Rising Healthcare Costs: Why We Have to Change
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With rising healthcare costs, we hear so often about rate pressures on hospitals and the risk these pressures pose for their future. With healthcare reform, the burden of rising healthcare costs is shifting from payers to providers. Hospitals need to move toward value-based reimbursement models or they will face a -15.8 operating margin by 2021.Over the last 15 years premiums and employee contributions for an average family with health insurance sponsored by an employer have risen 167%. Along with these facts, government payers are reimbursing at lower levels becoming a negative margin for hospitals. These changes are not necessarily easy and can seem overwhelming. The question is whether your hospital will be a pioneer on the trail or will delay until it’s too late. The best way to get started is to understand exactly where you are today—your current cost structure and how each area of your organization is performing in terms of quality and cost, using an EDW.
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Rising Healthcare Costs: Why We Have to Change
- 1. Rising Healthcare Costs: Why We Have to Change — Jared Crapo
- 2. Rising Costs Driving Down Margins © 2014 Health Catalyst www.healthcatalyst.com The burden of rising healthcare costs is shifting from payers to providers. A recent study by an industry group determined the following sobering fact: Hospitals that keep operating according to business as usual will have a negative 15.8% margin by 2021. Proprietary. Feel free to share but we would appreciate a Health Catalyst citation.
- 3. Burden of Rising Healthcare Costs Family Premiums, 1999 to 2013 Family, Worker Contributions, 1999 to 2013 Kaiser Family Foundation © 2014 Health Catalyst www.healthcatalyst.com Healthcare costs in the United States are rising two to three times faster than the rate of inflation. Proprietary. Feel free to share but we would appreciate a Health Catalyst citation.
- 4. Burden of Rising Healthcare Costs The graph clearly illustrates the steady—and steep—rise in healthcare premiums. Fifteen years ago, the average yearly insurance premium was less than $6,000. Today, it is more than $16,000—a 167% increase. Employers have shifted costs to their workers through growing deductibles and coinsurance. Health insurance is the fastest increasing expenditures for large companies who are rapidly becoming less willing to sustain these increases. © 2014 Health Catalyst www.healthcatalyst.com Proprietary. Feel free to share but we would appreciate a Health Catalyst citation.
- 5. 2013 2014 2015 2016 2017 HAC Re-Admit VBP MU Some programs are penalty-only such as Readmission and Hospital-Acquired Conditions (HAC). Under the Medicare Shared Savings Program (MSSP) and through Value-Based Purchasing (VBP) hospitals earn incentives or are penalized. © 2014 Health Catalyst www.healthcatalyst.com Pressure on Payers Government payers normally pay at low levels. In 2014, the Medicare inpatient payment increase was .5%, and the outpatient payment increase was 1.8%. During 2013, sequestration brought a 2% payment cut. Medicare $ At Risk Proprietary. Feel free to share but we would appreciate a Health Catalyst citation.
- 6. The change in demographics only exacerbates the problem. As baby boomers age and become Medicare beneficiaries, the payer mix worsens. With more population moving into the unprofitable government-payer category, fewer patients have commercial plans to carry the cost burden. © 2014 Health Catalyst www.healthcatalyst.com Pressure on Payers Proprietary. Feel free to share but we would appreciate a Health Catalyst citation.
- 7. Hospitals Can Survive And Thrive This all sounds pretty dire, right? Here are four things hospitals can do to face these issues: Capture all available revenue in current VBP agreements (ex: meet readmission targets and disease management quality scores). Ensure clinical documentation and billing records accurately reflect the care provided. Many organizations miss billing opportunities due to incomplete or insufficient documentation. Increase revenue by negotiating shared savings agreements with payers. Eliminate waste and increase efficiency to reduce operating costs. © 2014 Health Catalyst www.healthcatalyst.com Proprietary. Feel free to share but we would appreciate a Health Catalyst citation.
- 8. Hospitals Can Survive And Thrive © 2014 Health Catalyst www.healthcatalyst.com Getting hospital data assets together to form one picture for data analysis is a challenge. A single source of truth requires a healthcare enterprise data warehouse (EDW) that can aggregate clinical, financial, and patient satisfaction data to help hospitals understand and improve their business. Proprietary. Feel free to share but we would appreciate a Health Catalyst citation.
- 9. Hospitals Can Survive And Thrive © 2014 Health Catalyst www.healthcatalyst.com A hospital’s success will depend on ability and willingness to creatively collaborate with payers. It will also require efficient operations and an in-depth understanding of relationships between clinical quality and operational costs. An EDW gives hospitals the data foundation required to successfully plan, prioritize, measure, and sustain these improvements. Proprietary. Feel free to share but we would appreciate a Health Catalyst citation.
- 10. © 2014 Health Catalyst www.healthcatalyst.com Link to original article for a more in-depth discussion. Rising Healthcare Costs: Why We Have to Change More about this topic The Key to Transitioning from Fee-for-Service to Value-Based Reimbursement Bobbi Brown, VP of Financial Engagement How Would An Accountable Care Approach Change How A Patient is Treated? Luke Skelley Healthcare Payers and Providers: The Best System for Process Improvement Bobbi Brown, VP of Financial Engagement Becoming the Change Agent Your Healthcare System Needs John Haughom, MD, Senior Advisor The Late-Binding™ Data Warehouse White Paper Dale Sanders, Vice President, Strategy Proprietary. Feel free to share but we would appreciate a Health Catalyst citation.
- 11. © 2014 Health Catalyst www.healthcatalyst.com For more information: Proprietary. Feel free to share but we would appreciate a Health Catalyst citation.
- 12. Other Clinical Quality Improvement Resources Jared Crapo joined Health Catalyst in February 2013 as a Vice President. Prior to coming to Catalyst, he worked for Medicity as the Chief of Staff to the CEO. During his tenure at Medicity, he was also the Director of Product Management and the Director of Product Strategy. Jared co-founded Allviant, a spin-out of Medicity, that created consumer health management tools. In his early career, he developed physician accounting systems and health claims payment systems. © 2014 Health Catalyst www.healthcatalyst.com Click to read additional information at www.healthcatalyst.com Proprietary. Feel free to share but we would appreciate a Health Catalyst citation.