Hospitals experienced a slight boost to operating margins in November, but not enough to restore the median negative margins that persisted for 2022 to date.
Kaufman Hall’s December “National Flash Hospital Report” — based on data from more than 900 hospitals — found hospitals’ median operating margin was -0.2 percent through November, a slight improvement from the median of -0.3 percent recorded a month prior.
A 1 percent decline in expenses from October to November drove the eleventh-hour improvement to margins and tipped the scales on hospitals’ relatively flat revenue. Additionally, hospitals saw labor expenses decrease 2 percent in November, potentially driven by less reliance on contract labor.
The median -0.2 percent margin recorded in November 2022 marks a 44 percent decline for margins in 22 year-to-date compared to 2021 year-to-date. Kaufman Hall’s index shows hospitals’ median monthly margins have been in the red throughout 2022, starting with the -3.4 percent recorded in January, driven by the omicron surge. November is tied with September as hospitals’ best month of the year, with both sharing a median margin of -0.2 percent.
Outpatient care marks one of the brighter spots for hospitals’ finances, with outpatient revenue up 10 percent year-over-year while inpatient revenue was flat over the same time period.
“The November data, while mildly improved compared to October, solidifies what has been a difficult year for hospitals amidst labor shortages, supply chain issues and rising interest rates,” Erik Swanson, senior vice president of data and analytics with Kaufman Hall, said. “Hospital leaders should continue to develop their outpatient care capabilities amid ongoing industry uncertainty and transformation.”
The number of amoxicillin products on back order has increased to 44 after months of the antibiotic being out of stock, according to the American Society of Health-System Pharmacists.
Depending on the ASHP’s website or the FDA’s drug shortage database, between two dozen and three dozen oral presentations of amoxicillin have been in shortage because of high demand since late October. At the time, the shortage was expected to resolve by the end of 2022.
As of Dec. 8, most drugmakers told ASHP they could not estimate a resupply date, but Teva Pharmaceuticals has release dates in January and February, and Hikma Pharmaceuticals short-dated their allocated supply for August 2023.
The worsening supply issue could be connected to the surge in viral infections even though amoxicillin is not a recommended treatment for COVID-19, flu or respiratory syncytial virus infections. Amoxicillin is not recommended to treat RSV cases, but some physicians will prescribe antibiotics when they are not medically necessary.
The original drug shortage may have sent a ripple effect through amoxicillin/clavulanate products — the recommended backup treatment for some infections if amoxicillin is not available — because 29 of them were in short supply as of late November.
From tracheostomy tubes and syringes to amoxicillin and dozens of other drugs, medical supply chains are hindered by ongoing issues to access raw materials and enough staff, The State Journal reported Dec. 4.
“I’ve been doing this [for] about 25 years,” Bryan LaBuda, WVU Medicine director of enterprise materials management, told The State Journal. “I would say this is unprecedented. Obviously, there’s always back orders and things like this, but in my career I’ve never seen the volume and the variety of back orders. That’s 100 percent due to the pandemic, which turned into labor shortages, as well.”
Other hospital supply chain leaders have lamented the labor shortage and higher prices for raw materials, which are more scarce partly because of inflation and partly because of geopolitical frictions.
Mr. LaBuda told The State Journal one way to counteract the persistent issues are “strategic vendor partnerships that have a focus on domestic manufacturing” — a growing trend called nearshoring and friend-shoring. WVU Medicine is also building its own distribution center to combat future supply chain hiccups.
As the “tridemic” of flu, COVID-19, and respiratory syncytial virus continues, pediatric hospitals are running into a new problem: a shortage of medical-grade cribs, CNN reported Dec. 5.
Grand Rapids and Southfield, Mich.-based Corewell Health ordered more than 50 cribs and have brought out both specialized and non-specialized cribs from storage to meet the demand of patients, hospital officials told CNN.
They aren’t the only ones struggling to meet demand.
“These shortages vary from items being on backorder with no estimated shipping date to product discontinuation without notice. The reasons include transportation issues and labor shortages,” Cynthia Zheng, director of pharmacy operations and support services at Wilmington-based Nemours Children’s Health Delaware Valley, said in the report. “At Nemours Children’s Health, these supply challenges are magnified due to pediatric populations needing more specialized equipment to accommodate different stages of growth. In addition, the high volumes as a result of an early spike in RSV have only put more strain on an already stressed system.”
Ventilators are also in high demand due to the RSV surge. CNN reported that the American Hospital Association said it received its first non-COVID-19-related request to the dynamic ventilator reserve since its launch in April 2020.
November 29, 2022 – HIDA has urged Congress to take steps to maintain the freight rail system and avert any threatened labor disruption.
“Transportation is a healthcare issue,” said HIDA President and CEO Matthew J. Rowan. “As Americans weather a difficult flu season and a surge in pediatric RSV cases, this is no time to disrupt the medical supply chain. If the parties cannot reach agreement, then Congress must step in and pass legislation to keep the freight rail system operating and America’s supply chains moving.”
HIDA has encouraged its members to contact Congress and support a legislative resolution to the rail labor dispute. HIDA is at the forefront of healthcare organizations who have joined multi-association letters to President Biden and congressional leadership urging action to avert a rail strike.
The amoxicillin and clavulanate combination is a penicillin antibiotic. London-based Hikma Pharmaceuticals has 10 products on allocation, Switzerland-based Sandoz has 16 on back order without an estimated resupply date and Israel-based Teva Pharmaceuticals has three on back order with resupply dates between late November and early January.
Amoxicillin has been in shortage for weeks, and the FDA confirmed the issue in late October. As of Nov. 18, resupply dates have been pushed to be between early December 2022 and August 2023, depending on the company and the product.
Texas Attorney General Ken Paxton has launched an investigation into Epic Systems over a policy that allegedly prevents parents from accessing their children’s medical records once they become teenagers.
Mr. Paxton sent a civil investigative demand to the EHR vendor after he began an investigation into Houston-based Memorial Hermann regarding an alleged policy that doesn’t allow parents to access their children’s medical records if the child is between 13 and 17 years old.
Mr. Paxton said his investigation into the health system further revealed that Epic “may have additional information regarding these concerns,” according to a Nov. 17 press release from the attorney general.
“Texas law forbids any hospital or corporate entity from denying parents access to their children’s medical records, and we’re going to ensure that the law is followed,” Mr. Paxton wrote in his press release.
Epic declined to comment.
A spokesperson for Memorial Hermann told Becker’s that it was not aware of any specific patient complaints about access to records and first learned about the complaint in question via the attorney general’s press release.
Memorial Hermann still operates on an Oracle Cerner EHR system and will transition to Epic beginning in 2023. The health system said its implementation of Epic will take “multiple years.”
Flu activity metrics are quickly ramping up in the US, with 8,707 lab-confirmed flu patients admitted to hospitals for the week ending Nov. 12, according to the CDC’s latest FluView report.
That’s up from the more than 6,400 flu patients hospitalized the week prior. The CDC now estimates there have been at least 4.4 million flu cases, 38,000 hospitalizations and 2,100 flu-related deaths so far this season. The CDC emphasizes that data in the reports are preliminary and may change as more data become available.
Seven more notes:
1. Fourteen states (Alabama, Arkansas, Tennessee, South Carolina, Virginia, New Mexico, Texas, Mississippi, Georgia, North Carolina, Maryland, New Jersey, Colorado and Kentucky), the District of Columbia and New York City reported very high flu activity for the week ending Nov. 12. Thirteen states (California, Nevada, Washington, Arizona, Kansas, Nebraska, Louisiana, Illinois, Indiana, Florida, Ohio, New York and Connecticut) and Puerto Rico reported high flu activity. The remaining states reported low or minimal activity.
2. Two flu-associated deaths were reported to the CDC for the week ending Nov. 12. This brings the total number of influenza-associated pediatric deaths to seven for the 2022-23 season.
3. The overall cumulative hospitalization rate is 8.1 per 100,000 — the highest it’s been this early in the season since the 2010-11 flu season.
4. Clinical laboratories tested 103,830 specimens for influenza for the week ending Nov. 12. Of those, 14.7 percent were positive, most of which for influenza A. The positivity rate was 12.8 percent the previous week.
5. The percentage of visits to an outpatient provider for influenza-like illness — meaning fever plus cough or sore throat, not lab-confirmed flu — was 5.8 percent for the week ending Nov. 12. This is above the national baseline of 2.5 percent.
6. Nationwide, 1.2 percent of 14,161 long-term care facilities reported at least one flu-positive test among residents for the week ending Nov. 5.
7. The national flu, pneumonia and/or COVID-19 mortality rate is 9.4 percent, which sits above the epidemic threshold of 6.2 percent for the week. Among the 2,175 deaths reported for the week, 926 had COVID-19 and 70 had the flu listed as an underlying or contributing cause of death. “While current [flu, pneumonia and/or COVID-19] mortality is due primarily to COVID-19, the proportion due to influenza remains small but is increasing,” the CDC said.
Consumer-driven trends, value-based strategies and better physician relationships encourage transition to ASCs.
October 2022 – The Journal of Healthcare Contracting
By Daniel Beaird
The healthcare sector has significantly consolidated in recent years. Large health systems have acquired smaller hospitals and the remaining hospitals have amassed existing outpatient facilities like urgent care, imaging locations and independent physician practices as outpatient care has become more popular. This has limited inpatient days and lowered hospital revenues, all while the healthcare sector tackles higher overhead and labor costs.
The preference for outpatient care is set to continue. Healthcare staffs are encouraged to expand their abilities for a variety of alternative care sites and reimbursement models are being restructured to meet the shift toward outpatient services.
Site-neutral payments
CMS implemented the Outpatient Prospective Patient System (OPPS) rule in 2019, extending a site-neutral payment policy to off-campus provider-based departments (PBDs). It reduced off-campus PBD payments to 70% of the full OPPS rate.
The OPPS rule was ruled to be invalid by a federal judge that same year, but the U.S. District Court of Appeals for the D.C. Circuit overturned the court’s ruling in 2020. The American Hospital Association (AHA) and the Association of American Medical Colleges (AAMC) are opponents of the site-neutral payment policy, but the U.S. Supreme Court declined to hear AHA’s appeal of the U.S. District Court of Appeals decision in 2021.
Melinda Hatton, general counsel for the AHA, said in a statement at the time, “America’s hospitals and health systems are disappointed in this decision because it will cause serious harm to their ability to provide care for patients. It fails to account for the fundamental differences between hospital outpatient departments and other sites of care. Hospitals are open 24/7, held to higher regulatory standards and are often the only point of access for patients with the most severe chronic conditions, all of whom receive treatment regardless of ability to pay.”
But the Medicare Payment Advisory Commission (MedPAC) said the biggest driver for physician and hospital consolidation was that Medicare paid hospital-based clinics a higher price for the same services than it did physicians’ offices, and if CMS adopted site-neutral payments between hospital and physician offices, it would reduce the incentive for those mergers.
CMS has stated that it would have saved an estimated $800 million in payments to outpatient departments during 2020 under the 2019 rule. The rule aims to remove payment disparities between clinics affiliated with hospitals that receive more Medicare reimbursement than physicians’ offices providing the same services. CMS began reprocessing claims for outpatient clinic visit services at excepted off-campus PBDs in 2021 so that they were paid the same rate as non-excepted off-campus PBDs for those services under the physician fee schedule. It affected certain claims with dates of service between Jan. 1-Dec. 31, 2019.1
In American Hospital Association v. Becerra (2022), the AHA and several hospital associations and hospitals sued HHS, alleging that it exceeded its statutory authority in the rule reducing reimbursement rates for certain hospitals, specifically 340B hospitals and Medicare Part B insured patients. In June 2022, the U.S. Supreme Court unanimously ruled that the statute does not give HHS the authority or the discretion to vary the reimbursement rates for 340B hospitals.
ASCs become must-haves for hospitals
The movement toward value-based care, growing competition for physicians and surgical cases, and the ongoing shift of non-urgent surgical procedures into the outpatient setting have all had an effect on hospitals investing in ASCs. According to a national survey conducted by Avanza Healthcare Strategies of senior executives and clinical leaders at hospitals and health systems across the country, more than six in 10 hospitals and health systems intend to increase their investments in ASCs.
Hospitals are becoming less reliant on third-party management vendors for their ASCs and more willing to partner and share ownership with physicians in joint venture ASCs. Half of the respondents in Avanza’s survey indicated current ownership of multiple ASCs in their portfolios.
“It comes as no surprise to see that hospital systems are pursuing a variety of ASC initiatives, often in partnership with physicians, that will allow them to broaden their surgery center and outpatient portfolios,” said Joan Dentler, founder and president of Avanza. “As surgical care continues its migration out of the inpatient setting, hospital systems are recognizing the need for at least one ASC, and increasingly multiple centers, in their portfolios.”
The maturity of the ASC industry is cited as a reason for more growth in the category. Dentler says that management services were often a necessity to running a viable surgery center in the early days of ASCs. But the proliferation of support services and technologies for the industry and the growth of professionals with ASC experience has neutralized the need to give up valuable equity and enter expensive management agreements for ASC success.
More than 80% of hospital systems surveyed by Avanza have one or more of their ASCs as joint ventures with physicians, and more than half are allowing employed physicians to invest in their ASCs. Third-party management and partnerships continue to decline.3
Not only have consumer-driven and payer-driven trends from the past several years solidified the need for ASCs, but the COVID-19 pandemic also stiffened the competitive positions of ASCs as the preferred setting for high-quality, low-cost surgical care.
Hospitals more likely to share ownership in ASCs
According to the Avanza survey, from 2020 to 2021, the percentage of ASCs with 100% hospital and health system ownership declined from 25% to 12%. Yet majority ownership by hospitals and health systems in ASCs increased from 54% to 58% during that same period.
The takeaways included hospitals and health systems potentially being more amenable to sharing ownership with physicians since physician financial investment in the ASC may serve to motivate physicians to be more cost-conscious, helping drive profitability. Also, physicians are interested in joint ventures as minority owners due to contracts that can be leveraged with payers and GPOs that are accessible only if the hospital is the majority owner.
Hospitals, on the other hand, are owning or affiliating with ASCs due to four primary reasons:
Responding to consumer-driven trends.
Preventing physicians from taking cases outside the hospital and health system.
Supporting a value-based strategy.
Enhancing physician relationships.
And 63% of hospitals surveyed planned to increase ASC investments or affiliations. At the same time, third-party management is declining. In 2019, 23% of hospitals and health systems with ASCs had a third-party manager. That declined to 15% in 2021. The survey also found the percentage of hospitals and health systems with ASCs that permit third-party equity partners has declined from 44% in 2018 to 27% in 2021.
HOPDs converting to ASCs
One of the fastest growing areas of freestanding ASC development is hospital-based outpatient departments (HOPDs) conversions. These departments acted like freestanding ASCs but operated as arms of the hospital, collecting hospital reimbursement.
Medicare per-payment procedures were significantly higher for HOPDs than payments to ASCs,4 and the reduction in revenue for hospitals when converting HOPDs to ASCs has come with consternation, but it’s a step toward value-based care. According to Avanza, in 2021, 53% of hospitals and health systems with HOPDs that mimic ASCs were considering converting one or more of their HOPDs to ASCs.
Shifting outpatient procedures to ASCs reduces spending for commercially insured individuals by almost 60% and saves consumers close to $700 per procedure.5 Over 6 million routine outpatient procedures are performed in HOPDs, but only 10% of those procedures are for complex patients like those with morbid obesity or those suffering from end stage renal disease, and 35% of those procedures are for patients who do not have an ASC close to their residences.
The ASC market size in the U.S. is estimated to reach almost $60 billion by 2028,6 up from $34 billion in 2020 and $36 billion in 2021.
October 24, 2022 – NBC News reports that a shortage of liquid helium, a nonrenewable element that has been dwindling in supply, is worrying physicians because MRI machines require the ultra-cold material for its magnets.
The supply of helium has been strained for years, but geopolitical tensions are blowing up the problem. According to the report, a new facility in eastern Russia was supposed to provide a third of the world’s supply, but a fire last January caused delays, and current political strains because of the war in Ukraine have halted the U.S.’ plans to acquire the helium.
Four out of 5 U.S. helium suppliers are rationing their product and prioritizing it for the healthcare industry.
“Helium is on allocation for sure,” Donna Craft, a regional construction manager for Premier Health who contracts with helium suppliers for some 4,000 hospitals, told NBC News. “We’re probably not blowing up balloons in the gift shop anymore.”
At any time, every operating MRI holds about 2,000 liters of helium.
The coldest element on Earth, liquid helium is invaluable for hospitals that use MRI scans to detect cancer, spinal cord injuries and liver diseases. MRIs run on magnetic fields and radio waves, and liquid helium is necessary to keep the magnetic current at an extremely cold temperature.
“There’s no alternative. Without helium, MRIs would have to shut down,” Craft said.
Medical device makers GE Healthcare and Siemens Healthineers are working on making MRIs, which typically use about 10,000 liters of liquid helium over a lifespan, that can run on less liquid helium. The technology is not widely available, though, according to NBC News.
