While this article focuses on hospitals, the same issues face EMS agencies.
Medicare historically has reimbursed less than the cost of providing the level of EMS care local community’s desire. An increasing Medicare payer mix and decreasing commercial payer mix places further economic pressures on EMS agencies.
The article highlights service level changes hospitals are implementing to decrease costs, while maintaining focus on patient outcomes. So too, EMS agencies, and their communities, should identify service level changes that reduce costs, while maintaining patient outcomes.
Notable quotes from the article:
The aging of the baby boomers means Medicare enrollment growth is expected to exceed that of other major payers, at 7.8% annually from 2025 to 2031, the Centers for Medicare and Medicaid Services estimates. Yet many health systems are unprepared to manage the wave of Medicare beneficiaries.
Providers that don't take measures to avoid high-cost care will see their margins erode, especially as Medicare and Medicare Advantage reimbursement rates wane and as the number of relatively more lucrative commercially insured patient population declines, experts said.
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Medicare is booming, and providers are bracing themselves
ALEX KACIK
February 12, 2024
https://www.modernhealthcare.com/providers/medicare-medicaid-surge-tampa-general-hospital-memorial-hermann
Tampa General Hospital decreased sepsis mortality rates by nearly 10%, reduced emergency department utilization by close to two-thirds and slashed more than $1 million in costs over a two-year period.
The hospital set up a command center that uses predictive, artificial intelligence-backed analytics that flags potential early indicators of diseases like sepsis and tracks a patient's treatment. Catching the warning signs earlier and standardizing care have helped keep patients out of the hospital, improve outcomes and reduce expenses.
The command center is one of Tampa General's multi-year efforts aimed at better controlling the cost of care and improving quality for the influx of patients aging into the Medicare program.
“We need to manage a new world order [as payer mix shifts] from commercial insurance to Medicare,” said John Couris, president and CEO of Tampa General. “We’ve been anticipating this and working for the last few years to take friction out of the patient experience.”
The aging of the baby boomers means Medicare enrollment growth is expected to exceed that of other major payers, at 7.8% annually from 2025 to 2031, the Centers for Medicare and Medicaid Services estimates. Yet many health systems are unprepared to manage the wave of Medicare beneficiaries.
Providers that don't take measures to avoid high-cost care will see their margins erode, especially as Medicare and Medicare Advantage reimbursement rates wane and as the number of relatively more lucrative commercially insured patient population declines, experts said.
“This shift puts hospitals and health systems into an immense financial compression,” said Thom Bales, a principal at consultancy PwC. “The simplest recourse is to go back and renegotiate contracts with private payers, and that isn’t sustainable.”
Medicare patients make up about half of health systems’ inpatient care. That share has stayed relatively constant from 2006 to 2022, inching up from 47.7% of hospitals’ annual inpatient hospital days to 49.2% during that time, according to American Hospital Association data.
As hospitals’ patient mix skews more toward Medicare, hospitals have treated fewer commercially insured patients. Commercially insured and self-pay patients as a percentage of annual inpatient hospital days has dropped from 33.4% in 2006 to 27.8% in 2022, according to AHA data. The patient mix delta between Medicare and private insurance is expected to widen over the next several years.
AHA is pushing back against policies, such as site-neutral payments that would equalize Medicare reimbursement for some low-acuity care provided at hospital outpatient departments, ambulatory surgical centers and physician offices, under the premise that Medicare payments do not cover the care costs. Melinda Hatton, general counsel and secretary at the association, cited a recent AHA analysis that concluded Medicare paid hospitals 82 cents for every dollar they spent caring for Medicare patients in 2022.
“An aging population will continue to exacerbate these challenges,” Hatton said.
Hospital margins, in large part, hinge on care for the commercially insured. The decline in the commercially insured patient population, combined with commercial insurers’ cuts to Medicare Advantage and continued contraction in Medicare payments, have caused providers to restructure their workforce and operations, particularly in rural and low-income communities.
“If you are in a geographic market full of people who are aging and where young people are moving away, you have a problem,” said Jeff Goldsmith, president of consultancy Healthcare Futures. “Ultimately, it’s a public policy problem.”
Hospitals and health systems can better manage the changes through wrap-around care models that help patients manage housing, transportation, nutrition and other social needs, taking on financial risk through alternative payment models, directing more care to outpatient facilities, consolidating certain services and delegating less complex care and administrative work to lower-level staff, industry observers said.
Some health systems are trying to proactively head off expensive, resource-intensive care by improving the patient experience and adding outpatient sites.
For example, at Tampa General, the hospital implemented a nurse navigator program in June 2019. The navigators help patients book follow-up appointments, answer clinical questions, explain medication, facilitate transportation and connect them with support services such as nutrition and housing programs. As a result, the number of care referrals booked jumped 80% from 2022 to 2023, Tampa General's data shows.
Meanwhile, the health system continues to add small clinics and urgent care centers across Florida. Healthcare providers cannot expect patients to come to sprawling outpatient hubs, Couris said.
“When you are trying to break even on Medicare, you can’t necessarily afford a $100 million outpatient center,” he said. “The economics of healthcare are shifting, and we have to shift with it.”
Outpatient expansion and managing Medicare patients are top of mind for HCA Healthcare too. The Nashville, Tennessee-based hospital chain bought 41 urgent care centers in Texas from FastMed in 2023, and has a "large development pipeline" of outpatient facilities in 2024 and 2025, executives said during a Jan. 30 earnings call.
HCA CEO Sam Hazen has noted the importance of controlling spending and care coordination, particularly among its Medicare population. Medicare admissions grew 2.1% in 2021, 3.4% in 2022 and 4% in 2023, he said on the call.
Memorial Hermann tripled its urgent care footprint in 2023. The nonprofit health system based in Houston, in partnership with GoHealth, has opened 30 urgent care centers, which have helped free up capacity at its Memorial Hermann's emergency departments, Chief Financial Officer Alec King said.
Also, Memorial Hermann has been consolidating services such as obstetrics and neurology into hospitals that specialize in those areas. Taking low-volume services out of certain hospitals and putting them into a centralized location has improved quality and reduced costs, King said.
"It is not efficient for every hospital to be a center of excellence for every service," he said.
Health systems across the country are considering consolidating services, said Michael Corbett, director of healthcare consulting at LBMC. "Nearly every conversation we’ve had with clients is focused on consolidation of services," he said.
Providers are focused on boosting efficiency of specialty care given that most healthcare dollars flow toward a subsection of high-needs patients. The costliest 5% of Medicare beneficiaries accounted for nearly half of 2020 Medicare fee-for-service spending, according to a July report from the Medicare Payment Advisory Commission.
Cancer diagnosis and treatment has garnered attention from the federal government because of the disproportionate expense burden on the Medicare program. The Centers for Medicare and Medicaid Services on Nov. 2 created new billing codes for cancer patient navigation services as part of President Joe Biden’s Cancer Moonshot Initiative.
In addition, the Center for Medicare and Medicaid Innovation in July launched a risk-based payment model called the Enhancing Oncology Model. Participating physician group practices can earn a performance-based payment, or owe CMS a performance-based recoupment, if total expenses over a six-month period exceed a certain threshold.
“A lot of our [health system] clients are seeing an increase in Medicare and Medicare Advantage patients and looking at value-based care as one way to potentially break even,” said Rick Kes, a healthcare senior analyst at accounting firm RSM. “This is the tip of the iceberg of Medicare because of the demographic shift of people aging into the program.”
Still, some are taking a wait-in-see approach to Medicare care management strategies, he noted.
“Some health systems are so big that they have some opportunity to weather these financial challenges for some time,” Kes said. “Others do not have that luxury.”
