What You Should Know:

– Healthcare profit pools are expected to grow 4 percent annually resulting from $654 billion in 2021 to $790 billion in 2026, according to a new McKinsey report.

– The report reveals inflation is not transitory and the economic outlook has meaningfully darkened due to a healthcare worker shortage and endemic COVID-19.  

What to expect in US healthcare in 2023 and beyond

The US healthcare industry faces demanding conditions in 2023, including recessionary pressure, continuing high inflation rates, labor shortages, and endemic COVID-19. But players are not standing still.

Key findings from the report are as follows:

1. Healthcare services and technology is expected to be the fastest growing sector in healthcare at 10 percent annual growth between 2021-2026 (potentially landing at $81 billion by 2026).  On the other hand, the outlook for some segments has worsened compared with the previous analyses, including general acute care and post-acute care within providers and Medicaid within payers.

2. The Government segment’s profit pools are projected to land nearly 50 percent greater than the Commercial group segment by 2026 ($33 billion compared with $21 billion). In July 2022, it was estimated that  2021 payer profit pools to be $40 billion, however, actual 2021 profit pools were $5 billion higher Higher Medicaid EBITDA margins due to the extended public health emergency accounted for the majority of the increase, although it was partially offset by lower-than-expected commercial margins with the return of deferred care.

3. Increased labor costs and administrative expenses are expected to contribute to reduced earnings before interest, taxes, depreciation, and amortization by about 60 basis points in 2022 and 2023 combined. Previously, in July 2022, it was estimated that provider profit pools would grow at a 7 percent CAGR from 2021 to 2025. The current forecast is that of a 3 percent CAGR from 2021 to 2026 in updated and expanded estimates, with the decline primarily due to increased costs owing to high inflation and labor shortages.

4. Payer profit pools are expected to grow at 11 percent annually reaching $75 billion in 2026. Growth in 2021 resulted from making up for care deferred from the first year of the COVID-19 pandemic as well as additional healthcare demand attributable to COVID-19. Provider profit pools faced substantial pressure in 2022 and are likely to continue to do so in 2023 as a result of inflation and increased labor costs.    

5. Payer profit pools are likely to see slower than normal growth between 2022-23 due to inflationary pressure and provider reimbursement rate increases.  

6. Provider profit pools are also expected to see slower growth annually than previously predicted (3 percent growth annually from 2021-26, compared to the 7 percent figure previously predicted).  Three factors account for the anticipated faster growth in HST. First, analysts expect higher demand from payers and providers to improve efficiency and address labor challenges. Second, payers and providers are likely to be willing to absorb vendor price increases where there is clear value. Third, experts expect HST companies to make operational changes that will improve efficiency, including through the use of technology and automation across services.

7. Increased labor costs and administrative expenses are expected to contribute to reduced earnings before interest, taxes, depreciation, and amortization by about 60 basis points in 2022 and 2023 combined.

– As the world prepares for the Inflation Reduction Act’s landmark policy changes, healthcare stakeholders realize that its wide-ranging effects will require new approaches to drug pricing, health plan design, and investment.

– Avalere’s ‘2023 Healthcare Industry Outlook’ examines how community-wide healthcare will be affected by a recent court ruling, and consider data’s role in addressing health disparities.

Key Trends in Healthcare in 2023

The main insights from the report are highlighted as follows:

1. Understanding the Interaction Among New Drug Pricing Policies

Drug pricing policy changes will have far-reaching effects for all stakeholders, varying based on product-specific payer mix, channel mix, and market dynamics. For example, Medicare negotiation and increased management of physician- administered drugs could meaningfully impact ASP, changing physician reimbursement, prescribing, and access. Evaluating the policies’ individual effects and their interactions will improve the development of new pricing and contracting strategies.

2. Organizing for Medicare Part D Redesign

Part D benefit redesign will add pressure to plans and manufacturers, while increasing affordability for beneficiaries. Manufacturers can expect Part D volume and revenue changes and should prepare for new plan approaches to formulary and benefit design. Plans developing 2024 bids will consider their increased liability and the effects of lower patient out-of-pocket costs on medication use and adherence, with an eye to enrollment in future years, given historical data that beneficiaries are unlikely to switch plans once enrolled.

3. Anticipating the Effects of Vaccine Coverage Changes

The IRA requires coverage of recommended adult vaccines with no cost sharing in Part D starting January 1 and for state Medicaid plans starting October 1. This ensures no-cost access for almost 75M adults in those programs and aligns coverage with requirements for Medicaid expansion populations and enrollees in most commercial health plans. As affected payers adapt their coverage policies and anticipate increased uptake, provider reimbursement rates remain unchanged, potentially creating a barrier to stocking and administering vaccines.

4. Engaging in Policy Advocacy on IRA Rules and Congressional Priorities

The IRA’s legislative language lacks important operational details that will affect the Medicare market. Over the course of 2023, CMS will release guidance that will shape the implementation of Part D redesign and Medicare negotiation policies in the IRA. Stakeholders can best influence these policies before drafts are published. Therefore, anticipating when CMS will make these decisions is critical for those seeking to shape implementation and prepare for their impact.

5. Preparing for the Impact of Part D Risk Adjustment

Part D redesign shifts liability from the government to health plans through changes to reinsurance programs and to direct subsidies that are adjusted based on health status and other demographic factors. Thus, the accuracy of the risk-adjustment model will be even more influential in determining if plan payments will reflect actual enrolees costs, especially for those with high drug spending.

6. Considering IRA’s influence on Healthcare Investment: Manufacturers may evaluate the need to adapt their pipeline strategies to incorporate the IRA’s new pressures and incentives into planning across the product lifecycle. Scenario analyses will inform early-stage portfolio decisions, such as therapeutic area targets, formulation and route of administration, Part B vs. D considerations, and phasing of indications in specific patient populations. Factoring policy and access change in early clinical development may allow manufacturers to optimize a product’s value potential and improve targeted R&D investment.

As the COVID-19 pandemic continues to change healthcare operations in the world, foundational systems are being adapted to meet these new demands. Sometimes it takes extreme circumstances to see the cracks in a system. COVID-19 has exposed areas with more room for improvement in the healthcare system, such as optimizing operational efficiency. Organizations and individuals have changed their interactions, processes, ways of working, treatment plans, and even foundational technology. As the United States is beginning to reopen, many questions arise – namely, are these changes temporary fixes during the pandemic, or are they here to stay?

Physicians have been inundated during this time of crisis, and their ongoing main priorities amplified: saving as many lives as possible and providing the best patient care. Recent estimates from the beginning of July say, worldwide there have been more than 10.7 million COVID-19 cases and at least 516,000 deaths from the disease, according to Johns Hopkins University (JHU). JHU also revealed that in the United States, there have been 128,000 deaths out of a total of over 2.6 million cases. To say this has been a time of great stress and pressure for physicians who are on the frontlines is an understatement.

This pandemic has increased providers’ already heavy workload, amplifying where physicians need support. Patients need to remain the top priority, even in the first generations of the digital age where the list of backend administrative tasks and paperwork can feel endless, thus reducing the number of patients physicians can see each day. Finding a way to streamline administrative tasks with advanced technology can bring physicians back to why they went to medical school in the first place: to help patients.

One example of an important, and time-sensitive task is communicating with payers around treatment plans and reimbursement. Using technology to streamline this process to get the patient the optimal treatment and maximize use of their insurance coverage is essential, especially in this time of crisis where there is an increased number of patients in need and a depressed economy. Whether processing prior authorizations or checking eligibility, hospitals and health systems need technology to keep operations efficient, including smooth payer-provider communication to ease physicians’ workload, help to ensure providers will be reimbursed for care, and optimize business operations, ultimately providing an improved patient experience.

Three foundational ways in which payer-provider information exchange technology provides immense value to healthcare organizations are:

– Creating Administrative Efficiency: To help physicians stay focused on patients, administrative efficiency is key. Solutions can come in many shapes and sizes – technology can help to automate workflows and avoid care delays. Modernizing the prior authorization workflow can shorten average time to care, reduce the risk of treatment abandonment, and improve the quality of care. With changing legislation, updated laws encourage the use of technology to increase efficiency while keeping data secure in near real-time exchanges.

– Streamlining Exchange of Information: Interoperability and the technology standards needed to achieve it is an ongoing discussion in healthcare. Technologies that provide efficient, secure, and near real-time and even automated exchange of information are in high demand and will bring about the next era of healthcare. For example, technology has the power to align providers and payers efficiently and consistently, create an open exchange of information, centralize information, provide rapid and organized data transfer, ensure appropriate reimbursement by treatment plan, show pre-authorized treatment plans for the most successful and affordable care and aid health plans’ adaptability in health crises, like COVID-19.

– Increasing Value-Based Care: Optimizing the quality and cost of patient care is a leading principle of healthcare. The COVID-19 pandemic has exposed areas of healthcare where improvements in patient experience and provider reimbursement desperately need to be accelerated. Using technology with built-in normative databases of accepted treatment paths allows for evidence-based treatment decisions, which in conjunction with efficient payer-provider communication to ensure reimbursement, allows for optimal patient outcomes – creating value for all stakeholders.

Adopting technology to provide administrative efficiency, streamline information exchange and increase the value of all aspects of care will continue to be a fundamental pillar of healthcare; the pandemic has ignited a critical need for even faster change. COVID-19 has brought with it increased stress and uncertainty across the healthcare industry, amplifying the burden on physicians and their staff. Organizations have moved quickly to adopt technologies, such as those that provide a more efficient way to organize and analyze massive amounts of treatment plan decision inputs and aid communication between stakeholders, in order to better support physicians, and ultimately patients.

Tools and technology that automate processes, streamline communications and provide dynamic solutions have proven their value and are now “need to have” rather than “nice to have” for providers. These technologies are foundational to the healthcare system, providing the base from which all stakeholders operate. The pandemic has helped to realize the true value of efficiency technologies, galvanizing the adoption of these tools. Ultimately, more operational efficiency can bring the focus of care back to the patient.

About Christina Perkins

Christina Perkins is VP of Product Management and Strategy for NaviNet at NantHealth. She joined NaviNet in 2003 and has spent the last 17 years expanding the company’s products and services. Prior to joining NaviNet Christina spent seven years designing and building web-based solutions for Partners Healthcare and other hospitals in the Northeast U.S. and Ontario, Canada. Christina on LinkedIn.

PatientMatters, a company focused on improving patients’ financial experience while ensuring greater reimbursement for hospitals, today announced that leading PA and WV-based health system, Mon Health, has chosen the company to create a pre-access service system. Specifically, Mon Health will leverage PatientMatters’ new IntelliPass Phase I Advisory Program to improve the patient financial experience and overall collections process.

This will enable Mon Health to integrate data and workflows across departments to provide a fast, efficient and consistent patient registration experience with reliable, personalized financial services. This not only benefits patient satisfaction but provider operations and revenue performance as well.

The IntelliPass Advisory Phase I Program includes:

–       Assessment – Focusing on scheduling, reminders, E&B checks, estimation and workforce allocation

–       Workflow Redesign – Including centralization of team structure, process workflow and related functions

–       Implementation and Go-Live – With full documentation, training, testing and on-going process optimization

The program implementation will leverage and complement Mon Health’s existing Cerner EHR and Experian RCM solutions as part of the project. The agreement includes an option to engage PatientMatters’ IntelliGuide® Advocacy services as part of the final implementation.

“While we have already invested in world-class staffing and technology, PatientMatters brings a very specific expertise that closely aligns with our vision for breaking down silos and making our process 100 percent patient focused,” said Candi Powers, Chief Revenue Cycle Officer at Mon Health. “The PatientMatters Pre-Access Service Center model will put us ahead of the curve on patient experience and revenue performance. Most importantly, we see this work as a critical step in our ongoing effort to ensure that the highest quality care is affordable and accessible for the communities we serve.”

 

The latest CMS figures report nearly $600 million was recouped from healthcare providers in the first quarter of 2012 alone. Added to earlier overpayments, providers have “given back” over $1B since the Medicare Recovery Audit Contractor (RAC) program began.

The success of the RAC initiative is fueling other payers and agencies to increase their audit pressure in 2012. This year’s biggest challenges for healthcare providers come from MAC pre-payment reviews. In addition, two new governmental audits are coming on-line in 2012. One is the RAC prepayment review; the other is the Medicaid RAC. Here is an overview of each.

Pre-payment Reviews

The prepayment review demonstration project is officially underway. After several pushbacks, CMS has moved forward and providers are starting to see the program’s impact.

The pre-payment review project is a three-year pilot involving 11states. During the first six months, it will focus on eight short-stay, inpatient DRG’s. These diagnoses are typically high volume and, per Medicare, have a questionable need for hospital admission.  Medicare is hoping to drive more inpatient activity to the outpatient setting.

Medicaid RAC

The final rule for the Medicaid RAC program was published Sept. 16, 2011, and became effective Jan. 1. The rule answered several outstanding issues and referred the remaining issues to individual state agencies. Many of the resolved issues are similar to the Medicare RAC program, but some differences include:

• · Limit and frequency of requests will be left up to individual states.
• · Response time for providers to audit requests has not been established.
• · States can use either the existing appeals infrastructure or establish a new one.
• · States can, if they choose, contract with multiple entities to perform RAC audits.

These differences and new audit procedures and policies add a degree of difficulty to providers’ audit workflow.  Having software to track the many audits is essential to avoiding technical denials and negatively affecting cash flows. Excel spreadsheets, initially created to manage RAC reviews, are inadequate and out of date.

More Records, Physician Reviews and Medicare Parts C and D

In addition to new auditing bodies, the number of records a Medicare RAC can request within any 45-day period has increased in 2012. These increases are based on hospital revenues. Most providers can expect to see a 20 to 25 percent bump in record request volumes.

Furthermore, auditing bodies are expected to expand reviews into physician practice settings.  As provider billings come together under accountable care, the review of physicians will become easier for automated discovery.

Lastly, expect CMS to announce the expansion of audits into Medicare parts C and D. The part D contract has been awarded, but the start date has not been established. Part C is still a work in progress.

In The Loss Column: Provider Reimbursement

The reimbursement that providers receive for record production and mailing has been reduced.  As of April 2, this reimbursement has been capped at $25 per record. It was a straight 12 cents per page until April 1, which for many inpatient records resulted in higher reimbursement than $25. CMS has calculated that $25 is the average per record reimbursement, first-class postage included.

Most providers adhere to best practice guidelines that call for confirmation of record delivery, which demands a carrier such as Federal Express®. This cost is not being covered by the $25 cap.

Ignore at Your Own Risk

All of this increased activity is causing providers to beef up the number of staff used in audit processing and the technology needed to manage an expanding administrative process.  Providers are establishing full-time audit teams and expending greater capital and operational costs to protect their revenue stream. All in a day’s work for healthcare providers, recovery audits is one area that cannot be ignored.

About Lori Brocato:

 Lori Brocato, HealthPort Audit Product Manager, is a long standing expert on audit management, including the RACs. In 2010 and 2011, Lori served as a monthly contributor in Advance Magazine for Health Information Professional‘s e-newsletter and online audit advice column where she discussed case-specific audits experienced by HIM professionals. Lori is a frequent speaker on the impacts of RAC,Medicaid, Medicare and other audits that affect healthcare and has authored and contributed to articles that have appeared in industry publications and journals. Lori is the author of HealthPort’s Audit Insights blog where she discusses the latest news on healthcare audits and offers up education and insightful information on how to manage audit onslaught.