THE ONLY HEALTHCARE BUSINESS NEWS WEEKLY | NOvEMBER 27, 2017 | $5.

50

Diverted attention
CMS’ readmissions program
may be harming patients
Page 16

Almost Home, Making

LHC merger EHRs
would feed user-friendly /
joint-venture Page 22
trend /
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 News Opinions/Ideas
2 Late News 26 Editorial 27 Guest Expert
Mayo doubles operating The Senate returns from Nemours CEO Dr. David
income, giving more fuel its Thanksgiving break Bailey on how community-
to critics of its rural cuts. intent on picking up where based, tech-driven
4 The Week Ahead the House left off: taxing innovations could help
the sick and punishing the transform our outdated
Looming Senate tax bill
16 Cover story poor to reward the rich. healthcare system.
vote makes healthcare
Unintended consequences executives uneasy.
By Maria Castellucci
30 Innovations
Many health policy experts say it’s time to re-evaluate how
5 Regional News By Rachel Z. Arndt
the CMS’ Hospital Readmissions Reduction Program is California fines Anthem Quartet Health’s platform gives primary-care
affecting overall outcomes. There’s mounting evidence that $5 million over slow providers and their patients access to behavioral
its provisions could be harming patients. response to complaints. health services and other resources.
6 Post-acute
Features LHC Group, Almost “I will go
18 Little margin for error Family merger highlights anywhere
By Virgil Dickson post-acute growth. there is a best
Regulatory mandates, shifts 7 Medicare practice and
in payment policy and federal
CMS throws a lifeline to try to learn
budget-cutting are pinching
Medicare margins for a
13 rural hospitals with from others.”
enhanced reimbursement.
sizable number of hospitals
nationwide, placing the 10 Policy 32 Q&A
facilities in a precarious Tom Daschle, Mike Leavitt Dignity Health CEO
financial position. share their ideas on how Lloyd Dean discusses
to reshape healthcare. the opportunities and
obstacles on the journey
12 Regulation to value-based care and
Providers ask the CMS to population health.
create APM models that
are more flexible. Data
14 Insurance 31 Data Points
While hospitals have made
States lead the way in
progress in reducing
22 Rebooting the EHR reducing uninsured rates.
unnecessary readmissions,
By Rachel Z. Arndt there’s still much work to be
Clunky electronic health record systems are often blamed for done. View the trend lines.
making life miserable for clinicians. EHR vendors are out to
change that, with a lot of help from their provider clients. 34 By the Numbers
The largest EHR companies
@ModernHealthcare.com ranked by the number of
hospitals citing each firm
Special report as their primary vendor.
Addiction treatment: Access denied
Even as the death toll continues to rise in the opioid-abuse Diversions
epidemic, addiction still isn’t treated with the urgency
36 Outliers
of other chronic and deadly diseases. /Special/Opioid-
People You can’t pull the wool
Resources 29 Newsmakers over their eyes. These
Making sense of MACRA guys are experts in
Remembering economist
Looking for help in meeting the complex requirements face recognition, skills
and health policy sage
and deadlines under MACRA? Our site offers resources, that offer insights
Uwe Reinhardt, who
timelines and an archive of our coverage. into complex brain
passed away earlier this
/MasteringMACRA processes.
month at age 80.
MODERN HEALTHCARE (ISSN 0160-7480). Vol. 47 No. 47 is published weekly by Crain Communications Inc., (except for combined issues the last week of June and the first week of July; the last two weeks of December),
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November 27, 2017 | Modern Healthcare 1


Mayo doubles operating income,
fueling critics of its rural cuts
Rochester, Minn.-based Mayo Clinic
more than doubled its operating income in
the third quarter to $182 million, up from
$86 million in the same quarter last year.
Expenses grew 6% to $2.79 billion
from $2.63 billion and were related to
higher labor, supplies and services
costs. But those costs did not offset
revenue gains. The lauded health
system saw its total revenue increase
9% to $2.97 billion, up from $2.72 billion
in the year-ago period, driven by a
boost in patient revenue and positive
returns on investment. Its operating
margin nearly doubled to 6.1% in the
third quarter, up from 3.2% over the
same period last year.
Amid Mayo’s balance-sheet gains,
the system continues to be slammed
by residents and public officials of
Albert Lea, Minn., who decry Mayo’s
decision to strip services from the rural
community’s hospital.
Mayo earlier this year transferred
inpatient services at Albert Lea
involving overnight hospitalization for
illness or major surgeries, as well as
Net neutrality repeal
threatens telemedicine
The Federal Communications Com-
mission wants to eliminate rules that
EXCEPTIONAL
VISION
EXCEPTIONAL
PLACES OF CARE LILLIBRIDGE.COM
2 Modern Healthcare | November 27, 2017
its intensive-care unit and childbirth
services to its Austin, Minn., campus,
about 23 miles away. Executives said
it is no longer feasible to duplicate
complex and expensive healthcare
services in neighboring communities.
But Albert Lea residents said the
area economy would not survive cuts
to the 1,000-plus jobs Mayo provides.
Patients also must travel farther to
receive care, affecting quality of life and
their healthcare, said Mariah Lynne,
co-chair of the Save Our Hospital
organization. In response, Mayo said
that it remains committed to providing
care for everyone in need as a mission-
driven, not-for profit organization.
But Jennifer Vogt-Erickson, vice
chair of public relations for Save Our
Hospital, said Mayo is putting profit
over patients.
Minnesota Attorney General Lori
Swanson has already unsuccessfully
lobbied Mayo CEO Dr. John
Noseworthy to delay the restructuring
at Albert Lea to give time for a financial
review. —Alex Kacik
make it illegal for high-speed internet
service providers to throttle internet
speeds, blocking or slowing down spe-
cific content. FCC Chairman Ajit Pai
claims the rules hinder innovation.
But that move could threaten low-cost
service for telehealth, according to a
Health Affairs blog from earlier this year.
Prohibitively high internet costs could
exacerbate health disparities between
high- and low-income people and be-
tween people in urban and rural areas.
And large organizations that spend
more on internet connections will
likely pass those costs on to their pa-
tients, said Kenneth Dort, a partner at
Drinker Biddle & Reath. Healthcare
organizations rely on the web not only
for telemedicine but for data storage,
which is crucial, given government
mandates for the use of electronic
health records. —Rachel Z. Arndt
Briefs
„ A shrinking taxpayer base, swelling
beneficiary numbers and growing
healthcare costs all threaten Medicare’s
long-term viability, according to HHS. The
agency reported that the Medicare trust
fund “is not projected to be sustainable
over the long term with the projected tax
rates and expenditure levels.” The ratio
of workers paying taxes to beneficiaries
eligible for Medicare will drop from 3-to-
1 in 2016 to 2-to-1 by 2091. Healthcare
costs also continue to rise faster than
the taxable wages used to support the
program. The shortfall is expected to
equal $3.3 trillion over the next 75 years.
The CMS would need to significantly
increase its revenue or reduce Medicare
benefits to balance its budget, HHS said.
„„
„
The White House says the true cost of
the opioid drug epidemic in 2015 was
$504 billion. The Council of Economic
Advisers previewed a report to be
released this week showing that the
figure is more than six times larger than
the most recent estimate. A 2016 private
study estimated that prescription opioid
overdoes, abuse and dependence in the
U.S. in 2013 cost $78.5 billion. Most of
that was attributed to healthcare and
criminal justice spending, along with
lost productivity. The council said its
estimate is significantly larger because
the epidemic has worsened.
„„
„
Newly disclosed financial records
show that President Donald Trump’s
nominee to become HHS secretary reaped
big earnings during his tenure as a top
pharmaceutical executive. Alex Azar,
who worked at Eli Lilly and Co. from
2007 to 2017, built a financial portfolio
now worth $9.5 million to $20.6 million,
and he was paid nearly $2 million in
his final year at the company. Azar
served as general counsel and deputy
secretary at HHS during President
George W. Bush’s administration.
If confirmed, he would fill the post
vacated by Dr. Tom Price, who resigned
under pressure in late September
after using private charter flights at
taxpayer expense.
 SPONSORED CONTENT
Pharmacists Critical
to Success in
Value-Based Care
The role of health system pharmacists is expanding under value-based care. In this interview, Dr. Tina Moen
of IBM Watson Health discusses the role that pharmacists can play both at the bedside and in conversations
about population health to help improve outcomes and reduce costs.
By Adam Rubenfire, Modern Healthcare Custom Media
DR. TINA MOEN
DEPUTY CHIEF HEALTH OFFICER
Tina Moen, PharmD, has spent
the last 15 years in the healthcare
information technology industry
providing clinical leadership to
colleagues and clients in the US and
abroad. At IBM Watson Health, she has a leadership role
in value-based care, evidence-based medicine and life
sciences.
How should providers incorporate the pharmacist
perspective into discussions about value-based care?
TM: When we think about value-based care and its goal
of lowering costs while optimizing outcomes, we should
remember that most hospital patients are prescribed
at least one medication. Many – particularly those with
chronic or complex conditions – have 10 or 15 prescribed
medications. Given this dynamic, the pharmacist plays
a crucial role as the medication expert. It’s important to
bring pharmacists into the collaborative care conversation
early on, allowing them to take ownership of the
optimization of a patient’s medication regimen. Early
collaboration is critical to figure out what works best, from
an efficacy and outcomes perspective, but also thinking
about cost-effectiveness for the patient and the health
system.
How significant is the role pharmacists play in
population health management?
TM: Pharmacists have a great opportunity to look at
how medication management strategies are working at
the population level, which can inform and shape health
system policies in tandem with physicians and nurses
throughout the care continuum. For example, how do
we most effectively treat patients with heart disease, and
what kinds of medication strategies are effective? Where
have we seen less effectiveness, and can we identify
areas for a different approach? Including pharmacists in
the optimization of medication therapy guidelines for
a population enriches the outcome by capitalizing on
training and expertise from across the care team.
How can Artifical Intelligence (AI) support pharmacist
decisions?
TM: There’s definitely a role for AI in the pharmacy
industry. It’s going to be our job at IBM Watson Health,
along with our industry partners, to talk about the big
problems that aren’t being effectively solved right now–
what kinds of data we need more insight into, and what
kind of knowledge we want to combine with the data to
highlight new insights. For example, data on dispensing
could be combined with primary literature, outcomes and
demographics data to better understand the impact of
medication decisions.
How can pharmacy improvements help hospitals
improve market share?
TM: Years ago, pharmacy was a revenue driver rather
than a cost center, but that has shifted. Still, pharmacy
can impact a hospital’s market share by adding a human
touch to medication management, as more and more
pharmacists are deployed bedside and after discharge.
Patients get overwhelmed when they have a multitude of
medications. Patient concerns can lead to non-adherence
or inappropriate use, so pharmacists play a crucial role in
making patients feel comfortable with their regimen.
IBM Watson Health aspires to improve lives and give hope
by delivering innovation, through data and cognitive insights,
to address the world’s most pressing health challenges. In
the pursuit of value-based care, Watson Health works to help
providers, employers, health plans, and life sciences clients
improve quality and costs by understanding and managing risk,
resources and health; engaging with consumers, caregivers
and stakeholders; and making more confident decisions.
EDITORS
Aurora Aguilar Editor
312-649-5218 aaguilar@modernhealthcare.com

Matthew Weinstock Managing Editor

312-397-7585 mweinstock@modernhealthcare.com
Looming Senate tax bill vote
Paul Barr
312-649-5418
Features Editor
pbarr@modernhealthcare.com
makes healthcare leaders uneasy
Erica Teichert News Editor
212-210-0209 eteichert@modernhealthcare.com Health system executives face post-Thanksgiving
indigestion as Senate GOP leaders race toward a floor
David May Assistant Managing Editor vote on their sweeping tax-cut bill before the end of
312-649-5451 dmay@modernhealthcare.com
November.
Patricia Fanelli Art Director Not-for-profit executives are concerned the
312-649-5318 pfanelli@modernhealthcare.com
Senate bill would hurt hospital capital financing by
Keith Horist Production Manager prohibiting advance re-funding of prior tax-exempt
312-649-5467 khorist@modernhealthcare.com bond issues, which made up about 25% of the
Merrill Goozner Editor Emeritus municipal tax-exempt bond market in 2017.
mgoozner@modernhealthcare.com The House GOP tax bill passed earlier this month
goes further, eliminating all tax-exempt municipal Gerzog
DIGITAL
Blair Chavis Web Producer bond financing starting next year. That’s projected to
312-649-5225 bchavis@modernhealthcare.com save the government nearly $40 billion.
Emily Olsen Web Producer
On the for-profit side, executives worry that both the Senate and
312-649-5482 eolsen@modernhealthcare.com House bills would cap corporate interest deductions at 30% of earnings
before interest, taxes, depreciation and amortization. That could squeeze
Fan Fei Digital Graphics Producer
312-280-3155 ffei@modernhealthcare.com companies carrying large debt loads. But by reducing the corporate tax
rate from 35% to 20%, the bills could benefit profitable firms.
SENIOR REPORTER Not-for-profits also are leery of provisions in both bills setting a 20%
Harris Meyer Chicago
312-649-5343 hmeyer@modernhealthcare.com excise tax on executive compensation topping $1 million and sharply
reducing the number of taxpayers who would be able to deduct charitable
REPORTERS
Rachel Z. Arndt Chicago contributions. They also dislike a Senate provision eliminating the safe
312-649-5314 rarndt@modernhealthcare.com harbor for setting executive compensation and approving transactions
Maria Castellucci Chicago
with insiders.
312-397-5502 mcastellucci@modernhealthcare.com “That would create greater legal exposure for nonprofits and affect
hospitals’ ability to retain qualified board members,” said Jay Gerzog, a
virgil Dickson Washington Bureau Chief
202-434-4552 vdickson@modernhealthcare.com healthcare attorney at Sheppard Mullin.
Beyond that, healthcare industry groups fear that the Senate bill’s repeal
Steven Ross Johnson Chicago
312-649-5230 sjohnson@modernhealthcare.com of the Affordable Care Act’s individual mandate would sharply increase the
number of uninsured patients. And they foresee Congress later pushing
Alex Kacik Chicago
312-280-3149 akacik@modernhealthcare.com for big Medicare and Medicaid cuts to reduce the $1.5 trillion bump to the
deficit that would result from passage of the tax-cut bill.
Shelby Livingston Nashville The Senate bill’s fate is uncertain, with a number of Republicans
843-412-6857 slivingston@modernhealthcare.com
expressing reservations about various aspects, including repeal of the
Susannah Luthi Washington individual mandate. GOP leaders need the votes of at least 50 of their 52
202-434-8462 sluthi@modernhealthcare.com
members, since no Democrats are expected to support it. —Harris Meyer
RESEARCH
Megan Caruso Research Associate
312-649-5471 mcaruso@modernhealthcare.com

COPY DESK
Julie A. Johnson Copy Desk Chief
312-649-5236 jajohnson@modernhealthcare.com

EDITORIAL SUPPORT
valerie Lapointe News Intern
312-280-3173 vlapointe@modernhealthcare.com A biweekly poll taking the pulse
of the Modern Healthcare audience
CUSTOMER SERvICE
877-812-1581 customerservice@modernhealthcare.com
This week’s poll: Has President Trump
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4 Modern Healthcare | November 27, 2017

 WEST
California fines Anthem over
unresolved member complaints
California regulators hit health
insurer Anthem with a $5 million
fine for repeatedly failing to address
members’ complaints in a timely
manner.
The California Department of
Managed Health Care on Nov. 15
criticized Anthem for its ongoing
failure to recognize and resolve
members’ grievances, pointing to 245
violations between 2013 and 2016
identified during an investigation.
Anthem’s “defective” grievance
system creates frustration and stress
for patients, and could potentially
harm patients’ health if care is
delayed, the department said in its
MIDWEST
IlliniCare slashing rates
to Medicaid suppliers
IlliniCare, a private insurer that’s
part of Illinois Gov. Bruce Rauner’s
Medicaid managed-care overhaul, is
cutting reimbursement rates to med-
ical suppliers by up to 50%. The rate
cut effective on Jan. 1 affects suppliers
that provide durable medical equip-
ment, such as wheelchairs, oxygen
tanks and ventilators, to low-income
residents on Medicaid.
The move not only will impact sup-
pliers’ business, but could fuel their
exodus from Medicaid managed care,
leaving patients in the lurch.
In a statement, IlliniCare spokes-
man Danny Lysouvakon said the
carrier’s “top priority is to ensure our
more than 200,000 managed Medic-
aid members have access to quality
healthcare services. We work with
our providers and vendors to align
with the Medicaid program and
be good stewards within its finan-
cial structure.” He declined further
comment.
complaint. Including the latest fine, the
department has fined Anthem nearly
$12 million for grievance violations
since 2002.
Anthem said in
a statement that it
“strongly disagrees with
the DMHC’s findings and
the assertion that these
findings are systemic and ongoing.
Unfortunately the DMHC has not fulfilled
its obligations to clarify the regulatory
standards and definitions being applied
in the audits, despite multiple requests
from Anthem to do so.”
The insurer said it has already taken
steps to address issues identified by
Trinity Health to combine
St. Joseph Mercy, Mercy Health
Livonia, Mich.-based Trinity Health
is combining its St. Joseph Mercy
Health System and Mercy Health into
one statewide system. Rob Casalou,
St. Joseph Mercy regional president
and CEO, will lead the joined system as
president and CEO starting Jan. 1.
Roger Spoelman, CEO of Mercy
Health, will become senior vice presi-
dent of strategic and operational inte-
gration for parent Trinity.
The new system will have 10 hospi-
tals and about 22,500 employees.
SOUTH
Florida rarely punishes
doctors sued for malpractice
Florida doctors are rarely punished
by state regulators even after they are
sued for malpractice, according to the
South Florida Sun Sentinel. The news-
paper reported that state regulators
reviewed nearly 24,000 resolved state
and federal lawsuits against doctors
over the past decade. But of those re-
the regulators.
In one example regulators
provided, an Anthem plan
member was diagnosed with a
serious condition, and Anthem
pre-authorized surgery and
reconstruction to treat the patient.
Later, Anthem denied the claim when
it was submitted by the provider.
The patient, provider, broker and the
patient’s spouse called Anthem 22
times, but the insurer
didn’t resolve the
complaint, regulators
said.
Anthem paid the
claim only after the patient sought
help from the DMHC more than a
year and a half after the treatment.
Under California law, health plans are
required to have grievance systems
to address and resolve members’
complaints within 30 days.
—Shelby Livingston
views, regulators filed disciplinary
charges just 128 times. The state health
department is required to review every
malpractice lawsuit filed against Flor-
ida doctors to identify and punish
problem doctors.
Health department spokesman Brad
Dalton told the newspaper that officials
don’t take action against doctors in cas-
es too old to prosecute or with payouts
of less than $50,000. That minimum
payout amount would rule out roughly
70% of the malpractice cases filed.
November 27, 2017 | Modern Healthcare 5
 Post-acute

LHC Group, Almost Family merger

highlights post-acute market growth
By Alex Kacik share of all new job creation. But they
also account for some of the lowest-pay-
Home healthcare is a growing sec- ing jobs in the industry—home health
tor that presents hospitals and health aides’ median wage is $22,600, which
systems with both opportunities and likely contributes to the lack of qualified
challenges. home care providers available to fulfill
While home care provides a lower-cost that growing demand.
delivery setting that patients often pre- But the reimbursement model is a
fer, it nets lower margins than hospital moving target. The CMS canceled its
and outpatient operations. The sector overhaul of Medicare home health pay-
also has a fluctuating reimbursement ment that would have been based on
model where scale helps mitigate the patient characteristics rather than the
ebbs and flows. number of visits, amounting to a $950
But rather than owning home million cut. But further changes to the
healthcare businesses outright, many payment model are looming.
hospitals are turning to partnerships Still, there are opportunities to ac-
and joint ventures with home care op- quire valuable assets with attractive
erators that can deliver care efficiently multiples, said Thad Kresho, U.S.
and effectively. health services deals leader for Price-
Catholic-sponsored Christus Health, waterhouseCoopers.
GETTY IMAGES
Irving, Texas, formed a joint venture The home “These can be wise dives-
in August with LHC Group, which will adding that the combined titures to make, partly driv-
health sector
manage its 21 home health, hospice and company’s scale will also en by a nice valuation and
long-term hospitals. Christus tapped limit overhead. is growing at a lot of people interested in
into LHC’s operational expertise to help The deal highlights the a rapid pace, them,” he said.
lower its readmissions rate, optimize growing stature of the post- projected to Other partnerships in-
bundled-payment models and improve acute and home health add 425,600 clude Dallas-based Baylor
the discharge process to get patients in space as many organiza- home health Scott & White’s formation of a
the right care setting, said Paul Gener- tions aim to capitalize on aides from home health group through
ale, chief strategy and health network population health and 2016 to 2026, a a joint venture with Accent-
officer at Christus. payment initiatives that Care formed in June, and
Christus officials also had a positive emphasize reducing un-
46.7% increase Dallas-based Tenet Health-
view of the announcement this month necessary care, shifting according to care Corp.’s sales of its home
that LHC Group and Almost Family had care to lower-cost settings, the Bureau of health and hospice business
agreed to a merger that would create and improving patient sat- Labor Statistics. to Amedisys in March.
the second-largest home health pro- isfaction and outcomes. Joint ventures have reg-
vider in the U.S. with 781 locations in The home health sector ulatory hurdles to clear in
36 states, more than 31,000 is also growing at a rap- safe harbors, governance, credit and li-
employees and revenue of id pace, projected to add quidity limits, but they provide quicker
THE TAKEAWAY
$1.8 billion. Almost Family 425,600 home health aides access to local markets and avenues to
has experience in the con- The LHC Group from 2016 to 2026, a 46.7% alternative payment models, said Chris-
sumer-driven private-pay and Almost Family increase, according to the topher Donovan, a partner at Foley &
segment that will benefit merger reflects the Bureau of Labor Statistics. Lardner focused on post-acute deals.
LHC’s partners, including growing importance Over that 10-year span, “Most providers will find that both
Christus, Generale said. “It providers are putting home health and person- acquisition and joint venture models
on post-acute care
will provide synergies and in a value-driven
al care aides will expand work, but it is dependent on the market,”
complement what they are payment model. by 1.2 million more jobs, he said. “It’s important to deploy the cor-
already doing,” he said, making up a significant rect strategy in the correct market.”

6 Modern Healthcare | November 27, 2017


Medicare
CMS throws lifeline
to 13 rural hospitals with
enhanced reimbursement
By Virgil Dickson
For Corey Lively, CEO of Great
Plains Regional Medical Center in
Oklahoma, being selected for a ru-
ral hospital demonstration project is
a godsend.
With commercial reimbursement
rates plummeting and Medicare
and Medicaid continually under-
paying for services, Lively was con-
sidering scaling back service lines,
including cancer treatments, at the
50-bed hospital.
But last week, the CMS admitted
Great Plains, along with 12 other hos-
pitals, to the Rural Community Hos-
pital Demonstration Program, which
reimburses hospitals for the actual cost
of care for inpatient services provided
to Medicare beneficiaries rather than
standard Medicare rates. Medicare
typically pays as little as 80% of inpa-
tient services costs.
The demonstration “al-
lows us to maintain a THE TAKEAWAY
higher level of services that
The CMS has
if we didn’t provide, some expanded an
would have to travel 110 experiment that pays nurses and others have
to 130 miles to receive,” rural hospitals the
Lively said. actual cost of care
The program started in versus standard
2014 and was extended last Medicare rates.
The LHC Group and Almost Family
all-stock deal will combine two major
players in a segment of the industry
that is expected to grow along with the
aging baby-boom population, longer
life expectancies, rates of chronic con-
ditions and the push to move care from
the hospital.
Under the agreement, Almost Family
shareholders will receive 0.9150 shares
of LHC Group for each existing Al-
most Family share. Upon closing of the
transaction, expected in the first half of
next year, LHC Group shareholders will
year under the 21st Century Cures Act
for another five years. The new partic-
ipating hospitals join 17 that were al-
ready in the program.
Eligible hospitals have to be located in
a rural area, have fewer than 51 acute-
care beds, provide 24-hour emergency
services and not be designated as a criti-
cal-access hospital.
The program expansion comes as
Medicare margins are in free fall (See re-
lated story, p. 18). In 2015, the aggregate
margin hit negative 7.1% across hospitals
according to the Medicare Payment Ad-
visory Commission, and it was expected
to hit negative 10% this year.
The additional funds drawn through
the demonstration have helped Colum-
bus Community Hospital in Nebraska,
which has been in the program since
the start, keep up with rising costs of
technology and medical equipment, ac-
cording to its CEO, Mike Hansen.
It has also given the hos-
pital the funds necessary to
attract new staff. Over the
past few years, 120 clini-
cians, physician assistants,
been hired.
“It’s difficult to recruit to
small rural towns, but the
demonstration has cer-
own 58.5% of the combined company
and Almost Family shareholders will
own 41.5%.
The deal would put the combined en-
tity behind Kindred Healthcare and its
$2.5 billion in annual home health and
hospice revenue, according to Modern
Healthcare data. The transaction is in-
tended to produce about $25 million in
cost savings that will allow the company
to pursue other partnerships and acqui-
sitions and expand its geographic ser-
vice area, executives said. Its combined
gross leverage is expected to be 1.5 times
Joining the program
Rural hospitals added to the Rural
Community Hospital Demonstration
Anderson Regional Medical
Center—South
Meridian, Miss.
Aroostook Medical Center
Presque Isle, Maine
Avera St. Luke’s Hospital
Aberdeen, S.D.
Avera Queen of Peace Hospital
Mitchell, S.D.
Great Plains Regional
Medical Center
Elk City, Okla.
Highland Community Hospital
Picayune, Miss.
McPherson (Kan.) Hospital
Montrose (Colo.) Memorial
Hospital
Morton County Health System
Elkhart, Kan.
St. Anthony Summit Medical
Center, Frisco, Colo.
St. John’s Medical Center
Jackson, Wyo.
Trinity Regional Medical Center
Fort Dodge, Iowa
Valley View Hospital
Glenwood Springs, Colo.
tainly been key in helping to allow us
do that,” Hansen said.
Jason Cleckler, CEO of Delta
County Memorial Hospital in Colo-
rado, which garnered $800,000 from
the program, agreed that the money
is key to efforts to recruit and retain
staffers. “This program is really im-
portant for rural hospitals that are
facing difficult challenges when it
comes to reimbursement and payer
mix,” Cleckler said. l
based on 12-month adjusted earnings
before interest, tax, depreciation and
amortization of $145 million.
It would position both firms as logis-
tical partners to other providers, Don-
ovan said. “The push to value-based
care, which requires care coordi-
nation, cost tracking and outcomes
management across the continuum,
in many cases requires significant re-
sources and investment in technology
and personnel,” he said. “Most of the
time, this can only be accessed with a
large scale and size.” l
November 27, 2017 | Modern Healthcare 7
Policy
Talking points:
Daschle, Leavitt
on reshaping
healthcare
Mike Leavitt and Tom Daschle sit
on different ends of the political
spectrum, but share the goal of seeing a
public-private partnership drive healthcare
innovation. Leavitt, a former HHS secretary
and Utah governor and current head of
Leavitt Partners, and Daschle, a former leader
of Senate Democrats, recently shared their
thoughts on policy and innovation
with Modern Healthcare editors Paul
Barr and Matthew Weinstock. Year to
year, the average penalty per hospital
has varied, lending to the variation
in total penalties. This is an extended
edit of a conversation that took place
before a private event at Chicago’s
healthcare incubator, Matter.
A portion of this talk was included in
the Nov. 27 issue.
Policy and economic
pressures facing
healthcare
Tom Daschle: The demographics
of Medicare almost dictate that
you’re going to see expanded growth
because baby boomers like me are
increasingly a factor in how one looks
at the larger number. My fear is that
policymakers are going to look at cost-
saving measures for Medicare and
simply resort to what we always do,
which is shift the cost onto something
else rather than look at the universe of
health and really try to solve the cost
problem in a meaningful way where we
repair and improve. The cut-and-shift
model works in the short term for the
federal budget process, but it doesn’t
work in solving that larger issue about
per capita costs, whether they’re public
or private.
10 Modern Healthcare | November 27, 2017
TOM DASCHLE
THE BIPARTISAN POLICY CENTER
MIKE LE AV IT T
GETTY IMAGES
Progression of alternative
payment models
Innovation will lead the way
Daschle: There aren’t any home
Leavitt: It will be integrated systems, of
runs yet, but we’re going from
which hospitals are only a part. They will
singles to doubles at least and that’s
be integrated systems that either own or
encouraging. Healthcare as a public-
are owned by a payer. It will be hospitals
private partnership … that’s going
that have long-term-care assets, that
to require more risk for the private
have a physician practice and that
sector, but some commitment to
have created the collaborative capacity
stabilizing risk on the public sector
to work together. I think you’ll see
with reinsurance just as we did with
device companies and pharmaceutical
Medicare Part D and Part C, which
companies begin to step into this and
are probably the greatest success
say, “Wait a minute, we could be part
stories in terms of the integration of
of this. We can go from just being a
that public-private partnership.
chemical assembler—a pharmaceutical
Mike Leavitt: One of the reasons company—to a healthcare company and
(alternative payment models are) we could begin to take risk based on the
growing slowly is because people validity of our product.”
don’t know yet how to do it and
Daschle: The whole infrastructure
the competencies are not yet
landscape is going to change.
developed. Payers—the federal and
Aetna CEO Mark Bertolini recently
state governments being among
said the new models are not in the
the biggest—are going to have to
health field space. The models are
continue putting steady pressure; if
Amazon and Tesla as the way we
they put too much pressure, people
to look at healthcare and the way
will turn back. It’s not going to be
healthcare entities interact with people
done solely with legislation. It’s not
themselves. So I think you have leaders
going to be done in politics. It’s going
in the field who are trying to break out
to be driven by economics and the
of the old mold and really redesign the
market will begin to reshape and
whole notion of what healthcare will
react to it.
look like. l
 KNOW A MINORITY
HEALTHCARE EXECUTIVE
WHOSE INFLUENCE ON POLICY
AND CARE DELIVERY MODELS
IS MAKING A DIFFERENCE?
The Top 25 Minority Executives in Healthcare award recognizes the positive impact
diversity has on healthcare. If you know someone who has successfully served as
a leader, role model or mentor and would like to nominate him or her for this
prestigious award, go to Modernhealthcare.com/Minority and click “nominate.”

D O N ’ T D E L AY, N O M I N AT I O N S C L O S E J A N U A R Y 8 , 2 0 1 8 .
Regulation
Providers want the CMS
to create alternative pay models
that are more flexible
A M E R I C A N H O S P I TA L A S S O C I AT I O N
Broaden the definition of financial risk
under the Medicare Access and CHIP
Reauthorization Act so more providers
can participate in advanced alternative
payment models.
Consider models for accountable
care organizations and Medicare
Advantage plans that cover services not
currently reimbursed by Medicare, like
transportation, social services and remote
patient monitoring.
CMMI should test value-based payment
models for drugs.
A M E R I C A ’ S E S S E N T I A L H O S P I TA L S
We encourage the innovation center
to develop APMs and advanced APMs
that are voluntary, allowing providers to
select models most appropriate for the
populations they treat.”
12 Modern Healthcare | November 27, 2017
By Maria Castellucci
Provider groups want the CMS to develop new
pathways for alternative payment models. Several trade
organizations submitted comments to the agency, which
had solicited advice on how the Center for Medicare
and Medicaid Innovation could spur movement
to value-based reimbursement. Below are some
highlights. The CMS has not announced what it
plans to do with the provider recommendations.
A S S O C I AT I O N O F
MEDICARE AMERICAN MEDICAL
P AY M E N T COLLEGES
ADVISORY The CMS should consider lowering
COMMISSION the threshold of Medicare payments
required to be considered an
Expand opportunities
advanced APM under MACRA.
for participation in
Under current statute, clinicians
advanced alternative
must derive at least 75% of their
payment models
Medicare revenue from an APM by
through an ACO
2023 to be eligible for a bonus.
demonstration that
benchmarks providers The future threshold of 75% will be
through total Part A and
Part B spending.
very challenging and few eligible
clinicians may be able to meet it.”
F E D E R AT I O N O F A M E R I C A N H O S P I TA L S
We agree with the CMS that models are best created through early
collaboration with stakeholders.”
The CMS should implement the new voluntary bundled-payment
model that would meet the criteria of an advanced APM
“as soon as possible.”
A M E R I CA N C O LLE G E O F CA R D I O LO GY
ACC strongly requests that the CMS increase the number of
physician specialty models that qualify as advanced APMs under
the MACRA statute.”
“The College believes it is important that these models are
centered around large homogeneous groups of patients and are
triggered by a procedure or clearly defined acute event.”
 DO YOU KNOW S OMEONE
WHOSE WORK HAS CHANGED THE
INDUST RY FOR T HE BET T ER?

NOMINAT E TODAY.
The Health Care Hall of Fame recognizes the leaders, visionaries and
pioneers whose contributions to healthcare have made a lasting impact
on the growth and success of the industry.

As a reader-nominated editorial feature, help Modern Healthcare

determine who deserves to be added to the Health Care Hall of Fame.

V I S I T M O D E R N H E A LT H C A R E . C O M / H O F T O S U B M I T
Y O U R N O M I N AT I O N B Y D E C E M B E R 1 6 , 2 0 1 7.
Insurance

States lead the way in reducing

uninsured rates
By Shelby Livingston High deductibles grow
Another key trend influencing the insurance market is the continued climb
When it comes to covering the unin-
of high-deductible health plans.
sured, states have the federal govern-
ment beat.
■ Consumer-driven health plan (high deductible with health savings account)
The average uninsured rate is nearly
double in states that rely on the fed- ■ High-deductible health plan without health savings account 42.9%
eral HealthCare.gov insurance ex- 39.4%
36.9% 36.7% 17.4%
change when compared to those that 33.9% 15.5%
run their own. 31.1% 13.3% 13.3%
29% 11.7%
In the first six months of 2017,
23.3% 10.8%
HealthCare.gov states had an average 9.2%
uninsured rate of 16.1%, while states 7.7% 25.5%
23.6% 23.4% 23.9%
with their own exchanges—like Cali- 22.2%
20.3%
fornia and Colorado—had an average 19.9%
17.6%
uninsured rate of 8.3%, according to
data from the Centers for Disease Con-
trol and Prevention.
The disparity in coverage in states
2010 2011 2012 2013 2014 2015 2016 2017
that use HealthCare.gov and those Jan.-June
with state-based exchanges can be ex- Source: HHS
plained, at least in part, by Medicaid
expansion.
“States that went all in on imple-
menting the ACA set up their own ex- uninsured rates and healthier individ- “States that went
changes, but crucially also expanded ual marketplaces. all in on implementing
Medicaid,” said Larry Levitt, senior According to the CDC data, the un- the ACA set up their
vice president at the Kaiser Family insured rate among adults age 18 to 64 own exchanges,
Foundation. He added that many states residing in Medicaid expansion states but crucially also
with their own exchanges have been was 8.8% in the first six months of 2017,
more aggressive in outreach, which down from 18.4% in 2013. But in states
expanded Medicaid.”
may have also helped lower the unin- that didn’t expand Medicaid, the unin- Larry Levitt
sured rate in the state. sured rate is 19% in the first half of 2017, Senior vice president
Nearly all of the 12 states that run down from 22.7% in 2013. Kaiser Family Foundation
their own exchanges have expanded The CDC also found that the per-
Medicaid under the Affordable Care centage of people enrolled in a private
Act, so people with incomes up to health insurance plan with a high de-
138% of the federal pov- ductible climbed to 42.9% family coverage.
erty level have access to in the first half of 2017 In total, 28.8 million people of all
Medicaid coverage. THE TAKEAWAY from 39.4% in 2016. The ages, or 9% of Americans, were un-
Meanwhile, 17 states Fewer people are percentage has increased insured in the first half of 2017, about
that use HealthCare.gov uninsured in states every year since 2010, the same amount as in 2016. Among
or partner with the federal that set up their own when 25.3% of privately adults age 18 to 64, the uninsured rate
exchange for some func- Affordable Care Act insured individuals were was 12.5%.
tions opted not to expand insurance exchanges enrolled in high-deduct- About 176.8 million people, or 65.4%,
Medicaid. A growing body than in states that ible plans. These plans under age 65 were covered by private
of evidence has shown that use HealthCare.gov, have a deductible of at health insurance plans in the first half
states that expanded Med- according to data least $1,300 for self-only of this year, including 10.1 million, or
icaid in general have lower from the CDC. coverage and $2,600 for 3.7%, covered by the ACA exchanges. l

14 Modern Healthcare | November 27, 2017

Health IT UNMA R K
TRAI L E D
AHE A
D
Patient ID: Rocky terrain 2018
By Rachel Z. Arndt

It makes sense that, when you walk into any

healthcare setting, your doctors know who, exactly, you 2017 CMS will issue
Medicare
are. But the industry has long struggled to find a fail-safe cards with new
way to match the flesh-and-blood patient to the patient ID numbers
that exists in the medical record. One solution—one that’s instead of
Although the Social Security
been whispered about for nearly two decades—is a national 2017 HHS numbers.
unique patient identifier, a number assigned to each person appropriations
to keep her medical identity sorted out. Proponents of such bill still prohibits
an identifier say it would improve patient safety. 2016 the department
from spending
Naysayers say it would infringe on privacy. The whispers
money on a
behind a patient identification solution have, in recent years, patient ID,
grown, but they still aren’t loud enough to drive it includes a
universal change. Here, we trace the national patient The College section that
of Healthcare encourages the
identifier’s uphill battle since it was first mentioned
Information ONC to give
in the Health Insurance Portability and Management technical help
Accountability Act of 1996. Executives to the private
launches its sector in its
$1 million patient-matching
National Patient efforts—which
ID Challenge. are, technically,
1999 The goal: use different from a
crowdsourcing unique patient ID.
to find a solution
that will ensure
accurate patient CHIME calls
In budget legislation,
identification all off its patient
Congress banned
of the time. identification
HHS from spending
challenge,
1996 money on developing
replacing the
a patient ID. The
language has been in effort with
every appropriations the Patient
bill since. Identification
The Health Task Force.
Insurance
Portability and
Accountability Discussions about a national patient ID are muted, if
Act instructed not non-existent. “Early, there weren’t enough EHRs
the government to generate interest,” said David Muntz, principal
to create unique at health IT consultancy StarBridge Advisors and
identifiers former principal deputy at HHS’ Office of the National
for patients, Coordinator for Health Information Technology.
employers,
health plans
and providers. Then, Muntz said,
conversations trickled
to a halt because of the
appropriations language.

November 27, 2017 | Modern Healthcare 15

Policy

Unintended outcomes: Readmissions

program might be harming patients
By Maria Castellucci St. Elizabeth Medical Center in Utica, N.Y.
Percentage of net revenue lost
At St. Elizabeth Medical Center in
due to readmission penalties
Utica, N.Y., the CMS’ Hospital Read-
missions Reduction Program was an 0.25%
expensive wake-up call to hospital
leaders that they needed to do a better
job of preventing patients from making 0.20%
a U-turn after being discharged.
The hospital was hit with a $397,153
penalty in 2013, the first year the CMS 0.15%
issued penalties under the program,
according to a data analysis by Leavitt
Partners. The medical center’s reve- 0.10%
nue was $197 million that year.
“Without a doubt, the penalty pro-
gram wakes you up and makes you look 0.05%
at” readmissions, said Dr. Eric Yoss, se-
nior vice president of quality at Mohawk
Valley Health System, which operates 0
St. Elizabeth. “If you previously wanted 2013 2014 2015 2016 2017 2018
to ignore it, you don’t anymore.”
Source: Torch Insight from Leavitt Partners
But now another policy debate is
brewing, one that raises into question
the heavy spotlight that’s been put on risk patients are set up with navigators, “Without a doubt,
reducing readmissions: Could the tac- who call them after discharge to ensure the penalty program
tics used to avoid a readmissions penal- they have a follow-up appointment with wakes you up and
ty actually be detrimental to patient care their primary-care provider. And if they
makes you look at
in other ways? don’t, the health system sets up a visit at
A recent JAMA study found that as one of its outpatient centers within 10 readmissions.
hospitals reduced readmissions for days after discharge. If you previously
heart failure patients, their mortality The efforts have worked. The fi- wanted to ignore it,
rates increased. nancial penalty at St. Elizabeth has you don’t anymore.”
Health policy experts point to flaws in dropped from 0.21% of net revenue in
Dr. Eric Yoss
the study’s methodology, but say it’s an 2013 to 0.03% in 2018. The hospital’s Senior vice president of quality
important insight into how the financial penalty will be $52,003 in 2018, accord- Mohawk Valley Health System
incentives from the readmissions pro- ing to Leavitt Partners.
gram can influence hospital behavior, “It is driving us to avoid readmissions
and not always for the better. and there is a quality component to it program, which was established under
St. Elizabeth has set up several qual- as well,” Yoss said. “We should be doing the Affordable Care Act, has motivated
ity-improvement efforts to this anyway.” hospitals to change wasteful care prac-
try to drive down readmis- By comparison, the tices and better manage populations.
sion rates in response to the THE TAKEAWAY medical center’s mortality Readmissions have fallen as hospitals
CMS program. rate for heart failure pa- respond to penalties that can dock up to
Health policy experts
For example, all inpa- tients between July 2012 3% of their Medicare payments.
say it’s time to
tients are now screened for assess how the and June 2015 was 13.4%, “This program has gotten hospitals
risk factors that might sig- readmissions penalty slightly higher than the to focus on readmissions and a lot less
nal they are vulnerable to program is impacting national average of 11.9%. on everything else,” said Dr. Ashish
a readmission. Those high- outcomes overall. Overall, the penalty Jha, a professor of health policy at the

16 Modern Healthcare | November 27, 2017

Harvard School of Public Health.
“The big penalty for readmission
rates has meant hospitals put less
attention on reducing complica-
tions and on reducing mortality.”
To a degree, the CMS’ own math
has placed a higher value on re-
ducing readmissions than im-
proving mortality rates. Under the
Hospital Value-Based Purchasing
Program, high mortality numbers
cost a hospital 0.2% of its Medicare
payments, compared with a 3% hit
under the readmissions penalty
program, according to a February
2017 study in JAMA Cardiology.
“That doesn’t strike me as sensi-
ble,” Jha said.
Readmission rates also aren’t the
best indicator of quality of care, ar-
gued Dr. Peter Pronovost, director
of the Armstrong Institute for Pa-
tient Safety and Quality at Johns
Hopkins Medicine. Some readmis-
sions aren’t avoidable and some
may be beyond the hospital’s con-
trol, especially since patient adher-
ence to a treatment plan also has
an impact. Physicians can’t always
control if a patient actually picks up
and takes their medication.
“I don’t think we have approached
this measure with the nuance it proba-
bly entails,” Pronovost said. “It presents
some signal about quality but there are
some non-quality signals as well.”
In a statement responding to the
JAMA study, the CMS said, it “continu-
ously monitors the impact of the mea-
sures used in our programs, including
input from peer-reviewed research and
other sources. Studies like this are im-
portant inputs as we continuously as-
sess our programs.”
Heart failure, which is the most
common Medicare readmission, is
an incredibly complex condition to
treat. And for advanced heart failure
patients, a readmission is sometimes
unavoidable, said Jay Cyr, senior vice
president of surgical services at UMass
Memorial Medical Center in Worcester.
“These people are very sick—keeping
them out of the hospital is a challenge,
and sometimes we can’t do that despite
our best efforts,” he said.
Given the challenges of caring for
heart failure patients, it’s plausible
UMass Memorial Medical Center
Ratio of “excess” readmissions
for heart failure*
1.2
1.0
0.8
0.6
0.4
0.2
0 Armstrong Institute for
2013 2014 2015 2016 2017
Source: Torch Insight from Leavitt Partners
*Defined as higher than expected for an average
hospital of the same size with similar patients
that tactics hospitals adopt to avoid
readmissions have a negative impact
on patients’ survival rates, said Jason
Hockenberry, an associate professor
of health policy and management at
Emory University who has studied the
CMS readmissions program. Hospi-
tals “change care processes, and they
change how they handle patients,
which could lead to some fraction of
the patient population having their life
shortened,” Hockenberry said.
That’s not to say hospitals turn pa-
tients away if they need care, Hock-
enberry said. But interventions made
to help patients avoid a readmission
might influence whether or not they
decide to return to the hospital or wait
to get an appointment with their spe-
cialist. Low health literacy among pa-
tients might lead to difficulty both in
understanding discharge instructions
and compliance with subsequent self-
care protocols, he said.
“We still don’t understand what these
incentives are doing to care processes,
and how they might be impacting pa-
tients,” he said. “Are they satisfied with
their care? That is unclear at this point.”
“I don’t think we
have approached
this measure
with the nuance it
probably entails.
It presents some
signal about
quality but there
are some non-
quality signals
as well.”
Dr. Peter Pronovost
Director
2018 Patient Safety and Quality
Johns Hopkins Medicine
The CMS also adopted the
program across all acute-care
hospitals without much in-
sight or evidence into how it will impact
hospitals. “We have no idea whether re-
ducing readmissions is going to have
an impact on health outcomes,” Hock-
enberry said.
Dr. Karen Joynt, an assistant profes-
sor of medicine at Washington Univer-
sity School of Medicine, rejected the
notion that the CMS program might
be having a negative impact on patient
care. “It doesn’t kill people to try to im-
prove the discharge process,” she said.
Even with the positive statistical re-
sults the program has shown in driving
down readmissions, Johns Hopkins’
Pronovost said the JAMA study war-
rants more follow-up in terms of the
broader impact on outcomes.
“There was a lot of good by increas-
ing attention on care coordination
and thinking about patients when
they leave the hospital,” he said. “But
now we have a signal that there are
unintended consequences, so I think
(policymakers and researchers) really
need to come together and talk about
why this might be happening and what
should we be doing going forward with
this measure.” l
November 27, 2017 | Modern Healthcare 17
Slumping Medicare
margins put
hospitals on
By Virgil Dickson
avid Ramsey is
D in a dark place.
Despite running
West Virginia’s
largest hospital, a sense of dread
has grown about the facility’s future.
“There is no light at the end of the
tunnel other than another train,” said
Ramsey, CEO of Charleston Area Medical
Center. “There no reason to feel optimistic.”
Ramsey, and many of his C-suite peers,
are grappling with that fact that Medicare
margins are in a free fall. In 2015, the aggre-
gate margin hit a negative 7.1% across hospitals,
according to the Medicare Payment Advisory
Commission; margins are expected sink to a nega-
tive 10% this year.
While Medicare has never
totally covered the cost of care, THE TAKEAWAY
hospital executives say the chasm
between the two has widened in Payment shifts and
regulatory mandates
recent years due to a number of are putting hospital
factors: federal mandates to de- Medicare margins on
ploy expensive health informa- a slippery slope.
tion technology systems under
18 Modern Healthcare | November 27, 2017
precarious cliff
the meaningful use program, a 2% across-the-board cut to
provider Medicare payments under the Budget Control Act
of 2011, reductions in Medicare disproportionate-share hos-
pital payments and the move to alternative-payment models.
Layoffs and reductions in services have been common cop-
ing mechanisms to avoid the income drop.
Charleston Area Medical Center has been hit particularly
hard, especially since 20% of West Virginia’s population is on
Medicare, one of the highest rates in the country.
The hospital plans to cut 300 jobs by year-end. On top of
that, there are plans to close a wellness program, one of its
community-based pharmacies and a pulmonary rehabilita-
tion program.
Some experts are incredulous that the income woes faced
by Charleston Area Medical Center are shared across the
country. Paul Hughes-Cromwick, co-director of the Center for
Sustainable Health Spending at the Altarum Institute, point-
ed to MedPAC figures showing that total hospital all-payer
margins in 2015 hit 6.8%, their highest levels in 30 years.
“Cases where some hospitals are struggling are extreme
examples,” Hughes-Cromwick said. “Hospitals in general are
doing well.”
GETTY IMAGES
 Hospitals counter that MedPAC figures are based on ag-
gregate data and that hospitals in growing or thriving metro-
politan areas like Atlanta, Denver and New York City have a
disproportionate impact on margin averages.
Also, in a practical sense, there hasn’t been an influx of new
employers offering commercial coverage in rural markets
such as West Virginia, Ramsey noted.
It’s a similar story in Iowa where Todd Linden is CEO of
Grinnell Regional Medical Center.
Last year, Grinnell Regional closed its outpatient mental
health clinic. The system has reduced its workforce during
the past five years by nearly 20% in an effort to stay afloat.
For decades, hospitals could rely on rising commercial reim-
bursement, but those raises have stopped as insurance com-
panies struggle with their own thin margins.
“There is no silver lining from other payers,” Linden said.
Having a payer mix where 40% of patients are covered
commercially has been a lifesaver for New York-Presbyterian
Healthcare System, according to CEO Dr. Steven Corwin. It’s
why he gets nervous whenever the idea of a Medicare-for-all
single-payer program gets bandied about.
“The 150 million or 160 million people with employer in-
surance support the entire healthcare system,” Corwin said.
Even some of the positive trends driven by the Affordable
Care Act have had adverse consequences. For hospitals in
the 31 states that expanded Medicaid, uncompensated-care
costs fell from 3.9% to 2.3% of operating costs between 2013
and 2015, according to a 2017 Commonwealth Fund report.
The estimated savings totaled $6.2 billion. The expanded cov-
erage, however, also meant a dip in disproportionate-share
hospital payments and uncompensated-care payments. Hos-
pitals saw those payments drop to $11 billion in 2015, down
$1.2 billion from the year before, according to MedPAC.
While expanded coverage is a net positive, hospital leaders
still complain that the government payment programs do not
cover costs. For Medicare, hospitals received 88 cents for every
dollar spent caring for beneficiaries in 2015 and 90 cents for
Medicaid patients, according to the
In next week’s issue, American Hospital Association.
Modern Healthcare will Combined underpayments from
examine ways hospitals
and health systems are
the government programs were
working to plug financial $57.8 billion in 2015. This includes
holes, both operationally a shortfall of $41.6 billion for Medi-
and by reducing clinical care and $16.2 billion for Medicaid,
variation.
the association reported.
Attempts to move Medicare
from a fee-for-service system to a value-based model pose
perhaps the most serious challenge to hospitals and health
systems struggling with low Medicare margins.
Last year, a study by McKesson Corp. found that only 26%
of hospitals were meeting goals to lower healthcare costs
under the new pay models, and just 30% were meeting care-
coordination goals.
The slow progress is occurring despite significant imple-
mentation costs incurred by hospitals. On average, hospi-
tals have five full-time employees, including clinical staff,
tracking and reporting quality measures under value-based
models, according to the AHA. They are also spending ap-
proximately $709,000 annually on the administrative as-
pects of quality reporting.
Regulatory burden
The American Hospital Association estimated that health
systems, hospitals and post-acute providers spend $39 billion
annually complying with regulatory mandates. That equates to
$7.6 million for an average-sized community hospital (161 beds).
Regulatory area Total cost
Hospital condition of participation $3,108,052
Billing and coverage $1,641,046
Meaningful use $759,689
Quality reporting $708,691
Privacy and security $569,471
Fraud and abuse $339,652
Program integrity $337,379
New models of care $121,774
Total cost $7,585,752
Source: American Hospital Association
More broadly, the AHA suggested that the average com-
munity hospital spends $7.6 million annually on adminis-
trative costs to meet a subset of federal mandates that cut
across quality reporting, record-keeping and meaningful
use compliance.
Hospital executives understand that ensuring patients
are getting the right amount of care in the right settings is
ultimately in their best interest. However, the transition has
been painful so far.
“Keeping people out of the hospital really is the right thing
for our community, but it has reduced our fee-for-service
volume,” said John Bishop, CEO of the three MemorialCare
Health System hospitals in Long Beach, Calif.
Catholic Health Initiatives, a not-for-profit health system
with 100 hospitals in 17 states, has also been feeling the
pressure of low Medicare margins. The struggle led, in part,
to layoffs of 459 employees at its Texas hospitals and the de-
cision to leave 161 vacant positions unfilled.
Like other health systems, CHI’s aggressive move to
value-based care has weakened margins for Medicare pa-
tients, according to Dean Swindle, the system’s president
and chief financial officer.
In 2015, the Obama administration announced it
wanted 30% of payments for traditional Medicare bene-
fits to be tied to alternative-payment models such as ac-
countable care organizations by the end of last year and
50% by the end of 2018.
The first goal was met, but since the Trump adminis-
tration took over in January, CMS officials have been coy
about their own goals for the shift beyond noting they want
the move to be voluntary.
Overall, hospital leaders believe they are getting mixed
messages from the Trump administration over whether it
still supports the move away from fee-for service Medicare,
given that it has canceled or scaled back several new pay
November 27, 2017 | Modern Healthcare 19
 5.5%
Medicare margins take a dive
2.2%
-1.2%
-3% -3%
-4.9%
-6.1%
2001 2002 2003 2004 2005 2006 2007
Source: MedPAC
models created under the Obama administration.
“We went full speed ahead because we felt, as many did,
that value-based was going to be put in place more quickly
than it has,” Swindle said. “You cannot underestimate the
impact of the election last year.”
As it refocuses strategic priorities, CHI has reduced in-
vestments in value-based care and population health by
about 35% to 40%. Swindle said in the near term his sys-
tem’s focus is to ensure there is adequate staffing at the
bedside to give patients the best quality of care possible.
“Moving forward, we felt it would be a better turn for us
and our community if we redirected some of those invest-
ments to things like patient experience,” he said.
With hospitals struggling at historic lows in terms of
Medicare margins, perhaps the CMS should take this time
to determine if the benefits of shifting to value-based care
outweigh the cons, suggested Jeff Goldsmith, an adviser at
Navigant Consulting. Like hospitals, the CMS has reaped
limited rewards from value-based models.
For instance, under the Comprehensive Primary Care Ini-
tiative, which launched in 2012, the CMS and other insurers
pay physicians a monthly fee for patient primary-care visits.
The model aimed to improve health outcomes and lower
costs not only for Medicare beneficiaries but consumers
enrolled in commercial plans and other coverage options,
such as managed-care Medicaid plans.
Over the first three years of the experiment, the CMS
paid out $226 million in care-management fees for Medi-
care beneficiaries. However, over that same period, the
program generated only $121 million in savings, according
to a federal evaluation of the experiment. Final year spend-
ing and savings have yet to be released.
Researchers noted similar findings for a Medicare medi-
cal home model and another effort to reduce avoidable hos-
pitalizations for nursing home patients. In those instances,
the CMS’ investments either nearly or entirely outpaced
savings generated.
“The questions we’ve been asking in terms of alternative
pay models are, ‘Is it worth it to the federal government to
20 Modern Healthcare | November 27, 2017
-4.9% -5.0%
-5.3% -5.4%
-5.8% -5.7%
-7.2% -7.1%
2008 2009 2010 2011 2012 2013 2014 2015
pursue them? And if we don’t generate savings for the gov-
ernment and they increase costs for doctors and hospitals,
where is the benefit to society?” Goldsmith said.
Going forward, there are things Congress can do to sta-
bilize and lessen the financial pressures hospitals now face.
The Medicare recovery audit contractor program could be
overhauled. Under the program, private companies audit
the medical records of hospitals and doctors to find in-
stances of improper billing or erroneous payment from the
government.
Hospital executives argue that claims are often mistak-
enly flagged as being improper in some way. Of the claims
that have completed the appeals process, 62% were over-
turned in favor of the provider, according to the AHA. The
association found that 43% of all hospitals reported spend-
ing more than $10,000 managing the RAC process during
the third quarter of 2016, 24% spent more than $25,000 and
4% spent over $100,000.
RACs “should face some sort of penalty if they are wrong
most of the time,” Linden at Grinnell Regional said.
CHI’s Swindle said he would like RACs to be responsible
for covering the cost of an appeal should their initial deter-
mination be overturned.
Despite those concerns, the program has scored big for
the federal government. RACs have recouped $8 billion in
improper payments since its inception in 2009, according
to the CMS.
The other recurring request from hospitals is that Con-
gress preserve the individual mandate in the Affordable
Care Act. A proposal to repeal the mandate is included in
the Senate version of tax reform legislation.
If that were repealed, access to coverage would be
harmed. Many healthy people would likely flee plans,
leaving only the sickest patients, which would make it
financially unfeasible for some insurance companies to
continue to offer insurance in some markets.
“No matter what, we continue to figure out how to take
care of people, but you get to the point where there just aren’t
the resources,” Linden said. “I do fear for the future.” l
 SPONSORED CONTENT
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prosecutors will want to know who knew what
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Cases can stem from just one unfortunate
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In most cases, the government is targeting executives
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Understand the government’s criteria
Through memos and testimony, government
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Individual liability can also fall under Stark and
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While executive liability under the False Claims Act
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It’s also critical that compliance programs include
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high producers.
Providers and vendors
team up for
user-friendly
EHRs

GETTY IMAGES

By Rachel Z. Arndt

efore an Allscripts electronic health record unhappy, and not just because it affects their face-to-face

B appears on screen, it first appears on a story-

board—sometimes even a paper one. That’s
where Allscripts developers can test new ideas on
providers, figuring out what should go where.
“The design on paper is still at the basic level where we
time with patients.
“The challenge of established EHRs is that so much
functionality gets piled onto these complex systems,” said
Dr. Titus Schleyer, a research scientist with the Regens-
trief Institute.
can change on a dime,” said Ross Teague, director of user But as providers complain, vendors respond. Allscripts,
experience for Allscripts Healthcare Solutions. Users usu- Athenahealth, Cerner Corp. and Epic Systems Corp. are
ally feel more comfortable offering feedback on a design among those constantly tweaking their software after getting
when it looks unfinished. feedback from the source of those complaints. They’re con-
Such interaction is crucial, given sulting with and observing users inside and outside of their
that clinicians spend about half the natural work environments to build EHRs for efficient—and
THE TAKEAWAY
workday working with EHRs. And pleasant—workflows, layouts and functionality.
many of those hours are during Electronic health Most, if not all, major EHR vendors rely on a combination
patient encounters. A study in the records are of formal user testing, informal feedback, and what might
Annals of Internal Medicine found notoriously clunky. be called ethnographic research. The result isn’t just happier
that ambulatory physicians spent Vendors, with the clinicians but safer healthcare delivery.
more than a third of their time with help of their provider “Many of the same issues that can lead to clinician frus-
patients on EHR and desk work clients, are out to tration with EHRs can also lead to safety problems,” said Ben
change that.
tasks. That makes many providers Moscovitch, manager of health information technology for

22 Modern Healthcare | November 27, 2017

THANK YOU
Modern Healthcare would like to thank all the
participants and speakers in our 2nd Annual
Leadership Symposium in Paradise Valley,
AZ. This was an inspiring and educational
two days filled with innovative discussions
and thought-provoking ideas for the future of
healthcare from the top leaders in the industry.
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ModernHealthcare.com/Leadership2017
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the Pew Charitable Trusts. For instance, if a clinician acci-
dentally orders a medication for the wrong patient, correct- Electronic time suck
ing the error can be cumbersome, requiring multiple steps,
he said. The EHR can be tweaked to address that. Physicians are seeking customization of
electronic health record systems to help
reduce the amount of time spent per day
A partnership
on related tasks, with an example of the
With healthcare perpetually inching toward val-
time spent on different tasks listed below.
ue-based care, EHRs are more important than ever in
helping patient care. Vendors are working with providers Minutes spent per day
to improve their offerings, going beyond meeting the bare EHR task category Work After
minimum federal requirements for their software. hours hours
Athenahealth, Allscripts and others have formal pro- Clerical (overall) 121 36
grams to gain insight from their provider users both while Documentation 64 20
software is in development and after. “That relationship
Order entry 35 8
has really improved the way the system works for us and,
Billing and coding 10 4
I would presume, because of the way Athena works, for all
of its customers,” said Steven Kelley, CEO of Ellenville (N.Y.) System security 8 2
Regional Hospital, which, as an Athenahealth develop- Administration 4 2
ment partner, tries out prototypes with new features. Medical care (overall) 86 28
That kind of relationship also helps vendors, which learn Chart review–notes 47 1
from their users early on what kinds of features they're in-
Chart review–medications 21 5
terested in and how those features should work.
“In a good user-centered design process, you're involv- Problem list 8 4
ing your users early and often,” Allscripts' Teague said. Chart review–labs 6 3
His company does formative testing with its users during Evidence-based medicine 2 2
which they engage in the aforementioned and try new ver- Chart review–imaging 2 1
sions of the software. “This is the No. 1 method by which Inbox (overall) 62 22
we collect patient-safety issues before they ever become
Refills and results 41 14
patient-safety issues,” he said.
Allscripts also gets new product ideas by observing cli- Web portal 15 5
nicians in care settings. Sometimes, for instance, to get an Telephone calls 5 2
objective sense of how well its software works, Allscripts Letters 1 1
will measure how many users can complete a certain task Total 4 hours 1 hour
without any training. 29 minutes 26 minutes
Observational research is particularly helpful given
Source: Study of 142 family medicine physicians using Epic Health
how providers talk about what they want from their EHRs. Systems’ EHR system published in Annals of Internal Medicine,
“Sometimes, what people say only reflects part of what their September/October 2017
goal is,” said Janet Campbell, Epic's vice president of patient
engagement. “If you give a doctor a list of 10 activities in the
record and you say, ‘How many of these would you like to elements quickly. “Physicians want the right information
see on the screen?' they'll say, ‘All,' ” she said. “It's not until at the right time at the right point of care, and that helps
you watch how they interact and move back and forth that them provide better care,” said Rich Berner, Allscripts'
you realize that they only need three of those things.” senior vice president of health systems and population
When Athenahealth is testing a feature in the alpha or health solutions management.
beta stage, the company uses behavioral analytics to glean
how users are interacting with it. “One of the benefits of Presenting information, not data
being cloud-based is that all the data across our network is Part of the reason vendors must revise and tweak EHRs
very accessible, and we can see the actions people are tak- is because of their complexity, Schleyer said. It's hard to de-
ing,” said Scott Mackie, Athenahealth's executive director sign a program that's usable “right out of the box.”
of strategy design and user experience. To deliver a more consistent patient and user expe-
For instance, when the company was developing a time- rience across its facilities, SSM Health consolidated its
line feature, users complained about how many clicks it three versions of Epic into one. “We called the project
took to see everything that had happened to a patient over that we worked on ‘simple elegance,' ” said Philip Loftus,
time. Athenahealth developers watched how the timeline SSM's chief information officer. “If it took you five screens
affected workflow so developers could lay it out to high- to do something, we tried to bring that down to two or
light the most useful and appropriate events and data. three screens.”
Giving clinicians the information they need when they The improvements came from Epic's collaboration with
need it could help them better care for patients, since it SSM and from SSM's own developers, who get regular feed-
would reduce their workload and help identify important back from physicians and from consumers surveyed after

24 Modern Healthcare | November 27, 2017

the health system updates software.
One request was to display all information relevant to pa-
tients’ care on one screen.
Physicians want all of that information at the top level,
Mackie said. “They want less digging," he said. A solution
could be building artificial intelligence into the EHR so it
learns the most important information, he said. Another
solution might be voice, especially as it becomes more com-
mon in consumer life.
Increased population health efforts also have vendors
considering how new kinds of data should be presented.
“People aren’t asking for data—they’re asking for informa-
tion,” Teague said. “That means fitting it into their workflow
and making sure it’s presented in a way where they’re not
spending a lot of cognitive effort determining what it means.”
The balancing act
In general, despite these efforts to address problems, pro-
viders still have gripes with their EHRs. “Hospital-based
physicians consistently conveyed that EHRs have a nega-
tive impact on their interaction with patients,” wrote the
authors of a study published in the Journal of Innovation
in Health Informatics. And in an AMA study from 2016,
“meaningful use, EHRs and desk work were identified as
dissatisfiers twice as frequently as any other item.”
But vendors have to be careful to respond to providers’
needs while keeping larger goals and demands in place.
“There’s this constant balance between doing the things
we’re told we should do by the government and doing the
things we’re begged to do by our client base as well, and
they frequently do not line up,” Athenahealth’s Mackie said.
While healthcare can and does learn from digital con-
sumer technologies and trends, those can also be mis-
leading. “There are sometimes unfair comparisons to a lot
of very high-quality consumer apps out there,” said Paul
Weaver, Cerner’s vice president of user experience. Those
developers are not thinking about patient safety, he said.
“We can’t just concentrate on making things look nice. The
overriding element for us in design is to make sure that no
harm occurs. I’d rather we measure twice.”
Consumer-app developers also don’t have to take into
account the demands of federal EHR programs. Though
EHR certification requirements have again been delayed,
and meaningful use has been turned into the advancing
care information category of the Merit-based Incentive
Payment System for physicians, federal EHR mandates
still exist.
There’s also what vendors themselves want to do on their
own. Vendors must maintain some independence from
their users, Regenstrief’s Schleyer said. “Getting feedback
is a very valuable activity for vendors, but it doesn’t release
vendors from the need to innovate on their own,” he said.
“If you just do what your customers tell you to do, you’re
probably not going to be around much longer.” l

Q. How can I leverage technology

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A. Cleveland Clinic found a way, by turning

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November 27, 2017 | Modern Healthcare 25

 Tax the sick,
punish the poor
MERRILL GOOZNER Editor Emeritus
T
he Senate returns from its Thanksgiving break intent on passing some version
of the Tax Cuts and Jobs Act, the House-backed bill that taxes the sick and
punishes the poor to reward those who benefit most from America’s bounty.
So much for the holiday spirit.
The unpopularity of legislation that
showers almost all of its tax cuts on cor-
porations and the rich led the authors
of the Senate bill to propose eliminat-
ing the individual mandate, the least
popular aspect of the Affordable Care
Act. Repealing the mandate, accord-
ing to the Congressional Budget Office,
would result in 4 million fewer people
buying health plans on the exchanges
in 2019, rising to 13 million by 2027.
The CBO says this would reduce gov-
ernment subsidies for exchange-based
health plans by $338 billion over the
next decade. This “pay for” still leaves
the tax plan’s projected addition to the
national debt at $1.5 trillion.
That estimate has the deficit hawks
in Washington up in arms. In the per-
verse calculus of Washington politics,
that works to the Republicans’ ad-
vantage. Since the Senate is using the
budget reconciliation process to avoid
a filibuster, they cannot simply waive
long-standing budgetary pay-as-you-
go (paygo) rules, which require fiscal
neutrality for any new legislation.
Should the tax bill become law, Con-
gress would have to initiate an im-
mediate 6.6% across-the-board cut to
all discretionary spending programs
to make up for the shortfall. Within
15 days of Congress’s next adjournment,
the Trump administration’s Office of
26 Modern Healthcare | November 27, 2017
Management and Budget would be re-
quired to cut spending by $136 billion.
This would include an immediate
$25 billion Medicare cut, which is lim-
ited to 4% in the law. While some safe-
ty-net programs like food stamps are
exempt from the cuts, most domestic
programs like the National Institutes of
Health, the Centers for Disease Control
and Prevention and low-income hous-
ing aren’t. The Democrats in Congress
could find themselves cornered into
voting to waive paygo to spare domestic
programs from sharp cuts.
There are also punitive “pay-fors” in
the legislation that target the sick and
the healthcare industry with surgi-
cal precision. Why leave the charita-
ble deduction intact while repealing
the deduction for families with high
healthcare expenses, which falls most-
ly on cancer patients and other chronic
disease sufferers?
Why target not-for-profits’ tax-
exempt bonding status? Why raise in-
come taxes on not-for-profit executives
when the entire bill is predicated on
the evidence-free belief that tax cuts for
the wealthy will somehow trickle down
to average Americans? No one likes to
defend high salaries, but are they say-
ing hospital executives are somehow
less willing to contribute to the trickle?
Restoring cost-sharing subsidies—
floated as an offset to the mandate
repeal—would not protect the individ-
ual insurance market from a downward
spiral. Many healthier people, especial-
ly those who are wealthier and unsub-
sidized, would still abandon exchanges
since rates would rise 10% a year on aver-
age in most years, according to the CBO.
The Tax Cuts and Jobs Act is funda-
mentally flawed. Even if they drop the
mandate repeal, the revenue offsets
would impose unnecessary harm on
the nation’s sickest families and the
healthcare system they depend on. l
Uwe Reinhardt (1937-2017)
on the individual mandate
“Americans say the government
doesn’t have the right to tell me
to buy health insurance. But the
same Americans will say if I get
hit by a truck and I lie bleeding in
the streets, society owes it to me
to send an ambulance, and the
emergency room doctors owe it to
me to save my life. How could both
be true? Even a teenager would
blush at something this ridiculous.
If you believe society has a duty to
save your life when you get hurt,
you have a duty to chip in to a fund
that pays for that.”
-Interview with Terry Gross,
NPR’s “Fresh Air,” 2009
Community-based, tech-driven innovations
can help transform an outdated health system
By Dr. David Bailey

O
utdated care models often leave families trying to manage chronic illnesses
distressed, uncertain and financially strained. Furthermore, a significant body
of evidence shows that at least 80% of what affects health is outside the clinical
realm, factors such as literacy, behavior and socio-economic status.
digital tools and other innovations
To truly deliver on the promise of Dr. David Bailey in technology to bridge the gaps in
value-based care, health systems is president and care and information, health systems
must effect change outside the walls CEO of Nemours may be able to overcome serious, but
of the hospital and other clinical set- Children’s Health solvable, obstacles that many fami-
tings, developing and utilizing tools System, based in lies face, particularly those battling
that create a means for patients to Jacksonville, Fla. chronic illness.
play a fully active and effective role in On the surface, our effort might
their own care. seem like just another healthcare app,
Take asthma, for example. Some but it represents a crucial opportunity
25 million Americans have asthma, to evolve healthcare to integrate more
about 7 million of them children. The effortlessly into the lives of children
condition costs the U.S. about $56 bil- we’re able to deliver care to families and their families. Our digital plat-
lion in medical care, lost school and using traditional methods. form was initially developed for asth-
work days. It’s the most common At Nemours, our Center for Health ma, but we are already adapting it for
chronic disease in children and the Delivery Innovation recently launched other chronic conditions. We hope to
leading cause of school days missed. the Nemours App for Asthma, a improve diagnosis and treatment for
While children account for less than smartphone tool that supports the the most complex conditions affecting
one-third of patients with use of physician-ordered patients by giving both families and
asthma, they account for Healthcare home-monitoring devices, physicians more reliable, accessible
nearly half of all asthma hos- has hit a wall such as a breath-flow moni- and interactive tools.
pitalizations. in how well tor and a digitally connected Innovation is not a one-time effort.
Our work at Nemours has we’re able to stethoscope. It also provides We believe modernizing care through
shown that a comprehen-
deliver care to video instructions for in- digital innovation can help eliminate
sive community-based ap- haler use, allows families to many of the logistical and financial
proach fully integrated with families using keep a real-time digital jour- barriers that have foiled past attempts.
available technology can re- traditional nal of symptoms, provides Technology will continue to drive
duce the rate of emergency methods. for real-time access to the changes in healthcare, but unless we
department visits by more overall treatment plan, and synchronize and align these advances
than 40% along with reductions in hos- enables better communication, in- in a model that treats the whole patient,
pitalizations and overall costs. cluding telehealth visits with pri- we risk reducing progress to nothing
For many families, poor control mary-care and asthma specialists. more than high-tech distraction. Using
of asthma is a side effect of an out- This type of integration of clinical sup- digital tools to care for patients where
dated care model dependent on pen- port throughout a child’s everyday life they live, work and play can help trans-
cil-and-paper questionnaires and has the power to deliver real change in form healthcare, enabling both chil-
frustrating visits to scarce and distant their care outcomes. dren and adults to thrive. l
specialists. In fact, fuzzy recall, mis- We believe changes such as this are
remembered treatment plans and un- at the crux of a successful transfor-
Interested in submitting a Guest Expert op-ed?
coordinated care are all too common mation to value-based care and re- View guidelines at modernhealthcare.com/op-ed.
hallmarks of chronic disease care. imbursement. This transformation is Send drafts to Assistant Managing Editor David May
Healthcare has hit a wall in how well neither simple nor easy, but by using at dmay@modernhealthcare.com.

November 27, 2017 | Modern Healthcare 27


Research tells different story
about impact of
hospital-employed docs
The article “Hospital-employed
physicians drain Medicare” (Mod
ernHealthcare.com, Nov. 14) suggests
that the employment relationships
between hospitals and physicians cou-
pled with hospital consolidation are
drivers of increased cost of care for pa-
tients. Recent research on the subject
tells a much different story.
A study conducted earlier this year by
economists at Charles River Associates,
or CRA, found that hospital mergers
can result in efficiencies that unleash
savings and innovation. While the
CRA study largely focused on mergers
between hospitals, the CEOs surveyed
noted that creating systems along the
continuum of care, which includes rela-
tionships between physicians and hos-
pitals, was also necessary to manage
the changing demands of healthcare.
Physicians and hospitals alike are
working together in new ways due to
these changes. According to the study,
acquired hospitals were able to cut an-
nual operating expenses by 2.5%—or
$5.8 million. The ultimate marker of suc-
cess for these new models of care will be
if patients have a better experience, im-
proved health and a lower per capita cost
compared with current models.
The article disregards patient
choice, severity of illness or availabil-
ity of services within some communi-
ties. It implies that patients pay more
for procedures performed in outpa-
tient settings, ignoring that provid-
er-based departments, or PBDs, offer
services that are not otherwise avail-
able in the community to vulnerable
patient populations.
Relative to patients seen in physi-
cian offices, patients seen in PBDs are
2.5 times more likely to be Medicaid, self-
pay or charity patients; 1.8 times more
likely to be dually eligible for Medicare
and Medicaid; 1.8 times more likely to
live in high-poverty areas; and 1.7 times
more likely to live in low-income areas.
In addition, oftentimes these patients
are too sick for physician offices or too
medically complex for ambulatory sur-
gery centers. Physicians refer more com-
plex patients to PBDs for safety reasons,
as hospitals are better equipped to han-
dle complications and emergencies.
Hospitals and physicians are devel-
oping new strategies to improve care
delivery and meet the needs of the
communities they mutually serve.
Melinda Reid Hatton
Senior vice president, general counsel
American Hospital Association
ACA architects should
have seen the flaws in
risk-corridor program
The article “Feds owe health insur-
ers $12.3 billion in unpaid risk-corri-
dor payments” (ModernHealthcare.
com, Nov. 14) mentions that the
Trump administration owes health
insurers millions under the risk-cor-
ridor program and that a similar pro-
gram for Part D was put in place by the
George W. Bush administration.
I assume there will be a follow-up
piece that speaks to how the flawed
design of the Affordable Care Act cre-
ated the debt. It’s hard to believe that
the architects didn’t see this coming
when many of us did. One of the many
“unintended consequences” of the law.
Stanley Sieniawski
President
InsureOne Benefits
Litchfield, Ohio

Nominations sought for Top 25 Minority

Executives in Healthcare recognition
Modern Healthcare is now accepting nominations
for the Top 25 Minority Executives in Healthcare for
2018. The biennial program recognizes leading minority
healthcare executives who are influencing policy and
care delivery models across the country. In doing so,
they are also highlighting the continued need to nurture
and advance diversity in their organizations.
Nominations for the program, sponsored by Furst
Group and NuBrick Partners, will be accepted
from all sectors of the industry, including hospitals,
health systems, physician organizations, insurance,
government, vendors and supplier organizations, and
patients’ rights groups. To be eligible, the candidate
must be considered a minority based on the U.S.
Census Bureau’s definition, which includes being
African-American, American Indian, Asian, Latino,
Pacific Islander or multi-racial.
For each nomination there is a $100 entry fee, which
must be paid upon submission. Each nominee will be
reviewed by a panel of industry judges and the senior
editors of Modern Healthcare. Criteria include: specific
actions the nominee took in the past year to help the
organization achieve or exceed financial, operational
and clinical goals; and specific steps the nominee has
taken to establish or contribute to a culture of innovation
and transformation.
The deadline for nominations is Jan. 8. Winners
will be profiled in the Feb. 26 issue and online. For
more information and to submit a nomination, visit
ModernHealthcare.com/Top25Minority.

28 Modern Healthcare | November 27, 2017

Remembering
health policy sage
Uwe Reinhardt
Who: Uwe Reinhardt, professor
of economics at Princeton
University’s Woodrow Wilson
School of Public and International
Affairs, died earlier this month at
age 80.
Background: Through his
writing, speeches and media
appearances, Reinhardt became
perhaps the nation’s foremost
popularizer of healthcare policy
issues. His research focused
on hospital pricing, healthcare
systems around the world,
Medicare and healthcare
spending. His work appeared
in the New England Journal of
Medicine, JAMA, Health Affairs,
the British Medical Journal and
New York Times, among others.
Official positions: Reinhardt
served on the governing council
of the Institute of Medicine and
on the Physician Payment Review
Commission, the precursor of
the Medicare Payment Advisory
Commission. He and his wife,
Mei, also a health economist,
advised the Taiwan government in
reforming its healthcare system.
To place your ad contact Kelly Rademacher
312.649.5452 l krademacher@modernhealthcare.com
CLINICAL MANAGEMENT SERVICES
Marathon Health, Winooski, VT
Marathon Health would like
to recognize a rising star for
her leadership, initiative, and
pursuit of excellence:
Rosa De La Torre, RN, MSN,
FNP-BC, CDE. De La Torre
is a Regional Clinical Leader
and creator of our diabetes
program, designed to empower patients at
our onsite employee health centers across
the nation. Thank you, Rosa, for being a
great ambassador for Marathon Health!
CORPORATE
Modern Healthcare, Chicago, IL
Susannah Luthi comes to
Modern Healthcare to cover
policy and politics. She was
most recently at Inside Health
Policy where she learned the art
of the midnight hallway scrums
while covering the ACA repeal-
and-replace bills in all their
iterations. She is back in journalism after a
stint away that included vanilla exporting in
Tonga. She has a master’s in writing from the
University of Southern California a classics
degree from Hillsdale College.
TO SEE OTHER INDUSTRY MOVES, VISIT
MODERNHEALTHCARE.COM/PEOPLEMOVES
November 27, 2017 | Modern Healthcare
HOSPITAL
Jupiter Medical Center, Jupiter, FL
Donald McKenna is departing
St. Mary’s Health Care System
to join Jupiter Medical Center
as their new President and
Chief Executive Officer
effective January 2018. In this
role, he will build on Jupiter
Medical Center’s strong
foundation and spearhead the leadership
team’s mission to care for people’s health
and wellness.
HOSPITAL
Universal Health Services (UHS),
King of Prussia, PA
Victor Radina joined UHS
in July 2017 as Senior
Vice President, Corporate
Development. In this
capacity, he leads the
company’s Strategic Business
Development, focusing on
Mergers, Acquisitions, and
Joint Venture Partnerships across UHS’
Acute, Behavioral, Ambulatory, Physician
and Managed Care Divisions.
29
Accessing behavioral health resources
through primary-care providers
By Rachel Z. Arndt
Primary-care providers write most
of the anti-depressant prescriptions in
the U.S., where just under a fifth of all
adults are taking some kind of psycho-
tropic medication. These providers may
have “limited” training in mental health
treatment, according to the American
Psychological Association, but they re-
main the front door to psychiatric care
for many.
Rather than ignoring that this is hap-
pening, Arun Gupta is working with
it, giving primary-care providers and
their patients access to mental health
resources through the Quartet Health
platform, which identifies patients who
may have mental health conditions and
pairs them with mental health provid-
ers. It also gives primary-care physicians
direct access to behavioral health pro-
viders for consultations about patients,
creating a team-based care model. Ac-
cording to consulting firm Milliman,
integrating behavioral and medical care
could save the industry $26 billion to
$48 billion annually.
Gupta founded Quartet in 2014 after
work as a consultant and a stint as an
adviser for software developer Palantir
Technologies.
“I didn’t just want to built another
startup,” he said. “I wanted to build a
company that applies modern technol-
ogy to healthcare in a way that could
create order around this super-messy
experience that all of us have in our
lives in the healthcare system.”
Because Quartet has enterprise rela-
tionships with large payers and health
systems—including Highmark, Huma-
na, and Sutter Health—it can combine
results from behavioral health screen-
ings with their data to reveal which
patients might benefit from behavioral
healthcare. It also draws on big data
techniques to match those patients
30 Modern Healthcare | November 27, 2017
with local behavioral health providers
who accept the right insurance; tele-
health behavioral health providers; and
online resources, like cognitive behav-
ioral therapy.
“Individual experiences make us think
that people have the power of choice,
that they can just will their way out of
addiction and depression,” said Quartet
board member Patrick Kennedy, a for-
mer U.S. representative who sponsored
“I wanted to build a the Mental Health Parity Act of 2008.
company that applies “Tech-enabled solutions like Quartet
modern technology benefit not only patients but the entire
to healthcare in a way
healthcare system by lowering costs and
that could create order
improving productivity.”
around this super-messy
experience that all of us
By giving patients a more efficient
have in our lives in the way into the behavioral health system,
healthcare system.” Gupta hopes to destigmatize mental ill-
ARUN GUPTA ness, he said. “I’ve heard from some of
the providers that patients are relieved
Quartet Health once they know someone is going to do
the legwork of finding a provider and
FOUNDED that the provider is linked to primary
2014 care and that the provider accepts their
insurance,” said John Boyd, CEO for
HEADQUARTERS mental health services at Sacramento,
New York City Calif.-based Sutter Health, which began
using the Quartet platform in Septem-
CEO ber 2017. “Ultimately we want to provide
Arun Gupta more personalized healthcare to our pa-
tients using a variety of tools and deliv-
INNOVATION ering it in a setting they prefer.”
Quartet Health’s Quartet officials say using the com-
platform gives primary- pany’s system lowers costs. Because
care providers and hospital systems and insurers pay for
their patients access Quartet’s platform, it’s free to use for
to behavioral health patients as well as primary-care doc-
providers and resources. tors and behavioral health specialists.
The platform is currently available
STATUS in five metropolitan areas: Boston,
The company’s platform New Orleans, Pittsburgh, Sacramento
is available in five and Seattle.
metropolitan areas. Though the company is growing, the
Leaders hope to expand pace is tempered by the healthcare sys-
that to 25 within the tem itself. “Anything in healthcare takes
next few years. time and is slow, and you have to be re-
ally methodical,” Gupta said. l
 Getting a handle
on readmissions
Although strides have been made to curb readmissions, the problem still plagues the
healthcare system. Medicare, under the Hospital Readmission Reduction Program, has been
penalizing hospitals for excess readmission rates since fiscal 2013. Year to year, the average
penalty per hospital has varied, lending to the variation in total penalties. Penalties will hit
$528 million in 2017, roughly $108 million more than in 2016. According to the Kaiser Family
Foundation, most of that increase can be attributed to more conditions being measured.

Penalties are growing Fiscal 2013 Fiscal 2014 Fiscal 2015 Fiscal 2016 Fiscal 2017

Percentage of hospitals penalized 64% 66% 78% 78% 79%

CMS estimate of total penalties $290 million $227 million $428 million $420 million $528 million
Source: Kaiser Family Foundation

Readmissions reach well beyond the six

2017 penalties by Urban
conditions assessed by Medicare—heart
type of hospital
75%
attack, heart failure, pneumonia, chronic
obstructive pulmonary disease, hip or knee
replacement and coronary artery bypass Rural
grafting. Some estimates suggest that 25%
all-cause readmissions cost $40 billion annually.
Readmission rates for selected conditions
Major
teaching
29% Kidney transplant 9%
23% Amputation of lower extremity

22% Schizophrenia Other

teaching
22%
22% Acute and unspecified renal failure

19% Heart valve procedures Nonteaching

Source: Agency for Healthcare Research and Quality
68%

Readmissions rates falling

■ Heart failure
■ Heart attack
24.7% 24.8% 24.7% ■ Pneumonia
24.5%
Readmission rate for congestive
23% heart failure by payer
22.7%
22% 20%
19.9% 19.9%
19.8% 19.7% 30% Medicaid Private insurance

18.3%
17.8%
17%
18.2% 18.3% 18.4% 18.5%
17.6% 25% Medicare 17% Uninsured
17.3% 16.9%

July 2005- July 2006- July 2007- July 2008- July 2009- July 2010- July 2011-
June 2008 June 2009 June 2010 June 2011 June 2012 June 2013 June 2014
Source: Agency for Healthcare Research
Source: Kaiser Family Foundation
and Quality

November 27, 2017 | Modern Healthcare 31

‘I will go anywhere
there is a
best practice
and try to learn
from others’
Operating in 21 states, Dignity Health serves a diverse patient population. For Dean: It depends upon
CEO Lloyd Dean, ensuring that the system evolves to meet community needs is what you mean by “move
essential. Since arriving at the San Francisco-based organization in 2000, Dean in,” because we are in it.
has not only led a financial turnaround, but, more recently, has spurred Dignity to But in terms of are we at
embrace population health management strategies. And he’s not too proud to the cliff, where that’s the
borrow from his peers, saying he’ll go anywhere to pick up a best practice that only methodology that we
will help Dignity improve. Dean talked about the challenges of building a population have and reimbursement
health model and other strategic priorities with Modern Healthcare Managing Editor and other changes that
Matthew Weinstock. The following is an edited transcript. need to be in place to move
us totally out of a fee-for-
Modern Healthcare: You’ve some of the (federal policies) Dean: We have metrics that service environment into
made a push into value-based that are being tampered are quantitative in terms strictly a value-based
purchasing and population with, but so far, the of the number of people environment, we don’t think
health management. What’s in indicators are very positive. engaged—those kinds of we have matured from
it for Dignity? What’s been the And what we are seeing things; we can measure that perspective. In certain
driving force? is that while we are still— the cost side of things. Also, markets, our penetration
whether people want to when we look at our models is much higher than other
Lloyd Dean: At a high level, admit it or not—engaged in and we look at how many markets. So, in the global
the concept of managing a fee-for-service world, this people we are treating, sense, the barriers are
populations—making sure concept of value-based care and we do a pre- and post- reimbursement.
there are models that will is creating access points, analysis, it becomes very Some of that is driven by
ensure comprehensive making sure that we are clear. The other thing that where our concentration
care for communities delivering comprehensive we do is a lot of surveying of services are delivered.
and engaging the other care through the least and communication with Other than the public
members of the community expensive models. (That has constituencies: “Tell me health system in California,
to ultimately add value led Dignity) to partnering. what you are feeling, what we are the largest provider
for the patients, which So when we talked about do you see differently, how of Medi-Cal. So when
then leads to a healthier partnerships with Kindred good is the way we are we talk about instituting
community, which reduces Healthcare, when we talk delivering care, how many some of these models,
costs—is something that we about partnerships with people are we being able to we have to make sure
have to be about. UCSF Medical Center in prevent from inappropriately that they align with the
San Francisco, the ultimate presenting at our EDs?” needs of the community
MH: What kind of results have winner has to be the patient and, that together with
you seen? and the community. MH: What are the barriers for other members of the
an organization like Dignity to community, we can put
Dean: It has taken a few MH: What does winning move into value-based care or together a model that works
bumps and curves given look like? population health? and that is sustainable.

32 Modern Healthcare | November 27, 2017

“We are doing a lot of things, and we are not sitting still waiting
for the ultimate solution, because every day there is need.”
MH: Will we ever get rid of
fee-for-service? Is there a
need to?
Dean: I happen to believe
that there will always
be an element of fee-for-
service, unless nationally,
we move to a universal
health system that has a
very well-defined payment
structure that is different
than fee-for-service. There
is always this discussion
about single-payer and
there are certainly pluses
and minuses to that, but
our position on universal
healthcare … I think we
could get there, but I don’t
see it in the foreseeable
future, because I think that
the policy debates right
now are so volatile and so
unstable that I don’t think
there is a bipartisan or a
collective agreement that
(says) this is the (right)
model and therefore we
will move away from fee-
for-service. I don’t see it in
the near future, but I think
it will continue to be on
the agenda.
MH: Is there anything that you
can do as a leader to quell
those fears?
Dean: Right now, we are
staying the course, but we
are out there advocating
for some bipartisan
solution. That’s why we have
something called “Horizon
2020” which is a systemwide
effort to be more innovative,
creative, and to drive down
costs, but not compromise
medical outcomes. That’s
why we are partnering, like
I was talking about, with
others in the communities.
We are doing a lot of things,
and we are not sitting still
waiting for the ultimate
solution, because every day
there is need.
MH: Part of that is learning
from your peers, who are
your competitors, right? How
are you approaching that
dynamic?
Dean: We have a partnership
and relationship with
Intermountain (Healthcare)
because they have some
best practices. We have
partners and relationships
with Kaiser (Permanente);
I mentioned UCSF. We are
partnering with Google.
We are partnering with
Kindred. I will go anywhere
there is a best practice and
try to learn from others.
And I think you are seeing
across the nation, people
and providers and hospitals
coming together to share
best practices because of
the need for us to address
populations now. Some
of the things that the
Affordable Care Act did like
bundled-payments—those
kinds of things—drove us
to have to work together.
We are seeking out best
practices and we are not
ashamed to say, “Wow,
that’s really good.” It can’t
be that we think we can do
everything. l

2017 BY THE NUMBERS

COMPETITIVE INTELLIGENCE
AT YOUR FINGERTIPS
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other data sets across the healthcare industry. From physician compensation to the top 100
hospitals, our 72,049+ subscribers use this supplement to get the latest on trends and industry
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November 27, 2017 | Modern Healthcare 33

Largest vendors of electronic health record systems
Ranked by number of hospitals reporting company as primary vendor, 2015
Rank Vendor (Owner if applicable) Location Number of hospitals

1 Epic Systems Corp. Verona, Wis. 997

2 Cerner Corp. North Kansas City, Mo. 994

3 Meditech Westwood, Mass. 935

4 McKesson Corp. San Francisco 444

5 Medhost Franklin, Tenn. 333

6 Evident (CPSI) Mobile, Ala. 272

7 Allscripts Chicago 243

8 Sunquest Information Systems¹ Tucson, Ariz. 219

9 YourCareUniverse (Medhost) Franklin, Tenn. 212

10 Healthland (CPSI) Glenwood, Minn. 191

11 FairWarning Clearwater, Fla. 166

12 CPSI Mobile, Ala. 163

13 Iatric Systems Boxford, Mass. 152

14 HCA Information Technology & Services2 Nashville 139

15 SCC Soft Computer Clearwater, Fla. 139

16 Orion Health Auckland, New Zealand 136

17 Medisolv Columbia, Md. 117

18 Influence Health3 Birmingham, Ala. 107

19 Midas+ (Conduent) Tucson, Ariz. 86

20 Siemens Healthineers4 Malvern, Pa. 84

Note: Data are self-reported by healthcare providers participating in the Medicare EHR incentive program.
It is summarized from the ONC open dataset, EHR Products Used for Meaningful Use attestation.
¹Laboratory focused
2
Self-developed EHR for use within organization only
3
Formerly MedSeek
4
Formerly Siemens Medical Solutions

Source: Office of the National Coordinator for Health Information Technology, “EHR Developers Reported by
Health Care Providers Participating in Federal Programs,” August 2017

Information in this chart may be subsequently revised at the discretion of the editor.
For more information on our research, contact Megan Caruso at 312-649-5471 or mcaruso@modernhealthcare.com.
FOR MORE charts, lists, rankings and surveys, please visit modernhealthcare.com/data.

34 Modern Healthcare | November 27, 2017

 classified marketplace
jobs.ModernHealthcare.com
To place your ad contact Kelly Rademacher l 312.649.5452 l krademacher@modernhealthcare.com

EXECUTIVE RECRUITMENT

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November 27, 2017 | Modern Healthcare 35

 In the study,
the sheep were
rewarded when
they recognized
the famous faces.

Sheep show a flair

for recognizing faces

hough their political leanings are a little fuzzy, eight
T sheep at the University of Cambridge in England can
now recognize Barack Obama’s face.
A team of Cantabrigian researchers trained eight
female Welsh mountain sheep to recognize the faces of
four famous people to determine how sheep measure
up to monkeys and humans in the task.
The sheep learned to select the faces of Obama, BBC
newscaster Fiona Bruce, and actors Emma Watson and
Jake Gyllenhaal.
The animals were put through three training
scenarios. In each step they were presented with two
options: a photo of the celebrity facing forward, or a
photo of something or someone else. They then had 15
seconds to approach the celebrity image and trigger an
infrared sensor that, if they chose correctly, would pop
out a treat. On average the sheep chose the celebrity
face 8 out of 10 times.
Anyone doubting their sheer ability is having the
wool pulled over their eyes. “Sheep are capable of
sophisticated decision-making,” neurobiologist and
study author Jenny Morton told the Washington Post.
To show they’re not just celebrity-worshipping
CAMBRIDGE UNIVERSITY
sheeple, the flock was also tasked with choosing
between a picture of their handler and an unfamiliar
face, and they readily recognized their handlers.
Being able to recognize a 2-D photo of someone they
see in real life shows the ability for “complex image
processing,” said the authors of the study, which was
published in Royal Society Open Science this month.
In her research on Huntington’s disease, Morton uses
sheep as a stand-in for humans in part because of their
large brains and humanlike anatomy.
People who have Huntington’s struggle to recognize
facial emotions.
“Although I didn’t think sheep could recognize
emotion, it made me think about face recognition as a
complex brain process,” Morton said. l

Breastfeeding image joins the throng of emojis

London neonatal nurse
A thought there was something
missing from the array of available
baby bottle. “If there was the baby
bottle, there should be the other
alternative,” Lee told the BBC.
campaigns and warnings by
scientists and public health workers
battling skeeter-borne diseases.
emojis: one representing a In June, the consortium approved The new emojis have been rolling
mother breastfeeding. the emoji along with 55 others, out to smartphone users with
So Rachel Lee, who including ones representing software updates.
works at University vampires, fairies, hedgehogs Lee wants the new emoji to spark
College London Hospital, and broccoli. One health- conversations. She told the BBC
petitioned the Unicode related proposed emoji that she hopes the emoji will “normalize
Consortium, the not-for- didn’t make the cut was (breastfeeding in public) a little bit,
profit corporation that for mosquitoes. A pair of and hopefully allow society to see it
sets global standards public health workers in in a different light. There are a lot of
for emojis and other Maryland are seeking people who still have very negative
software. to add that one to the things to say about that and think
At the time there online animal kingdom, that women should be doing that
was just the baby The emoji is one of 56 saying it could be used behind closed doors and that it’s
emoji and one for a recently approved. in communications meant to be a private thing.” l

36 Modern Healthcare | November 27, 2017

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