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CHCA and NACHRI to Move Forward on Merger
November 14, 2010

Posted by chcablogadmin in : Leadership

This week at the Executive Dialogue, the CHCA/NACHRI Transition Task Force presented their recommendation on a model for a merger to the NACHRI and N.A.C.H. Executive Committee and the CHCA Board.  The CHCA Board of Directors and the NACHRI and N.A.C.H. Executive Committee voted unanimously to move forward with a joint venture and establish a shared governance structure for the two organizations. The leadership of both organizations is excited about the tremendous opportunities ahead and the possibility to jointly serve member/shareholder needs more effectively.  

A shareholder communication is expected from the Transition Task Force this week to outline the developments and provide more detail on the next steps.

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Highlights from the Executive Dialogue: Transformative Change
November 14, 2010

Posted by chcablogadmin in : Industry Trends, Leadership

As I listened to the speakers and discussion at the Executive Dialogue last week, I was struck by the sheer breadth of changes facing children’s hospitals and overwhelmed by the knowledge that you are all prepared to meet them head on. Here are some of the messages I heard facing our future:

  1. Children’s hospitals need to focus on liquidity to ensure they have enough money to invest in the future and survive some of the reimbursement challenges that are on the horizon.  Key to ensuring liquidity is the continuing to position and fight for adequate Medicaid funding in their states.
  2. Challenges for hospitals under evolving health reform at the state level will be managing the financial transition from a fee-for-service environment to accountable care. It will be even more critical to reduce costs while preserving revenue. Paramount to managing the financial transition is a real need to understand and learn more about insurance risk and risk-based models of reimbursement.
  3. There is a real opportunity for children’s hospitals to make productivity, quality and cost improvements. We have to be more efficient in health care.
  4. To ensure future access to capital, hospital executives need to continue to spend time educating rating agencies, but have to invest additional efforts in educating and working with institutional investors.
  5. Depressed birth rates and the continued shift from inpatient to outpatient services will require hospitals to build more robust ambulatory network strategies.
  6. Data presented exploring mortality differences between children’s hospitals and non children’s hospitals emphasizes the importance of seeking care in a children’s hospital first.

Look for additional information from Kass and Karen later this week.

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The Future of Pediatrics: Advancing to the Medical Home
November 14, 2010

Posted by chcablogadmin in : Industry Trends

We had the privilege of having Dr. Maddie McDowell from Sg2 present “The Changing Pediatric Landscape“ at our fall Forum series.  In her well researched and well received presentation, Maddie highlighted pivotal trends in pediatrics that will affect children’s hospital utilization and resources in the future. We asked her to create a high-level overview for you. — Don

By Madeleine McDowell, M.D., FAAP, Sg2 Clinical Advisor

Pediatrics has made great strides in improving health care outcomes for children, with the opportunity to do even more in the years to come. However, improved outcomes will mean less future need for some services and, at the same time, health care reform will demand that care becomes more standardized and cost-efficient, focusing on prevention and outcomes data.

Madeleine McDowell, M.D.

Pediatric Specialties in Demand 
While overall pediatric admissions have declined below population-based growth levels in the past few years, children’s hospitals have consistently increased their inpatient admissions, with a 21.4% climb in medical/surgical discharge rates (excluding normal newborns) from 2000 to 2006. A rise in the incidence of common chronic diseases like asthma and obesity in the 1980s and 1990s has driven demand for pediatric specialty care, primarily provided by children’s hospitals. Dramatic improvements in survival rates during this same time period for many traditionally fatal conditions have further fueled demand for specialty services. For example, survival rates for leukemia improved from 50% in the 1980s to 85% early in this decade and the survival rate for preterm infants at 22 to 24 weeks gestation has gone from 0% in the 1980s to 46% in this decade.

This trend has allowed children to live longer with complex medical conditions that require ongoing tertiary care. These advances, combined with a pediatric specialist shortage and heightened customer expectations, have translated into a shift in consumer demand from community hospitals to children’s hospitals. However, even though children’s hospital discharge volumes will grow by 9% in the next 10 years, this is a significant slowing of the growth experienced in the past decade, and Sg2 expects overall pediatric inpatient utilization to decline nationally by 1% by 2020.

Innovations and Future Outlook
Many pediatric diseases and conditions occur less frequently today, contributing to better children’s health, but subsequently diminishing service needs. At the same time, the growth in many pediatric chronic diseases has begun to level off, signifying that these conditions will no longer be a main driver of growth for children’s hospitals. For example:

Health Care Reform
Health care reform has already made changes in children’s health care coverage. From now through 2012, for example, children may retain coverage under their parents insurance until age 26 and the government guarantees 100% well child care coverage, as well as guaranteed issue and renewal of insurance. As coverage expands from 2013 to 2015, Medicaid reimbursement will be increased to 100% of Medicare for pediatric care. Then, in 2017, disproportionate share hospital (DSH) payment discounts will top out at $5.6 billion (a 30% reduction from 2009 total payments). These reforms will shape payment incentives. In the short term, improvements in children’s access to primary care services may stress capacity, particularly for states with high numbers of uninsured and underinsured children. In addition, the shift in payer mix will pose operational and profitability challenges for hospitals. In the long-term, DSH payment cuts will challenge children’s hospitals ability to provide unprofitable services. Additionally, shifts in payment structure will incentivize prevention and reduce inpatient utilization.

The Quality Incentive
Under the current fee-for-service system, success (for example in asthma prevention programs), often translates into empty hospital beds, resulting in lost revenue and creating a lack of incentive for prevention. As children’s hospitals are expected to do more with less, a focus on prevention will be required and payment models that align incentives will emerge. Delivering the highest quality care is paramount for pediatric providers and, with a culture of continuous performance improvement, the standard of care is rising, which will ultimately reduce utilization through reducing average length of stay and avoidable admissions. Comparative effectiveness research (CER) will support the quality movement and reshape pediatric care delivery. CER is the direct comparison of existing interventions to determine which treatment works best, for whom and under what circumstances The Institute of Medicine has created 100 initial priorities for CER, 50% of which will impact pediatric care and 25% of which pertain to pediatric-specific research.

With the advances that pediatrics may offer in the years ahead, providers and children’s health care leaders need to shift their perspective from a facility focus to an integrated network focus, piloting their System of CARE (Clinical Alignment and Resource Effectiveness) from children’s entry into pediatric care, through disease surveillance and hospital admission, to their return home. Future care delivery will be driven by payment models that shift risk to the provider, while a focus on safety and quality will require children’s hospitals to do more with less. Anticipate these changes in demand and a shift to the outpatient setting for many conditions as technology advances, quality research and payment incentives combine to reduce costly inpatient stays, while prevention and disease management help children achieve optimal health.

 Top Pediatric Trends:

 About Sg2
Sg2′s advanced analytics, business intelligence, education and publications deliver measurable value across the full continuum of health care services. The Sg2 team includes MDs, PhDs, RNs and health care leaders with extensive strategic, operational, clinical, academic, technological and financial experience. Clients include hospitals and health systems, academic medical centers, physician organizations, private equity and investment firms, health insurance providers and medical device manufacturers.

Contacts:
Maddie (Madeleine C. McDowell, MD)
Clinical Advisor, Sg2 Pediatric Intelligence Team
mmcdowell@sg2.com

Mary Blanchard
Sg2 Regional Director
mblanchard@sg2.com

Briony Maxwell
Sg2 Account Manager
bmaxwell@sg2.com

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What Mid-Term Election Results May Mean for Us
November 7, 2010

Posted by chcablogadmin in : Healthcare Reform

You will remember Henry Aaron from the Executive Dialogue meeting last June when he mapped out the political landscape around health reform. We’ve posed some questions and asked him to comment on the potential effects of the mid-term elections this week. — Don

By Henry J. Aaron, Senior Fellow, Economic Studies, 
The Bruce and Virginia MacLaury Chair, The Brookings Institution

Henry J. Aaron

1. A dramatic shift of power occurred with mid-term elections this week and Republicans now have control of the House of Representatives. Voters indicated that the economy and health reform were big influences in their votes. What does this mean for health reform? 

Outright repeal of the ACA in the next two years is extremely unlikely.  Even if a repeal bill could be passed, which is improbable, President Obama would veto it and it is unlikely that two-thirds of either House would vote to override such a veto.  But the next two years should be regarded not in isolation.  They are prologue to the 2012 presidential campaign.  The outcome of the 2012 election will be strongly influenced by whether or not the economy shows signs of recovery.  If unemployment falls significantly and incomes begin to go up, president Obama will have good reelection prospects.  If not, not!  Whatever happens to the economy, Republicans are quite likely to win the Senate in 2012 (twice as many Democratic as Republican Senators will be up for re-election).  Should a Republican win the presidency in 2012, repeal cannot be ruled out. 

The most immediate threat to the ACA is not repeal, but that Republicans will carry through on their threat (or promise, depending on your point of view) to deny the administration funding to implement the legislation.  Without such funding, it will be extremely difficult to go ahead.  The battle in 2011 and 2012 will be fought in the Appropriations committees.

2.   Will the mandate be ruled unconstitutional? What would this mean for universal coverage and insurance market reforms?

The constitutionality of the individual mandate will most likely be settled in the Supreme Court, quite possibly by a 5-4 vote, and quite possibly by Justice Kennedy as the ‘swing’ vote.  I am not a lawyer and have no insight beyond that of an ordinary newspaper reader on which side will prevail.  Should the individual mandate be ruled unconstitutional, that would be the only provision that the decision would directly overturn.  The rest of the law would be left standing—legally!  But if people could elect not to buy insurance until they were sick, insurers could suffer devastating adverse selection.  As important actual adverse selection would be the fears adverse selection insurers would fear.  That fear would cause insurers and just about everyone else to lobby for other changes in the bill.  In principle, one could save the rest of the bill by adopting a proposal put forward by Paul Starr, under which individuals who chose not to buy insurance would be barred for an extended period—say, 4 years—from buying insurance through the exchanges and from qualifying for subsidies.  That provision might be sufficient to reduce adverse selection to a manageable level.  If Congress did not adopt some such ‘fix,’ the insurance regulations (mandatory issue, prohibition of rescissions) would probably be unsustainable.

3.   Will Republicans seek to roll back the scope of federally financed coverage expansion of Medicaid or reduce the subsidies of those who purchase through an insurance exchange?

They may try, but I don’t think that they could succeed.  One would need sixty votes in the Senate, which would be an even harder for a minority holding fewer than 50 seats than it was for a majority holding 59 or 60.  Furthermore, many governors—even Republican governors loyal to their party—will recognize that repeal is not in their interest or that of their states.  The ACA is quite generous in picking up nearly all of the cost of the Medicaid extensions, which means a large inflow of dollars as well as extended services.  Here, too, the state of the economy is crucial—recovery would mean a rebound in state revenues that would make the added Medicaid costs look quite manageable.  The bigger problem at the state level may be finding sufficient physicians and other providers to care for the expanded Medicaid rolls, as recent reports out of Massachusetts suggest.

4.   Will there be more variability by state and more state-by-state discretion?

There will be a lot of state-to-state variability, but not because of the elections.  The source of variation is the fact that states will organize exchanges differently and these differences can have large effects on the types of insurance offered and who can offer it.

5.  Is there a strategic shift now for children’s hospital CEOs or should they continue to focus on physician alignment, cost reduction, outcomes and transparency?

All providers will have to decide whether they want the legislation to survive or die.  If it survives, all providers will, presumably, want the legislation to operate effectively.  That means that hospitals and all other providers will have an interest in seeing that Congress appropriates sufficient funds for the federal agencies—principally, HHS and IRS—to implement the ACA effectively.  I cannot see why any provider group would want the legislation to fail; if it does, then choking off funds for implementation is the probably the most diabolically effective instrument available for the next couple of years.


About The Brookings Institution
The Brookings Institution is a nonprofit public policy organization based in Washington, DC. Our mission is to conduct high-quality, independent research and, based on that research, to provide innovative, practical recommendations that advance three broad goals:

Brookings is proud to be consistently ranked as the most influential, most quoted and most trusted think tank.

A noted health care expert, Henry Aaron focuses on the reform of health care financing; public systems such as Medicare and Medicaid; Social Security; and tax and budget policy.

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