Healthcare Coalition Attacks

Initial estimates projected the 1997 Balanced Budget Act (BBA) would cut $116 billion from Medicare spending. More recent estimates, however, project a five-year impact of about $227 billion, with a large portion of the cuts coming from payments to hospitals.

America's hospitals are feeling the strain. Across the country, services are being cut and facilities are being closed while health care costs continue to rise. Independent groups and government agencies agree the BBA resulted in severe unintended consequences.

A new coalition of hospitals, health systems, national hospital associations and businesses formally announced July 24 its formation to focus on preserving access to healthcare services for communities across America. The Coalition to Protect America's Health Care has developed and funded national television and radio ads bringing directly to the American people the message that hospitals need Balanced Budget Act relief this year.

The ads began airing during the summer's national political conventions and will continue running through the fall. Later ads, with special emphasis on telling the hospital story, will focus on setting the 2001 healthcare agenda.

BBA Reduces Hospital Margins

A new report by the healthcare information and consulting firm HCIA-Sachs bolsters hospitals' allegations that the financial difficulties caused by the Balanced Budget Act of 1997 will probably continue, despite Congress enacting the Balanced Budget Refinement Act last year.

The study, The Financial State of Hospitals Post-BBA and Post-BBRA, says the 1997 law is largely responsible for reducing hospital operating margins from 5.5% in 1998 to 2.6% in 2000. Medicare margins fell from 2.5% in 1998 to -0.5% in 2000. The report says that the BBA created the greatest financial instability hospitals have experienced since Medicare was created in 1965. It also notes that the most severe reductions have just begun to affect the nation's hospitals.

Findings of the study are consistent with data from the Medicare Payment Advisory Commission, which recommended in April that hospital payment updates mandated in the BBA should be increased 3.5% to 4%.

Fitch: Non-profit hospitals worse in 2000 than in '99

Two significant new government mandates—the Health Insurance Portability and Accountability Act and the new payment system for outpatient care—"will exacerbate pre-existing negative pressures of the Balanced Budget Act of 1997," the Fitch rating agency said recently. As a result, it said, hospitals will feel increased pressure from managed care payers, sustain losses on their physician contracts and see expenses rise. It added that all this comes at a time when non-profit hospitals and health care systems saw their profitability shrink by 63% in 1999 from the year before. For more, see www.fitchibca.com.

Employers Seek to Increase Employee Involvement in Healthcare Benefits Process

As healthcare costs continue to rise, employers are increasing the role their employees have in the healthcare process, according to a survey by Watson Wyatt Worldwide, Washington Business Group on Health, and the Healthcare Financial Management Association. Healthcare costs have risen an estimated 10 percent in 2000, an increase from the 7 percent rise over the last two years.

To avoid passing on the entire increase in costs to employees, organizations are reducing costs by using Internet-based technologies and getting employees more involved in the benefits process. While 70 percent of organizations surveyed said they would pass on some of the cost increases to their employees, 63 percent also said that they are moving toward greater use of the Internet to ease administrative costs associated with the distribution of healthcare information.

The Internet has become key in integrating employees into the healthcare process because it is easy to use and provides self-service access to a large amount of healthcare information. Employers are also using the Internet to outsource some of the administration of health benefits programs, such as health plan enrollment. The survey indicates that, while only 20 percent of organizations believe that employees will eventually be fully responsible for their healthcare coverage, employers are aware of the changing role of the employee in the healthcare process, most notably in the areas of administration and dissemination of healthcare information.

New Arkansas Tissue Service

Arkansas hospital CEOs may soon be contacted by a representative of the Southern Plains Area Tissue Services of the American Red Cross. The organization, which already distributes donor tissues to hospitals in Arkansas, is beginning to seek contracts to serve as hospitals' tissue recovery agency.

Currently, the Arkansas Regional Organ Recovery Agency (ARORA) is the sole organ recovery and tissue recovery group serving Arkansas. The Red Cross tissue group, headquartered out of Tulsa, would not be involved with organ recovery activities. Nor would it conflict with the blood services activities conducted by the Arkansas chapter of the American Red Cross.

Sheila Sadler, RN, supervisor of donor services with the Southern Plains organization, said the Red Cross' tissue services group currently acts as the tissue recovery agency for seven other states in the mid- and south-central U.S.

In total, the American Red Cross Tissue Services provides about 25% of all tissue needed for transplantation in America. It operates through six regional offices, is accredited by the American Association of Tissue Banks, and is inspected and governed by the Food and Drug Administration.

National Payment Error Reviews

At a recent meeting of Peer Review Organizations, the Arkansas Foundation for Medical Care (AFMC) was given preliminary data about the National Payment Error reviews. These cases are screened by DynKePRO using InterQual admission and procedure criteria and are reviewed by coding experts for correct DRG assignment.

If a case fails to meet criteria or the DRG is thought to be incorrect, DynKePRO refers the case to AFMC for complete review. Nationally, 35% of the cases are being referred to PROs because they failed admission necessity criteria.

As of June 28, 2000, AFMC has completed review of 294 charts. Of these, 116 admissions have been denied and 65 DRGs have been changed.

JCAHO Outlines Patient Rights in ER Filming

The Joint Commission on Accreditation of Healthcare Organizations has clarified its patient confidentiality standards. The new rules, prompted by a debate on privacy issues regarding a cable TV series, said hospitals could allow filming only if the patient or the patient's family provides consent. Filming can occur if the patient or family cannot provide consent, but they must have consent before the tape is used in any capacity. Additionally, JCAHO said health care organizations must notify patients if filming might occur and suggested posting signs in the emergency room area. For more on the clarification, issued July 28, see www.jcaho.org/standard/clarif/stanclar_frm.html.

UB-92 Electronic Format Required January 1

Effective January 1, 2001, version 6.0 of the Health Care Financing Administration's UB-92 192-byte electronic billing format will be the only UB-92 version accepted for Medicare Part A claims. Claims submitted in version 5.0 will not be accepted after December 31, 2000. Arkansas Blue Cross and Blue Shield (ABCBS), the state's Medicare fiscal intermediary (FI), began accepting claims in the version 6.0 format August 14. Sharon Allen, executive vice president of ABCBS, urged hospitals to contact the FI's electronic billing services to test submission of their claims.

VA Grants Program Helps Research Continue in Arkansas

Since July 1999, the Research Grants program of the Biomedical Research Foundation (BRF) at the Central Arkansas Veterans Healthcare System (CAVHS) distributed 12 grants in two funding cycles to VA investigators for a total of nearly $1.5 million.

The success of these two funding cycles demonstrates the commitment of the BRF to promote and sustain VA Research at CAVHS. The BRF Grants Program is designed primarily to give funding for promising pilot projects initiated by VA researchers. In the intensely competitive world of medical research, only one in three investigator-initiated projects get national funding. In order to increase the chances of funding, an investigator tries to generate data from a small, preliminary study to determine if an approach to a medical research question has sufficient merit to justify a request for further funding.

While the BRF pilot project grant program is available to CAVHS researchers at any stage of their career, it is designed to help junior faculty launch their own research careers. Cummins Lue, M.D., a rheumatologist at CAVHS and a recipient of a BRF pilot project grant in 1999 said, "The BRF grant review and approval process was swift. This grant allowed me to hire needed staff and to purchase supplies to sustain my laboratory activities."

Another function of the BRF Grants Program is to assist VA investigators with the purchase of common resource research equipment. Under this section of the program, two or more funded VA researchers can apply for funding through individual VA or NIH research grants. The equipment can be related to basic science projects or for clinical research.

"Bridge" funding is also available through this program. In the highly competitive medical research funding arena, it is possible that even seasoned investigators who have been productive will not get funded for a cycle. This can be disastrous for an established research investigator. The laboratory is not allowed to carry over funds from year to year. Therefore, if there is a break in recurring funding, the investigator is forced to significantly downsize the laboratory. This is highly disruptive to a productive and active laboratory. If the investigator applies for BRF funding, and the request is approved, the funds will allow the work to continue until the next cycle of funding by VA or NIH becomes available.

All three of these plans are designed to promote and sustain valuable research conducted at CAVHS.

The Biomedical Research Foundation (BRF) was incorporated in 1989 as an Arkansas not-for-profit corporation with the main goal of promoting and assisting research at the Central Arkansas Veterans Healthcare System. It is the largest VA research corporation within Veterans Integrated Service Network 16. This network, comprised of 10 hospitals, is based in Jackson, MS.