Hospitals Are Seeing Fewer Acute Patients

Rural hospitals that have higher volumes of less-acute patients, saw a 3.7% drop in year-over-year admissions (and 0.7% growth in admissions adjusted for outpatient activity), according to a report by Fitch. Payors are exerting pressure to reduce short-stay admissions and re-admissions; high-deductible health plans encourage patients to seek care in less expensive settings outside of the acute-care hospital; and technological advances allow more complex cases to be handled in outpatient settings.

Covered California Announces Contract Changes with Carriers

ContractCovered California adopted significant changes to its contracts with health insurers. The contract provisions were developed over the past year with consumer advocates, health plans, clinicians, other stakeholders, and subject matter experts. Plans must do the following for years 2017 to 2019:

• Ensure that all consumers select or are provisionally assigned a primary care clinician within 30 days of when their plan goes into effect.
• Exchange data with providers. This will enable physicians to be notified if their patients are hospitalized and track trends and improve performance on chronic conditions, such as hypertension or diabetes.
• Identify hospitals and providers that deliver poor-quality care or unwarranted high-cost care. Health plans will be expected to work with them to improve their care or lower their costs. Hospitals that don’t improve and don’t provide justification will be excluded from Covered California networks as early as 2019. Covered California will adopt a payment system for hospitals, such as the one employed by the Centers for Medicare and Medicaid Services (CMS). Over time, it will put at least 6% of reimbursement at risk or subject to a bonus payment based on quality performance.
• Manage high-cost pharmaceuticals and help consumers understand the effectiveness and costs of their drug treatments as well as any alternatives.
• Track health disparities, identify trends in disparities, and reduce disparities, beginning with four major conditions: diabetes, hypertension, asthma, and depression.
• Develop programs to identify and manage at-risk enrollees with requirements to improve in targeted areas.
• Provide tools to help consumers understand their diagnosis and treatment options and understand their share of costs based on the contracted costs of their plan.

Covered California will encourage plans to promote advanced models of primary care including patient-centered medical homes and integrated health care models, such as accountable care organizations. Also, Covered California is improving its patient-centered benefit design for 2017 plans. Outpatient care in Silver, Gold, and Platinum plans will not be subject to a deductible. Bronze plan consumers would get three outpatient visits that are not subject to the deductible, in addition to the free preventive visits. For 2017, Covered California is proposing to lower out-of-pocket costs for primary care and urgent care.


How Major Players Are Driving Regional Networks

healthcare copyFollowing implementation of the Affordable Care Act, large players are consolidating the control of hospitals and physician organizations in the San Francisco Bay area, according to a recent report by the California HealthCare Foundation (CHCF).

In a region with many segmented submarkets, major providers are expanding to manage care efficiently, serve more patients, and compete with Kaiser Permanente. The number of independent hospitals is shrinking as financial problems mount. Independent practice associations are seeking to diversify, raise capital, and keep private practice viable, especially for primary care physicians. Though none of the region’s remaining private safety-net hospitals appear threatened by imminent closure, several face an uncertain future. The safety net is strong, but faces capacity and access challenges resulting from Medi-Cal expansion. Safety net providers are particularly hampered by their limited ability to recruit and retain clinicians. For more information, visit

Hospitals Well Positioned for Insurer Consolidation

The for-profit hospital industry is well positioned to weather the wave of mergers and acquisitions (M&A) among the largest for-profit health insurers, but consolidation could have some important longer-term ramifications, according to Fitch Ratings.

M&A activity among health insurers is not likely to result in immediate price pressure for hospitals. In many markets, health insurers are already fairly consolidated. Recent actions by hospitals to build market presence will shore up negotiating power. However, it could hurt the competitiveness of smaller insurers in some markets. It could also accelerate the shift towards value-based payments for hospitals and other healthcare providers.

The merger of Aetna and Humana would create the second largest national for-profit health insurer by revenue. The announcement of the merger comes after some favorable developments for the hospital industry. Most importantly, the Supreme Court recently ruled that public health insurance exchange plans could keep the financial subsidies that make these plans more affordable. In part because of the ACA-related expansion of health insurance coverage, hospitals have recently had more patients. M&A activity among acute care hospitals has given them more negotiating clout. Hospitals have been expanding their presence in key geographies through acquisitions and financial partnerships

Sports Injuries Land Many Californians In the ER

Over 300,000 Californian athletes visit the ER annually, which is a rising financial risk for families as high deductible health insurance grows and health coverage shrinks, according to a Sun Life Financial report. More Californians participate in each of five sports – baseball, basketball, softball, soccer, and volleyball – than do residents in any other state. The report reveals the following sobering statistics:
• A household has a 50% chance of having an emergency room injury within five years when a family member participates in football, ice hockey, or soccer.
• Injuries from seven popular sports lead to average ER medical costs of $3,000 to $4,000.
• Football, which has the highest sports injury rate at 8.5%, leads to over 60,000 California ER visits this year, second only to basketball. Soccer is expected to generate over 40,000 California ER visits this year.
• Increasingly popular high deductible health insurance plans have average deductibles of $4,000 for a family deductible and $2,000 for an individual.
• Accident insurance can fill widening gaps in medical insurance coverage. Beginning in 2018, a 40% excise tax will be imposed on the value of health insurance benefits exceeding a certain threshold. The estimated thresholds are $10,200 for individual coverage and $27,500 for family coverage. Employers are starting to phase out medical coverage that would be subject to the tax.

One doctor, who was interviewed for the survey, reports a disturbing number of people who refuse essential emergency care because of medical costs. He says that agility training can prevent injury by increasing the ability to anticipate an accident. For more information, visit

Federal Drug Discount Program Faces Challenges

A federal program that provides billions in drug discounts to safety net hospitals and other health care providers is expanding under health care reform. The 340B program faces a number of critical issues, such as whether to better define eligibility, strengthen compliance efforts, and provide greater transparency about the discounts provided, according to new analysis by the RAND Corporation. The federal Health Resources and Services Administration is developing new regulations to address these and other issues. “Policymakers need a clear, objective description of the 340B program and the challenges it faces on the road ahead. There are increasingly divergent views on the program’s purpose and the role it should play in supporting safety net providers,” said Andrew Mulcahy of RAND.

The federal 340B program began in 1992 to help health care providers extend services to the indigent and uninsured. The program allows some hospitals, clinics, and health centers to buy outpatient prescription drugs at discounted prices. The program covers more than 7,800 entities as a result of expanding eligibility rules. Hospitals that participate in the program account for more than one-third of all U.S. outpatient hospital visits.

Federal officials estimate that the 340B program accounts for $6 billion in outpatient drug spending, about 2% of all U.S. prescription drug spending in 2011. This translates into savings of $1.6 billion for eligible safety net providers. RAND researchers say that these savings are small compared to the disproportionate share hospital payments and primary health care grants that play a large role in financing care in the safety net. However, some estimates suggest that the size of the program could double under provisions in the federal Affordable Care Act. Formulas used to calculate drug prices are based partly on proprietary information, which can make it difficult for health care providers to know whether they can negotiate a lower price for drugs through another source. For more information, visit

Hospitals Shift Strategies to Face Private Exchanges

The advent of private exchanges will be one of the biggest challenges for health care providers over the next several years, especially in light of the Cadillac tax for employer-based health insurance set to go into effect in 2018, according to James Bonnette, MD of the Advisory Board Company. “As health care purchasing behavior becomes more consumer-oriented, providers will be forced to develop new skills in consumer marketing. Providers don’t look at patients as consumers, but they need to understand them as consumers, the same way retail outlets do,” said Dr. Bonnette. “There may not be strong employer appetite to pay the tax, so the number of firms offering employees health insurance could shrink significantly. Consumers will generally choose high-deductible options, with supplemental plans, and act more like the price-sensitive consumers typical in other sectors of the economy,” he added. For more information, visit

Limited English Proficiency Patients to Flood U.S. Hospitals

The Affordable Care Act (ACA) will bring 9 million newly insured limited English-speaking patients to U.S. hospitals, according to Stratus Video. Hospitals must now meet new regulatory standards and provide interpreting services or risk noncompliance with federal law.

Healthcare providers are already encountering a rising number of patients who speak limited English: 26 million Americans speak limited English – a rapidly growing number that has increased by 30% over the past decade. That’s more than triple the growth rate of the U.S. population. Fewer than half of patients who need an interpreter usually get such assistance, despite studies proving that language barriers are highly associated with repeat visits to the emergency room, fatalities, and medical malpractice lawsuits.

The average hospital spends nearly $1 million a year on language services. But services are often underutilized because they are difficult to access. However, according to Stratus CEO Sean Belanger, the costs of language services pale in comparison to those associated with malpractice suits due to language barriers. A tragic example of a language barrier involves 18-year old Willie Ramirez. A paramedic misunderstood what Ramizez was trying to say, assuming that he was intoxicated rather than nauseated. He was mistakenly treated for drug abuse, then suffered a brain aneurysm and became a quadriplegic. The resulting malpractice case awarded the patient $71 million. One study found that 2.5% of a malpractice insurance company’s lawsuits could be blamed on the lack of use of interpreters, at a cost of about $5 million to the company that year. For more information, visit

Most Providers Like the ACA

Nine out of 10 healthcare providers say that,  once it is fully established, the Affordable Care Act (ACA) will be a step forward in addressing long-term health issues, and 83% say it is good for Americans, according to a survey by Mortenson Construction. However, 86% say the ACA needs major revisions.

Seventy-nine percent of providers say health reform creates significant uncertainty for the healthcare industry. Seventy-four percent predict that it will challenge their organization’s financial condition, and 72% say it already has. The survey also reveals the following:
• In 2013 60% of healthcare providers were optimistic about the future of U.S. health care compared to 85% in 2012.
• Four out of five say the ACA will shift reimbursements to pay for the quality of outcomes.
• 71% say the ACA will improve quality and outcomes, and 65% say it will lower the cost of care
• 95% say that specialized facilities, such as MRI centers, cancer centers, and urgent care centers, will grow in prominence in the next three years.

For more information, visit

Hospitals Charge Wildly Varying Rates for Childbirth

Depending on the hospital, a California woman could be charged $3,296 to $37,227 for a vaginal delivery, and $8,312 to $70,908 for a caesarean section, according to a study by BMJ Group. Hospitals in markets with middling competition had significantly lower adjusted charges for vaginal deliveries. Hospitals with higher adjusted charges are for-profit hospitals as well as those with higher wage indices and case mixes. Hospitals in markets with higher uninsurance rates charged significantly less for caesarean sections while for-profit hospitals and hospitals with higher wage indices charged more. However, the institutional and market-level factors included explained only 35% to 36% of the between-hospital variation in charges. For more information, visit

Last Updated 09/22/2021

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