Can America's Perverse Payment System Be Fixed?

Mark Taylor, in the Sep. 26, 2008 issue of Hospitals & Health Networks magazine, asks this question in his article "Experiments in Payment". In it he discusses several new experiments in revising the payment system that are attempting to mitigate the current system, which he calls "a mess." As he and others see it, the current method provides little incentives to hospitals, physicians and other providers to work together, which in turn leads to overuse and duplication of services, as well as often neglecting preventive services and chronic disease.

The overriding principle in these experimental payments systems is to provide financial incentives based on quality measurements. But how do you measure quality? Is it strictly what happens during the patient stay, or thirty days after discharge, or 6 months after discharge? If your incentives are based on post-discharge results, how do you adjust if the patient does not follow the post treatment plan the physician or hospital designated? And if you bundle payments, how do you allocate the payment to the various providers? All tough questions.

While there is no question there needs to be remedies to the current payment system to provide incentives for delivering quality treatment, there is more important problems to address to get control of the healthcare system. First and foremost, preventive medicine must be emphasized. Political leadership, both in the public and private sectors, needs to get on the bully pulpit to drive this message and dollars must be invested to back up this message and change behavior.

Fraud must be reduced and the system must be redesigned so that malpractice considerations and insurance companies are not driving medical practice, which often includes unneccessary tests and procedures, which further increases the risk to the patient. We need to get some control over medical and pharmacutical research by addressing the question - at what point do we spend billions of dollars to add one or two months of life expectancy?


Healthcare reform has to be re-engineered from top to bottom. Experiments in the payment system are only one small step in the process.

Home Remote Patient Monitoring

The home remote patient monitoring sector of the healthcare industry is an emerging market that suffers from a lack of reimbursement policy support. However, despite such obstacles, several key growth trends will counteract negative factors and lead to strong definitive growth.

Successful exploration and implementation of new payment strategies focus on bottom-line cost savings. In addition, new market participants are expected to increase demand and the need for home remote patient monitoring services in the near future.

GE Healthcare, a business of General Electric Co., is entering a potential $5 billion market providing health monitors for the elderly who live alone.

What Type of Third Party Claims Do Not Qualify for MAR Funding?

To determine if a medical provider can qualify for MAR funding, the focus must not be on the provider's services or goods, but must always look toward "who the payor is." We should examine the qualities of a payor that qualifies for MAR funding first. Examples of such companies are Aetna, Cigna, United Health, Blue Cross/Blue Shield, GHI Medicare (gov't) and Medicaid (gov't).

What makes these companies appropriate for MAR funding? These insurance companies have: 1) contracts with providers and therefore are directly paid by the carriers

2) pay "out of network" reimbursements to those patients who use providers that are not "in their plan." BUT...in all cases, they carry medical coverage which has virtually limitless patient funding amounts, and are not contingent upon legal outcome or compensation-board approval.

So we ask, is a Chiropractor (for example) able to use MAR funding? The answer is YES...however, that provider can only sell the claims of "traditional" type carriers as exemplified above. Unfortunately, Chiropractors usually have the majority of their payors as workers compensation or personal injury carriers. These cannot be MAR funded as the payment has a contingency on it, and there is no contract, or obligation to pay until such adjudication is reached. Suppose the Chiropractor is predominantly paid by Medicare, then we have a MAR funding opportunity.

The case can be made however, that personal injury carriers are insurance companies, and therefore can be used in MAR funding. Correct, however the contracts under which patients get reimbursements are auto or casualty contracts, and not medical coverage, refuting that theory.

Suppose a provider has both traditional carriers and some workers compensation/ personal injury, will the MAR funding company entertain that kind of provider? Yes! The MAR funding company will purchase only those claims paid by the traditional payors!

To see if you qualify for MAR funding...look to the payor!

Sun Capital Group, Inc. Honors Employees

Sun Capital Group, Inc. (SCG) recently awarded their 5-year to 10-year employees with a special gift to celebrate their dedication and commitment to the company.

22 employees received brass pins with white stones symbolizing the number of years each employee has been with SCG.

To date, SCG has funded billions of dollars of accounts receivables for their clients in the commercial, government and healthcare industries.

SCG clients utilize SCG's accounts receivable funding programs to generate an immediate cash infusion and reduce dependency on debt-incurring bank loans and lines of credit as their sole source to obtain working capital.

Doctor Owned Hospitals

"Doc ownership takes a legal hit" is the title of an article posted on 9/15/08 at Modern Healthcare.com. It has an interesting discussion of the legal issues involved in the on-going competition between physician owned hospitals and competing hospitals.

The decision to dismiss a suit against Baptist Hospital in Little Rock by a group of physicians who own a competing cardiology clinic was based on a technicality. Nonetheless, the issue is continuing to create debate within the healthcare community nationally.

In my opinion, doctors should be doctors, not owners of hospitals, for several reasons.

1. The potential conflict of interest when the doctor admits a patient to a facility. Does the doctor's facility provide the same level of service as the competing hospital? Will it have the same degree of emergency facilities immediately available if there is a problem? Will the financial incentive of admitting the patient to the doctor's hospital override the possibility that the competing hospital will be better for the patient? Not easily answered questions are they.


2. The most likely groups of doctors who would open hospitals would be the specialists who have the most profitable practices. Consequently, they would siphon off most of the profitable patients from the competing hospitals, leaving those hospitals with a patient mix that will bring additional financial burdens.


3. It is hard enough to run a healthcare facility with all the challenges, fiscal constraints and competing demands of the healthcare industry - just ask any hospital CEO - without having the extra burden of managing a hospital that could conceivably make them less effective doctors.

The healthcare industry - the challenges never end!

Congress, AMA Mull Better Ways for Medicare to Pay Doctors

Congress, AMA Mull Better Ways for Medicare to Pay Doctors.

The way Medicare pays doctors is a mess. Every year or so, an automatic pay cut looms, and Congress scrambles to come up with a last-minute, temporary patch to block the cuts. The most recent scramble ended in July, when Congress overrode a presidential veto to pass a patch that runs through the end of next year.

Everybody knows this is a silly way to run things, but nobody’s managed to come up with a better alternative. At hearing in Congress yesterday, a few key players tried to move in that direction.

Several key figures are trying to make some changes.

Miami Physicians Confess to Scam Medicare of $6.8 Million

Miami physicians Carlos Contreras and Ramon Pichardo pled guilty last week to defrauding the Medicare program in connection with a $6.8 million HIV infusion fraud scheme.

Contreras admitted that, from November 2002 through April 2004, he conspired with others to submit approximately $6.8 million in fraudulent Medicare bills, he signed documents containing false information about treatments purportedly given to HIV-positive patients and he approved medically unnecessary treatments at CNC.

He also admitted that the clinic received approximately $4.2 million from the Medicare program as a result of his and his co-conspirators' conduct. In November of 2002, Contreras entered into an agreement with Carlos Benitez, Luis Benitez, Thomas McKenzie, Pichardo and others to operate CNC as a fraudulent HIV infusion clinic.

According to federal officials, Contreras admitted that the Benitez brothers would refer HIV-positive Medicare beneficiaries to the clinic, provide staff members to work at the clinic and transport patients to CNC in exchange for a substantial share of CNC's profits.

In addition, they said, Contreras was aware that the patients referred to CNC by the Benitezes were paid cash kickbacks in exchange for visiting the clinic and allowing their names to be used to bill the Medicare program. He also agreed to approve expensive and medically unnecessary HIV infusion claims at the clinic, and to falsify medical records.

THE CHALLENGES FOR NON-PROFITS

"A variety of emerging or intensifying factors threaten the future performance and credit quality of the nation’s not-for-profit health care system. Growing concerns include “unquenchable demand” for health care services and related growth in new health care technology and health care costs, the sustainability of managed care rate increases; the slow erosion of employer-based health insurance; reductions in Medicaid eligibility and reimbursement; the growing burden of rising bad debt and charity care; the government’s long-term ability to adequately fund Medicare without future reductions; and the availability of an adequate and affordable labor supply."

The above statement from the 'Environmental Scan' in the current [9/11/08]issue of H&HN magazine paints a foreboding picture for non-profit providers of healthcare. Demand for healthcare is increasing due to increasing demographic trends while the costs of developing new technologies, medications and operational costs for delivering those services are also increasing. Coupled with the financial pressures on Medicare and reimbursement cuts, it is apparent that the healthcare system is in crisis.

Where will the capital that is needed to address these issues come from? As the article indicates, performance determines the quality and amount of credit. And banks are reluctant to lend money when financial performance [profitability and balance sheet ratios] does not conform to their expectations and willingness to accept risk [the exception being the subprime mortgage market...but that is another story]. And since equity is not a viable option for non-profits, the delivery of healthcare to the most vulnerable segments of the population is at risk. Non debt or equity financing, such as that provided through Sun Capital HealthCare's Medical Accounts Receivable funding program, is a tool to both increase working capital and reduce the financial impact of cash flow problems resulting from reimbursement delays. Even though Sun Capital has kept the lights on and doors open for facilities in fiscal crisis, as well as provided the means for hospitals to grow, until the issue of rising costs is adequately solved, the scary prognostication outlined above will continue.

Congress to Delay Health Care Overhaul

Congress is likely to delay a health care overhaul. They will continue needling health care companies and likely to bide time on major reforms.

Democrats have launched probes of some of the country's largest drugmakers and passed laws curbing marketing tactics used by insurers. Analysts expect those efforts to continue this fall while party leaders begin laying the groundwork for broader changes after the November elections.

With a Democratic administration and Congress next year, analysts say the slowing economy, rising food and gas prices, and new tensions with Russia will take precedence over health reform.

How Do Municipalities Handle Cash Flow Challenges?

Over the past few weeks we have seen state medical agencies (Medicaid) curtailing their provider reimbursements. A common theme nationwide, providers of all kinds are suffering from "the budget has not been passed yet" disorders. How do state agencies expect a medical professional to care for patients, pay for supplies, pay rent, buy new and updated equipment and feed his/her family? State agencies should know better!

It is interesting to note that when state or local municipalities have short falls in cash flow, they can and usually issue very short term bonds (tax free to investors) called "revenue anticipation notes" (RAN's), "tax anticipation notes" (TAN's), and "bond anticipation notes" (BAN's). These securities are issued specifically to fill the cap created by short term cash flow deficiencies, and once the main source of funds arrives (the "revenue" "taxes" or "bonds") the short term notes are paid off. Municipalities have such abilities, but providers do not.

So what do providers have to fill the cash flow gap? Medical providers can use a strategy very similar to "revenue anticipation notes." A provider can sell his/her medical claims in anticipation of payment, through MAR (medical accounts receivable) funding. The sale of these anticipated payments can only be done through a finance facility specifically accustomed and designed to buy these receivables.

So the question is answered...medical providers can use the same strategy that municipalities use. A revenue anticipation note issued by cities, states and counties is a debt instrument. MAR funding is not! It is the sale (not borrowing) of the asset in anticipation of payment by a third party payor. If doubt arises when considering MAR funding, think for a moment....municipalities do something very similar almost every month!

Hospitals Battle With Competing Health Care Proposals

Mid Coast Hospital recently proposed a new $3.5 million urgent care and diagnostic center as an alternative to a proposed alliance with Parkview and Central Maine Medical Center (CMMC) made earlier this year.

In an effort to overcome financial challenges and ensure a continued ability to meet current and future community health care needs, Parkview announced their plans to join forces with CMMC in June '08. However, Mid Coast hospital contends they are prepared to meet the health care needs of the entire mid-coast region with a plan that will cost an estimated $18.5 million per year less than what it would cost CMMC to continue to operate Parkview hospital.

Parkview officials called Midcoast's assertion "absurd" saying that Midview's proposed urgent care and diagnostic center isn't about integrating care and saving the community money - it's about trying to run Parkview out of business.

According to health care financial analysts, the battle between these two hospitals comes as no surprise. Before Mid Coast built their current hospital, it was in the courts for four years being fought out between them and Parkview.

"AN EXCELLENT INVESTMENT"

This is the title of an interesting article that appeared in the May 2008 issue of HHN Magazine by Michael Bilton. It is not about finances, although in a way it ultimately is. Rather, the author points out that an "annual community health assesment" can be a valuable tool for a hospital's planning. By understanding what the healthcare needs of the community are, a healthcare executive can plan a strategy and allocate financial resources towards those programs for which there is the greatest demand in the community.

Identifying the needs of your marketplace so that you can target your services towards meeting those needs is one of the basic principles of running a business. Borrowing this strategy from the business world can enable healthcare executives to better develop service lines and prevention programs that will increase their market share and enhance their financial performance.

And when it comes to financial performance, healthcare executives are increasingly using another tool used in the general business world - accounts receivable financing. The unique medical accounts receivable funding program from Sun Capital HealthCare, Inc. has proven itself to be a valuable tool for healthcare organizations in fiscal stress as well as those poised for growth and profitability.

Declining Liquidity = Low Bond Ratings for Hospitals

Per a recent statement made by Standard & Poors (S&P), hospital bond ratings across the U.S. have plummeted due to continued declines in liquidity.

Because interest rates are based upon the creditworthiness of the issuer and the conditions in the financial market, many hospitals and healthcare providers are finding it more and more difficult to get and maintain a positive bond rating.

SCH's MAR Funding program can provide a much needed boost to hospitals' and healthcare providers' credit ratings. MAR funding is not dependent on the availability of credit and serves as a source for working capital that can actually be used to improve liquidity.

By using the cash flow generated from MAR funding as working capital, profitability can be restored and a healthier balance sheet can be attained.