Top Most Healthcare Trends and Challenges for 2015: From Our Financial Expert

There are all kinds of facts, figures, and guesses floating around right now as to what will be the top healthcare challenges and trends in 2015 … and beyond. I’ve thought about it and put together this list about what we can expect this year. Give it a look, and let me know if I’ve missed anything.

1. Physicians start to feel the financial pinch from CMS’s regulations.

Value-based purchasing programs are solidly in place for hospitals. But now, eligible physicians are starting to feel the penalty phase of CMS’s quality reporting and Meaningful Use initiatives. In fact, CMS revealed that more than 257,000 eligible professional providers who are not meaningful users of certified EHR technology will have their Medicare Fee Schedule cut by one percent this year. Eligible professionals may also see reductions in reimbursements for noncompliance with Medicare’s Electronic Prescribing (eRx) Incentive Program and the Physician Quality Reporting System (PQRS).

Eligible physicians also need to comply with CMS’s new Value-Based Payment Modifier program, or face penalties. The Value-Based Modifier program calculates Medicare’s payments to physicians in group practices based on annual cost and quality measures. It’s part of Medicare’s efforts to improve

healthcare, but the program adds yet more regulations physicians need to monitor.

All these changes and new reporting requirements are overwhelming busy physicians, which is why the American Medical Association has repeatedly asked for relief.

There is some positive news for physicians, however. CMS passed a final rule to allow for a new procedural terminology (CPT) code, 99490. The code enables physicians to bill CMS $41.92 per month for providing remote chronic care management to qualifying patients.

Another positive note for physicians, more states under Medicaid and commercial payers are adding telemedicine to their reimbursement fee schedule, so physicians can bill for these services.

2. Technological advancements are transforming the entire healthcare industry.

The proliferation of new technology in healthcare is exploding. The following list highlights some opportunities and concerns for these rapidly evolving technological advancements:

Wearable Tracking Devices

I heard on the radio there are now 70 million people in the U.S. are using wearable tracking devices to monitor their physical activity, sleep patterns, calorie consumption, and a whole lot more. This is an exciting new frontier with so much potential to improve patient care. It will be fun to see the impact this trend has on improved patient engagement.

Patient-Centered Care

A significant change in the healthcare industry’s approach to providing care is underway—putting the patient at the center of care. The goal is to improve patient satisfaction scores and engagement.

But, this is new territory, and the industry as a whole is just starting to look into ways to engage with patients outside of a traditional office visit. For example, many providers haven’t yet tapped social media to build relationships with their customers. This will need to change, especially as patients begin to shop for healthcare the way they shop for cars or electrician services—by searching the Internet, looking for quality metrics and patient reviews, and comparing prices.

Increased Data Demands

Both clinicians and administrative leaders are hungry for data to make decisions and guide their planning. Yet, there always seems to be a missing piece of information, such as which skilled nursing facility a patient was discharged to. For this example, providers either have to make assumptions based on unreliable data or try to get that data through cumbersome processes. (My colleague, Tim Campbell, talks more about those inefficiencies.)

An enterprise data warehouse (EDW) is key to overcoming the current data challenges. An EDW enables users of all backgrounds (both technical and nontechnical) to analyze near real-time data easily through analytics applications. As demands for access to high-quality, accurate data continue to grow, workers will want better analytics tools, such as EDWs, so they can improve care and reduce costs.

Attaining Meaningful Use and Switching to ICD-10

Eligible providers and eligible hospitals will continue to work on meaningful use of EHRs in 2015. Fortunately, CMS may issue guidance to shorten the reporting period of certified EHR technology from one year to 90 days.

In addition to the Meaningful Use program, the switch from ICD-9 to ICD-10 will take front stage during 2015. It’s slated to occur in October. I certainly do not want to see another delay for ICD-10 because of the time and effort involved to implement this new coding system.

Data Security

Patient privacy issues (including concerns about data breeches) will continue to be top-of-mind for providers, payers, and consumers, especially with ongoing data breeches in the news. Providers and payers will need to step up data security to avoid the type of Health Insurance Portability and Accountability Act (HIPAA) violations that can negatively impact an organization.

3. Financial viability continues to be a significant concern for healthcare CEOs.

A main concern for hospital CEOs continues to revolve around the financial position of their organizations. Other concerns include new CMS mandates and rulings, patient satisfaction and quality scores, population health management, and personnel shortages—all of which end up impacting the bottom line if health systems can’t overcome the related challenges.

Because of the significant trials the industry as a whole is facing, three major credit rating agencies (Standard & Poor’s Financial Services, Fitch Ratings, and Moody’s Investors Service) have all given the healthcare and hospital sectors negative outlooks for the 2015 calendar year. Specific forecasts include the following:

• Standard & Poor’s Financial Services forecasts more ratings downgrades in 2015. The agency is also updating its methodology for credit ratings of acute-care, stand-alone hospitals. Specifically, these new criteria assign ratings using a framework that considers enterprise risk (enterprise profile) and financial risk (financial profile) factors. The credit rating agency expects almost one-quarter of stand-alone hospitals to have non-stable outlooks.
• Moody’s Investors Service predicts another year of weak performance based on the slow revenue growth and the fact that expenses still outpace revenue.
• Fitch Ratings gave a negative outlook for the non-profit hospital sector, but said the ratings outlook for the industry as a whole is stable.

There is some good financial news, however. In 2013, the spending curve grew more slowly than any other time in the past half century. The U.S. spent $2.9 trillion dollars on healthcare, which is only a 3.6 percent increase from 2012.

Some other good news is that the Medicare Payment Advisory Commission (MedPAC) asserted the need for positive updates for both the hospital inpatient and outpatient prospective payment system for fiscal year (FY) 2016. One of the recommendations the commission is considering would increase payment rates for the acute-care hospital inpatient and outpatient prospective payment systems by 3.2 percent. A lot of these increases are hinged on value-based purchasing, though, and if health systems can’t adhere to CMS’s quality measures, they are at risk of not receiving reimbursements.

4. There is a new need to tolerate risk in a value-based purchasing world.

Hopefully, health systems have already determined their tolerance for risk and started to implement risk strategies to survive value-based payment models. Examples of risk strategies include applying for CMS’s Accountable Care Organization (ACO) status and participating in bundled payment arrangements. To know which strategy is best for each individual organization, it’s important to use data analysis and scenario building. Some organizations are more risk averse than others and having the data enables good decision making.

But some risk isn’t based on risk tolerance, and right now, most hospitals are already at risk for decreased reimbursement from CMS’s value-based programs. For example, if a hospital performs poorly in all three programs (hospital-acquired conditions, high readmissions, and value-based purchasing), it is at risk for a 5.5 percent reduction during 2015. For hospital-acquired conditions alone, Medicare is reducing payments by one percent to 721 hospitals this year.

The healthcare industry as a whole is also experiencing the proliferation of value-based contracts for the commercial sector. In fact, the independent, non-profit organization, Catalyst for Payment Reform,estimated 40 percent of payments made to healthcare providers in commercial plans are based on value. This is an 11 percent increase from 2013. Fifteen percent of value-based payments are paid under full capitation arrangements, and 12.8 percent are fee-for-service payments with pay-for-performance built into the contracts. Over half of these arrangements have performance risk built into the contracts.

Also a new kind of risk looms on the horizon. When Medicare reduces payments, the names of affected hospitals are publicly listed. Patients search online for public information and patient reviews before selecting where to receive care. Seeing that a provider has been penalized for a high rate of hospital-acquired conditions could cause damage to the organization’s reputation that is difficult to overcome. Social media also makes it easy for a bad reputation to spread quickly.

5. Interest in population health management will grow.

Even though many people in the healthcare industry are talking about population health management, there isn’t a common definition for what it means yet. This is problematic for those trying to develop strategies to effectively improve the health of various groups of patients. Right now, we use the following definition at Health Catalyst:

Population health management is a proactive application of strategies and interventions to defined cohorts of individuals across the continuum of healthcare delivery in an effort to maintain and/or improve the health of the individuals within the cohort at the lowest necessary cost.

As the risk for a population of patients shifts to the provider, health systems need to know more about the patients they serve. At Health Catalyst, we feel success will depend of the combination of three systems: technology (data), deployment (execution strategy), and content (clinical knowledge). A medical center used this approach to drive preventive care improvements and lower population health costs. I’m seeing a lot of investment and partnership in this area and expect it to continue.

6. Outcomes will continue to improve.

I was excited to see an article in Modern Healthcare that showed improvements in patient safety in U.S. hospitals. In fact, approximately 1.3 million fewer patients were harmed between 2010 and 2013. That represents a 17 percent reduction in adverse events and the prevention of 50,000 deaths. The largest improvement was in CLABSI (central line-associated bloodstream infection), which showed a 49 percent reduction from 2010.

One of the driving forces behind improved outcomes is CMS’s emphasis on reducing hospital readmission rates. From 2007 to2011, the all-cause 30-day readmission rate among Medicare fee-for-service beneficiaries held steady at between 19 and 19.5 percent. Once CMS introduced readmissions penalties in 2012, the rate dropped to 18.5 percent. Then in 2013, it fell further to approximately 17.5 percent. The net result is roughly 150,000 fewer readmissions from January 2012 to December 2013. Once the 2014 figures are released, I expect to see even more reductions in readmissions and have already seen significant reductions from the health systems we’ve worked with. For example, one health system reduced its heart failure readmission rate by 29 percent. By using analytics and an EDW, the organization was able to capture necessary data elements and then track various interventions quickly and adjust as needed.

7. Collaboration will increase.

An important source for trendsetting in the healthcare industry is the annual JPMorgan Healthcare Conference. This year’s presenters showed examples of the importance of partnership and collaboration to survive the shift to value-based healthcare. These new partnerships cross industries and include companies outside of healthcare.

I’m expecting to see more and more collaborative efforts during 2015. Some examples of recent healthcare partnerships include:

• Trinity Health System joined forces with Heritage Provider Network to deliver population health management in select markets throughout the country.
• Anthem Blue Cross Blue Shield of Wisconsin joined forces with Aurora Health Care and its Aurora Accountable Care Network. They agreed upon a shared-risk program to support value-based reimbursement payment models.
• Allina Health formed a dozen Citizen Health Action Teams (called CHATs) to bring community members together to discuss neighborhood health issues and come up with solutions.
• Henry Ford Health System is seeking ways to “hardwire the safety net.” It is pursuing more seamless integration between itself and the various navigators and volunteers it deploys to address community engagement. The safety net program alone required the participation of more than 30 community partners, including competing health systems in the Detroit region.

The End Goal: Creating Higher Value at Lower Costs

As we charge headlong in 2015, those of us in the healthcare industry are striving to create a better system that achieves higher quality at lower costs. The formula to get there is simple: value equals quality over cost. The effort required to get there, however, is anything but simple.

Every day I collaborate with clinicians and executives who are focused on delivering better outcomes for their patients and decreasing the overall cost of care. Along with a team of experts, I help them learn how to track performance with an EDW and analytics applications. Then, we dig into the data to discover the correlation between clinical outcomes and cost. With this approach, both clinicians and administrators can see how creating higher value contributes to significant performance and growth improvements. But we need to speed up the improvement process and ensure the industry as a whole can achieve the types of gains possible by digging deep into untapped data sources.

Why such urgency? Consider:

• There are 11,000 baby boomers aging into Medicare daily.
• The U.S. population is about 320 million, which makes 2015 “the first year healthcare spending will reach $10,000 per person,” according to a Forbes article.

The longer we wait, the more difficult it will be to make changes that will enable health systems to survive the challenges. And the more it will cost