fah hospital policy blog

Perspectives on health policy affecting America’s hospitals and the patients we serve.

Category Archives: uncategorized

FAH Congratulates Incoming HHS Secretary Burwell

June 05, 2014 | Chip Kahn

Category: Uncategorized

Congratulations to Sylvia Mathews Burwell on confirmation by the Senate as the 22nd Secretary of Health and Human Services. The Senate’s strong support of Ms. Burwell’s nomination to be HHS Secretary and its earlier vote unanimously approving her nomination as OMB director reflect her well-deserved reputation as a proven manager and consensus-builder in both the public and private sectors. We look forward to working with Ms. Burwell as she takes the helm of HHS on such priorities as ensuring access to high-quality health care for our patients and communities across the country.

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The FAH Weighs in on Health Care and Competition

May 29, 2014 | FAH Hospital Policy Blog

Category: Realignment, Transparency, Uncategorized

This afternoon, the National Academy of Social Insurance (NASI) hosted a panel featuring Keith Pitts, Vice Chairman of Tenet Healthcare Corporation and Chair-Elect of the Board of Directors of the Federation of American Hospitals. Pitts is the second FAH representative in just two weeks to have the opportunity to speak on a panel focusing on the important topic of competition in healthcare. The FAH is pleased that the voice of hospital systems and our esteemed leadership is included in these critical discussions.

With his extensive experience in financial and operational management of health care systems, Pitts was the only panelist with a view from inside a hospital’s doors. Hospitals are directly responsible for patient care, and as caregivers of last resort, we are reminded every day about the importance to community health care of extending and preserving access to care. This perspective is critical to better understanding the steps hospitals are taking to ensure delivery of high quality health care in the most efficient way possible.

In the evolving health care marketplace, hospital realignment often is an essential method of preserving access to care and improving health care quality and efficiency. Many of the other panelists presented only a partial picture of hospital realignment, overlooking the need to preserve access and basing presumptions and conclusions on common misconceptions and old data reflecting market conditions that were vastly different than what exists today.

Pitts painted the broader picture, emphasizing that a conversation surveying the last few decades is ineffective in understanding the current health care marketplace we are experiencing today. “The interesting thing about this discussion looking at the last 20 or 30 years, we are seeing a markedly different environment now…. We’re in a different world today. When we think about policy we can’t always use history to determine what we should do moving forward,” Pitts said.

The changing health care market landscape and is shifting towards a model of more integrated and coordinated care. Hospitals operate in an environment where dramatic public sector reductions in hospital funding make it difficult to adjust to this changing delivery system while investing in costly but important health IT systems. The reality is that hospitals must adapt to survive and continue serving their patients. Consolidation, mergers and other realignments can help achieve lower costs while increasing quality and improving access to care.

Earlier this year, the FAH commissioned a comprehensive review from the Center for Healthcare Economics and Policy to examine contemporary hospital consolidation, which reviewed 75 studies spanning the years 1996-2013, as well as 36 primary sources. The study found that the biased perception of hospital realignment stems from 20 year old data, and that current realignments provide significant benefits for patients and communities, including:

* Preserved and expanded access to essential medical care;

* Improved service offerings and quality of care;

* Sustained and necessary investment in technology, facilities and health IT;

* Sensible reduction in excess capacity; and,

* More competitive health care markets.

The report also found no consistent statistical relationship between realignment and hospital price increases and that, in some cases, without realignment there would be disruptions in emergency services, other service lapses and hospital closures.

The Federal Trade Commission (FTC) is active in reviewing mergers that could potentially have anticompetitive implications, yet the vast majority of mergers have been permitted over the last five years on the basis that they do not impede market competition. However, mergers are not rubber stamped. In fact, the Federal Trade Commission has successfully challenged recent mergers. Two such examples include:

* In April 2014, a federal appeals court ordered the unwinding of a 2010 merger between ProMedica, a nonprofit health-care system based in Toledo, Ohio, and St. Luke’s, an Ohio community hospital. The court agreed with the FTC that ProMedica’s dominance in the relevant markets would give it leverage to demand higher rates.

* In January 2014, a federal district court ordered the unwinding of St. Luke’s Health System’s 2012 acquisition of Saltzer Medical Group, Idaho’s largest independent, multi-specialty physician practice group.

In the Idaho case, the court recognized that the health care landscape is changing and suggested that although long-standing antitrust law prevented the court from deciding in favor of the merger, the best result in this case would be to allow the merger to proceed while monitoring the result.

The court’s message is clear: the new world order in health care requires greater flexibility to test new care delivery models to meet the needs of the current marketplace. Indeed, it may be prudent to take a cue from the court in St. Luke’s/Saltzer and allow mergers to proceed, while monitoring them for anti-competitive results. Wholesale changes in federal antitrust enforcement policy are not appropriate at this time.

In a further step acknowledging the changing landscape, the FTC recently held a comprehensive public workshop, Examining Health Care Competition, to solicit the views of policymakers and the public. The FAH recently sent a letter in response to this workshop, to outline our perspectives and flag the aforementioned study for the FTC’s review.

As the health care landscape continues to evolve, it is important to present the topic of hospital realignment and health care competition more holistically and to address the total landscape, rather than just discussing pricing impact without the broader context of why realignments are necessary in today’s marketplace.

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Recognizing the Importance of Hospital Realignment for Communities and Patients

May 16, 2014 | FAH Hospital Policy Blog

Category: Realignment, Uncategorized

Monday, Health Affairs will hold a briefing on hospital consolidation, featuring FAH Chairman and President & CEO of Ardent Health Services David T. Vandewater. The FAH and our members intimately understand the realities of health care delivery, and the decisions on which we base any pursuit of realignment. Hospitals bring additional improvements to their patients and communities through mergers and other realignments that help sustain health care providers in towns and cities across the country.

A review by FTI’s Center for Healthcare Economics and Policy earlier this year provided the most comprehensive, contemporary assessment of hospital realignments to date. In their assessment – which includes 75 studies from 1996-2013 as well as 36 primary sources – FTI’s analysis found that hospital realignment has yielded substantial benefits for communities and the patients they care for.

Some of the benefits to care brought about by hospital realignments include:

Preserved and expanded access to essential medical care;

Improved service offerings and quality of care;

Sustained and necessary investment in technology, facilities and health IT;

Sensible reduction in excess capacity; and,

More competitive health care markets.

Some in the health care industry have claimed that realignments drive competition out of the market. Yet, FTI’s analysis shows the vast majority of mergers do not impede market competition, dispelling one of many common misconceptions on this topic. The study points to reliance on 20 year old data and U.S. market conditions that do not resemble today’s market realities as a cause for the marked misconceptions.

These results challenge the oft cited notion that realignment increases prices, finding no statistical relationship between realignment and hospital price increases. FTI goes further, noting that without realignment, disruptions in emergency services, lapses in delivery of care and even hospital closures would occur.

As the health care system transforms and moves toward a coordinated care model, hospitals continuously strive to improve delivery of care while protecting patient access to care. Health care in America is shifting toward an integrated system; at the same time, hospitals are struggling to absorb nearly $122 billion in cuts over ten years, imposed since 2010 while Medicare hospital payments are projected to fall eight percent below the cost of care in 2014 – an all-time low. This challenging environment necessitates adaptation from hospitals to be able to survive, including realignments and mergers.

Realignments allow hospitals to maintain their presence, provide 24/7 access to care for patients and yield many community benefits. We look forward to a substantive conversation on contemporary hospital realignment at the briefing event Monday morning.

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New Reports, Analysis Put Spending Uptick In Perspective; Reaffirm Medicare Savings

May 14, 2014 | FAH Hospital Policy Blog

Category: Spending Slowdown, Uncategorized

Recent coverage of health care spending has focused on an uptick in health care spending, causing a swath of claims that the spending slowdown has ended, or been reversed. Fortunately, several new data points and analyses put the uptick in perspective after four consecutive years of historically low growth in national health care spending.

In a Bloomberg View article by Peter Orszag, he points out that in assessing this spike in spending, one has to keep in mind the 8 million people who recently signed up for coverage through the Affordable Care Act, as well as the 5 million who have enrolled in Medicaid. With the increased enrollment in health insurance exchanges spurred by the Affordable Care Act going into effect, naturally utilization of health care services will increase, causing this spike in spending. Orszag also points out that the continued slow growth of Medicare spending, along with the slow job growth in the health care sector are other indicators that the sending slowdown has not seen its last legs.

Orszag also points out the constant revision of estimates and projections on spending, GDP and other critical data for health care. Case in point: CBO recently adjusted its projections on Medicare spending to reflect an additional $106 billion in savings beyond its most recent 10-year spending estimates. And just last week, the Altarum Institute released its May 2014 monthly briefs on price and spending, urging caution on reaching any conclusions, noting, among other data points, that health and hospital price growth remains at or near historic lows.

In addition, there is another piece shining light on the realities of US health care spending. The Committee for a Responsible Federal Budget released a report noting $900 billion in Federal health care savings resulting from CBO‘s repeated reductions in spending projections

The report notes:

The last pre-ACA CBO baseline was in March 2010 and projected net spending on Medicare and Medicaid at $1.34 trillion in 2020. The April 2014 baseline, though, actually estimates spending on those programs plus the ACA’s exchange subsidies in 2020 will be $70 billion lower than before the ACA was even enacted, at $1.27 trillion. Note that the most recent comprehensive estimate of the ACA had it increasing federal health spending, on net, by $145 billion in 2020 (including the revenue effect of the exchange subsidies), but that increase has been outdone by the declining projections of federal health spending since then.

All of this news and new information reinforces the trend of slower growth in health spending due to structural changes taking hold in health care payment and delivery - points made in a report commissioned by the FAH earlier this year assessing the spending slowdown.

The report, from the economic consulting firm Dobson | DaVanzo, estimates as much as $900 billion in additional Medicare savings over the next ten years. The $106 billion already revised by CBO is movement towards this nearly $1 trillion in savings that we believe will come to fruition as the spending slowdown continues.

The increased utilization of health care services due to the enrollment of millions of Americans in the health care exchanges will naturally cause a spike in health care spending; however this should not be viewed as an indication that the past four years of an unprecedented slowdown in health care spending has been reversed. We continue to see positive signs of continued slowed spending, historic low price growth, and a downward spiral in projected Medicare spending. These welcome outcomes result in part from the power of the structural changes taking place in the delivery of health care – changes that are driven in large measure by the investments and leadership of hospitals. Going forward, it is imperative that hospitals be allowed to continue investing in this transformation and that resources are not syphoned off by short sighted budget cuts or burdensome new policies. Let’s continue investing in success.

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