3 unexpected stories in 2013

For more than a dozen years The Godbey Group has been proud to help hospitals and healthcare systems contract for the revenue they need to care for patients and improve the health of the communities they serve. During 2013 we observed three unexpected stories in the field of healthcare. Fewer inpatient admissions The trend towards fewer hospital inpatient admissions that began with Medicare patients seems to have jumped over into commercially insured populations as well during 2013. Combined with marginally lower Medicare rates, the emphasis on the elimination of unnecessary readmissions has reduced hospital revenue. As a result hospital efforts to cut operating costs are chasing a steadily diminishing line of revenue from Medicare and commercial sources. Given that CMS plans eight more years of Medicare rate reductions this trend may not end anytime soon. Return of narrow networks Health plans reintroduced narrow networks to cope with the tidal wave of utilization that might be unleashed by the new health insurance marketplaces. But politicians and providers alike did not expect narrow networks and were caught off guard by the implications. In some markets health plans walked past leading hospitals and even physicians to contract networks. Physicians in particular were startled to be left out of networks. Commercial plans in some states have taken the opportunity to reintroduce narrow networks to their commercially insured clientele, as well. Troubled rollout of insurance marketplaces on-line With all the time and money available to CMS it’s startling how the federal government frittered away its opportunity to introduce the new health insurance marketplaces online this year. All the more so because such diverse states as Kentucky and California among others have been so successful in launching their own state-controlled insurance marketplaces. Even the tardy and costly repair work to the sloppy federal sites raises legitimate concerns about the viability of the on-line approach to matching consumers with health plans. These and other fundamental concerns about the purpose and tactics of healthcare reform began to bubble to the top of media and public awareness in the closing days of 2013. In our next post we will focus on The Godbey Group predictions for 2014. Happy Holidays to all. Tweet Share Neil Godbey is President of The Godbey Group, Irving, Texas. Since 1999 The Godbey Group has been helping leading hospitals and healthcare systems negotiate favorable managed care and value-based...

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When are higher prices justified?

With all the media attention to health care reform you get the idea that raising hospital prices is never justified. But until the unique healthcare economy is completely recalibrated, it is one of the consistently fastest growing cost drivers in the American economy. Hospital costs seem to be driven up relentlessly year after year by the unholy three: labor costs, pharmaceutical costs, and the cost of innovative clinical technology. Obamacare addresses these obliquely, if at all. In my experience, hospitals seek improved healthcare rates from health plans because they need them. They need to fund the continuation of their mission to serve the healthcare needs of their community. Increased rates generally lag increased costs, unless an organization is farsighted and takes preemptive action to anticipate those costs in its managed-care negotiating strategy. This is especially true if an organization is trying to smooth its revenue stream over a multi-year period of time rather than endure ups and downs in bottom line results. For nonprofit organizations the availability of additional funds results in no pay out of profits to individuals or investors. Instead additional revenue helps sustain clinical programs, fund research and development of new and better treatments, and is it often invested in better clinical technology and facilities. To a public demanding the best of care for themselves and their loved ones, these uses are essential and sound public policy. Otherwise how can the hospital stay abreast of the relentless development and improvement in clinical services that its patients expect? For better or worse Obamacare will not eliminate the need for improving services to the public. This will cost everyone. Perhaps the best thing that can be said about this new regime is that under the ACA every adult American will have some financial skin in the game. So instead of the current situation of massive cost shifting from those without insurance coverage to those with private health insurance, every American will contribute some amount however small or large to the cost of care. And therefore every American has a stake in rising hospital prices. Hospitals will need to be prepared to be transparent about their pricing and the obligations they have taken on to provide the public with the best quality care. Hospitals and providers will need to justify their costs and take steps to reduce the per capita cost of care. An engaged public will expect hospitals to both explain and justify their prices, especially any increases. Tweet Author Neil Godbey is President of The Godbey Group, Irving, Texas. Since 1999 The Godbey Group had been helping leading hospitals and healthcare systems negotiate favorable managed care and value-based contracts that help sustain those organizations’ mission of improving the healthcare of the communities they...

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Is growth now a dirty word in healthcare?

With all the emphasis in healthcare reform on cost-cutting and reducing utilization, has the idea of growth become a dirty word? Recently Dr. Donald Berwyck spoke to HFMA and challenged the nation’s hospital chief financial officers to take control and root out waste. A parade of politicians and policymakers have spent the last two years talking about the need to cut the nation’s budget for healthcare. Of course they’re correct as far as it goes. What’s missing is an emphasis on generating legitimate revenue to sustain our healthcare delivery system. We still need to take care of sick people even as we move to do a better job of keeping the majority healthy throughout their lifetimes. Growing and expanding your market is one thing, but raising rates to generate more revenue is no longer the answer to bottom line pressure. With open enrollment on the new health insurance marketplaces only weeks away, it is still important for hospitals to ensure that their contracts with health plans at least cover the direct cost of care for patients. In the long run this is the only way that providers can sustain their offering to take care of patients in the new healthcare reform world. Now covering direct costs means an organization has a firm handle on the direct cost of providing each service or procedure that they provide. Surprisingly a number of hospitals’ accounting systems don’t really make it easy for them to have discrete cost accounting for individual services. That has suddenly become a table stakes issue. Beyond that, the future stability of hospitals has to move beyond mere cost-cutting. No industry can survive long if it’s only strategy is cost reduction. At some point an organization and an industry must find ways to generate revenue sufficient to sustain their service offerings. So it’s not a choice between cost-cutting and revenue-generating growth because in today’s world the hospital needs to be skilled in both. Author Neil Godbey is the President of The Godbey Group, Irving Texas. Since 1999 The Godbey Group has been helping hospitals and healthcare systems negotiate attractive managed care and value-based contracts....

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