The paper entitled, ‘"Must Have' Provisions under Health Care Reform," analyzed the potential impact of remedying three significant problems in the health insurance market and evaluated several publically available cost estimates for the proposed legislation. Our analysis focused on three solutions to insurance market failure: eliminating pre-existing conditions, waiting periods and cancellations; limiting out-of-pocket expenses; and eliminating annual and lifetime coverage limits. This white paper was delivered to every member of the Congress.
WASHINGTON, D.C. – Introducing a government-run health insurance plan could cause hospitals to shift a new financial burden onto patients with private insurance, raising premiums for those who already have coverage.
According to a new study by Dobson DaVanzo & Associates, LLC – published today on the Health Affairs Web site – implementing a public plan could place a variety of financial pressures on hospital management, resulting in sharply raised private insurance premiums if hospitals prove unable to curtail costs under a new system.
When public programs pay less than costs for the services their patients receive, hospitals attempt to shift costs to private payers in order to cover their expenses, modernize, and stay current with emerging technology. A health care system with a public plan could increase hospital pressures to shift costs.
"This paper supports the contention that a government-run plan that is aggressively implemented to include large proportions of the privately insured could test the U.S. health care financing system," write Allen Dobson and Joan DaVanzo, lead authors of the study. "Rising hospital private-payer payment-to-cost ratios could be followed by rising private insurance premiums. The result could be the antithesis of what advocates say is the advantage of a public plan: to curtail cost growth for the average citizen."
A large influx of individuals to a new public health care program could place tremendous strain on the nation's health care financing system, even if payments are set at Medicare rates plus 10 percent. While some hospitals may be able to absorb the initial costs imposed by a government-run plan, some degree of cost shifting could occur to pay for the new, and likely underfunded, public program.
Based on hospital financial data from the California Office of Statewide Health Planning and Development (OSHPD), the study was designed to show the effect of various reallocation scenarios on hospital patient revenue margins and private payer payment-to-cost ratios. The study indicates that a high level of enrollment of the uninsured would initially bolster hospital finances. However, when the privately insured begin to move from the private sector into the public plan, this positive effect is reversed and hospital patient revenue margins decrease. The mass reallocation of the privately insured to the government-run plan could lead to an increase in private insurance premiums to defray hospital costs, unintentionally forcing private plan enrollees to bear a portion of the costs of health insurance reform.
Article: "How A New 'Public Plan' Could Affect Hospitals' Finances And Private Insurance Premiums," Allen Dobson, Ph.D., Joan DaVanzo, Ph.D., M.S.W., Audrey El-Gamil, and Gregory Berger, Dobson DaVanzo & Associates, LLC, Vienna, Virginia; Health Affairs, September 15, 2009.
(Full text of the article is available at HealthAffairs.org.)
Dobson DaVanzo & Associates, LLC is a health care consulting firm based in the Washington, D.C. metropolitan area. The work of the firm's principals has influenced numerous public policy decisions, and appears in legislation and regulation.
The presentation was delivered to the National Investment Center for the Seniors Housing and Care Industry (NIC). The presentation was part of the Skilled Nursing Federal and State Reimbursement Update Session of the NIC Annual Conference on September 24, 2009. Dr. Dobson provided an overview of the Fiscal Year (FY) 2010 Skilled Nursing Facility (SNF) Prospective Payment System (PPS) final rule, and discussed how the future implications of Resource Utilization Group (RUG) IV, non-therapy ancillary payments, and post-acute care bundling may affect the SNF industry.
The presentation provides an overview of how post-acute care (PAC) payment bundling might be designed and implemented, and considered who the winners and losers in the PAC industry might be under a bundled payment system.
The presentation took place at the 2009 America's Health Insurance Plans (AHIP) Medicare and Medicaid Conferences on September 15, 2009. They presented findings from an earlier Dobson|DaVanzo report commissioned by MedSolutions, which examined the potential savings to Medicare of implementing a radiology benefits management (RBM) program.
Al Dobson delivered a presentation entitled "How Should Bundled Payments be Structured: Bundling from the Perspective of an Administrative Price Setter" at a one-day conference on bundling payment for post-acute care at Georgetown University's Leavey Center on June 24. The conference was hosted by the Center for Post-Acute and Long-Term Care Studies, and sponsored by the National Rehabilitation Hospital Center for Post-Acute Studies and Georgetown University School of Nursing and Health Studies. Materials from the conference can be accessed here: http://www.postacuteconference.org/
Washington, DC - A new analysis assessing how the deepening national recession is affecting the long term care sector found that cash flow is being used to simply fund operations rather than making critical infrastructure improvements. This comes at a time when demographic trends show a growing need for skilled nursing facility services and additional staff.
According to the report, within the long term care industry, "while there may be vacant positions that could be filled, one third of our respondents spoke of having to freeze jobs in their facilities and forgo filling these positions." Wages for current employees were also not increasing as a result of the economy.
The Dobson DaVanzo & Associates LLC study, designed to present a set of "early warning indicators" as to the severity of current capital access constraints, warns, "It is well known that the nursing home industry has an aging physical infrastructure which will be under considerable stress over the next twenty years. Two emerging trends will exacerbate the stress on this infrastructure: continued growth in the over-eighty-five aged population, and growth in the short-stay post-acute population as baby-boomers are aging."
A central component of the study involved fielding and analyzing a survey of proprietary nursing home senior management and staff to better understand the current financial, managerial, and clinical experiences in regard to how they have responded to the last six months of continuing deterioration in the national economy.
Respondents' managerial experiences included 100% who were forced to renegotiate supplier contracts; 66.7% who deferred improvements to information systems and deferred planned renovations of facilities; 55.6% deferred planned equipment acquisition and failed to award wage increases needed to retain key staff; 44.4% deferred planned therapy additions and 33.3% deferred planned bed additions.
Respondents' financial experiences included 88.9% who found a decreased likelihood of meeting budget targets; 66.7% experienced more restrictive debt terms and increased requirements for new borrowed capital; 55.6% experienced difficulty refinancing debt and a rising expense for existing borrowed capital; 44.4% said they were unable to renew lines of credit.
Respondents' clinical experiences included 88.9% who experienced increased pressure to add staff; 77.8% who experienced increased acuity of patients and increased Medicaid days as a percent of total days; 66.7% reported a decreased number of admissions and increased effort on collections from private payers; 44.4% experienced an increased number of prescriptions and increased physician involvement.
"The survey responses also reflect a diversion of existing capital sources to fund current operations and provide minimal refurbishing," the researchers noted. "These findings suggest that the aging physical infrastructure of the industry is not being updated to meet the needs of the 21st century baby boomer retirement population."
Long Term Care Jobs Have Potential to Boost U.S. Economy
The analysis also finds that despite the rising pressure on existing staff, the long-term care sector can play a role in mitigating the recession's effect on jobs, and contributing to eventual economic recovery. Dobson and DaVanzo say, "First and foremost, the nursing home industry represents an important and stable source of jobs and related benefits, such as health insurance. In some communities, nursing homes are among the largest employers. If these jobs are lost, particularly in rural communities, they are not likely to be replaced. Especially important, some deferred nursing home capital programs can be implemented very quickly. Many projects are 'shovel ready' and could represent an immediate economic boost to communities across the nation."
State Medicaid Funding Crisis Exacerbates Negative Facility, Patient Care Environment
"In usual economic environments," the analysis continues, "we believe that the impact of planned payment reductions and state budget shortfalls might be flat or slightly reduced Medicaid revenues. In the current environment, however, the immediate impact is considerably greater for some nursing homes -- especially those with a significant number of Medicaid residents. Furthermore, stimulus money is not currently being used to restore Medicaid payment cuts, as it is being used for other purposes."
The Complete Report and Methodology Information and Background Available at www.aqnhc.org
The American Health Care Association (AHCA) and National Center for Assisted Living (NCAL) represents nearly 11,000 non-profit and proprietary facilities dedicated to continuous improvement in the delivery of professional and compassionate care provided daily by millions of caring employees to 1.5 million of our nation's frail, elderly and disabled citizens who live in nursing facilities, assisted living residences, subacute centers and homes for persons with mental retardation and developmental disabilities. For more information, please visit www.ahca.org.
The Alliance for Quality Nursing Home Care ("The Alliance") is a coalition of 16 national long term care provider organizations that care for approximately 300,000 elderly and disabled patients each year in nearly 1,800 facilities across America. The Alliance is dedicated to improving the quality of nursing home care in the United States through measured results and outcomes and to assuring the government resources necessary to provide high quality care and services.
Dobson | DaVanzo was commissioned by the Patient Advocate Foundation to assist in its annual publication of the Patient Data Analysis Report, which provides analysis of healthcare access and insurance trends at the national and state-specific levels.
For more information on the PDAR, please contact the Patient Advocate Foundation here.