN Magazine on the subject of hospital closings, one that I would suggest anyone with an interest in the healthcare system should read. She paints a bleak vision of the future, unless something changes in the way we view the delivery of healthcare to our citizens. While covering hospital closings for 30 years, she sees some common factors in the current spate of closings that "...are frightening as they are disheartening."

The first factor she cites is "market mania", the idea that market economics will make the healthcare system work for everyone. But, she notes that the "...economics of healthcare, far from being humane, have become Darwinian" with its reliance on a market ideology that, in her opinion, is a failed ideology. Unless, as she notes, "....you think that it's just fine to have 16 boutique hospitals in every wealthy suburb while people in poor communities die for lack of basic emergency care."

The second factor she discusses is "a lack of anything resembling planning." As Ms. Friedman notes, "...we plan golf-course communities, downtown renaissances, parks, transportation systems, olympic sites and public bathrooms; surely we can find a way to have at least a semi-rational distribution of hospital resources."

Ms. Friedman cites a number of other factors that have contributed to what she clearly feels is a critical turning point for the healthcare industry. With the growing disparity between the "have" and "have not" hospitals in terms of revenues, margins and access to capital, the "...question is whether the luckier hospitals feel any obligation to those that are vulnerable" and, I would add, do the well-to-do patients feel any obligation to those less fortunate.

Those of us on the business side of healthcare, such as Sun Capital HealthCare, Inc. which provides medical accounts receivable funding, can address financing for the healthcare industry, but as Ms. Friedman points out, there is a more profound question that the country as a whole must resolve and that is what do we want our hospital and healthcare system to be.

Medicare Bill Could Lead to Tougher Hospital Inspections

The new medicare bill could lead to tougher hospital inspections.

In 1965, the year Medicare and Medicaid legislation was passed, Congress gave the “Joint Commission,” a professional accreditation organization established in 1951, the unique authority to inspect hospitals and determine whether they meet the patient health and safety standards required to treat Medicare patients.


Today, the Joint Commission collects $113 million in annual revenue, mainly from the fees it charges hospitals for telling them whether they comply with federal regulations. The hospitals that are inspected are the ones that foot the bill to be accredited and 99% of the hospitals that are inspected by this entity are generally accredited.


Thanks to the Medicare bill that Congress passed earlier this month, however, the Joint Commission will no longer enjoy unique authority over hospital inspections.

CMS Proposes Rules for New Rates

CMS just released a proposed rule to update its approach for paying hospital outpatient and ambulatory surgery center services.

The new rates are based on a 50-50 blend of the 2007 payment rate and the 2009 payment, which represents 65 percent of the hospital outpatient rate.

According to CMS, the proposed rule will build on efforts across Medicare to transform the program into a prudent purchaser of healthcare services, paying based on quality of care, not just quantity of services.

The new rule would include a 3 percent annual inflation update to Medicare payment rates for most services that would be paid under the outpatient PPS. That increase would apply to hospitals that report data on seven outpatient quality measures. Facilities not submitting the data would receive only a 1 percent update.

More than 4,000 hospitals and community mental health centers are expected to participate in the program in 2009.

Healthcare Turnaround Industry Expected to See an Increase

As profitability trends continue to slope downward for the healthcare industry, turnaround professionals are expected to be called upon.

The capital markets will soon not be a viable source of revenue for the healthcare sector as debt burdens continue to increase due to rising labor costs, the growing number of uninsured patients, and lower Medicare reimbursements.

Many turnaround professionals are advocating Medical Accounts Receivable (MAR) Funding as a funding alternative for the healthcare industry. MAR Funding serves an an ideal financial strategy for quick cash infusion that can begin turning revenue quickly.