The Best Solution for Declining Medicare Reimbursements


declining medicare reimbursementsGiven the continued trends for declining Medicare reimbursements, I am one of the brave souls who takes the time to read the report issued each spring by the Medicare Payment Advisory Commission (Medpac). Medpac is the independent agency that advises Congress on issues affecting the Medicare program—and its aim is to transform Medicare from a fee-driven model to one that encourages delivery of efficient, high-quality care.

Though the reading can be a bit dry, the information contained in the report is important—particularly considering the fact that the commission’s recommendations are influential in shaping policy.  Medicare payment policies tend to set a precedent for other payers.

Key Medicare Trends that Affect Healthcare Organizations

Here are a few key findings I extracted from Medpac’s March 2013 report to Congress:

  • Over the next 10 years, Medicare spending will grow at annual rate of 6.8 percent, consisting of 3.9 percent per-beneficiary growth and 2.9 percent enrollment growth
  • From 2004 to 2011, outpatient services per beneficiary grew 34 percent and inpatient admissions declined 8 percent.
  • The overall Medicare margin declined from -4.5 percent to -5.8 percent. In 2013, margins are projected at -6 percent.
  • Medpac recommends a 1 percent payment increase for 2014.
  • By 2014, there will be significant changes in payment policies, including incentives and reduction in DSH (disproportionate share hospital) payment.
  • Significant variation in use and spending, which does not correspond to better quality, raises flags that higher healthcare use and spending are not improving overall health and put beneficiaries at risk (both medically and financially).

In short: the numbers of Medicare beneficiaries and claims are growing; healthcare organizations are increasingly losing money on Medicare; payment increases certainly will not keep pace with declining margins; and Medicare policies will continue to incentivize quality and push providers to assume more risk.

But the report also reveals that some healthcare organizations—referred to as “relatively efficient”—are making money from Medicare with an average 2 percent margin.

How do you become one of these organizations? And how do you target and counter Medicare trends that impact your business?

How and Enterprise Data Warehouse Helps Healthcare Organizations Tackle Medicare Pressures

The answer to this question is straightforward: establish a healthcare enterprise data warehouse (EDW). An EDW creates a foundation on which you can build an analytics strategy that enables you to identify trends in your organization that affect your Medicare reimbursement.

For example, an EDW can help health systems create an informed strategy to address the trend of movement in the Medicare market from the inpatient to outpatient venue. With an EDW, you can pinpoint where drops in inpatient care for Medicare patients have occurred. Are you seeing fewer patients in cardiovascular surgery? In orthopedics? Reviewing the volume data  will allow you to talk with physicians and develop a strategy for outpatient care. With good data in hand, you can make informed decisions that have a significant effect on capacity and throughput.

Whether you’re a health system or a physician group, one of the most important things an EDW can do is help you identify where variation exists in your organization and determine the cause. An EDW platform like Health Catalyst’s offers apps that pinpoint the areas of greatest variation. This functionality, which I described in detail in a previous commentary, is hugely beneficial to healthcare organizations. Eliminating variation and waste can raise the efficiency of your Medicare care exponentially.

It is particularly important in the context of Medicare to review your performance in mortality and readmissions. The relatively efficient hospitals cited in the Medpac report show measures of 87 percent for 30-day mortality and 95 percent for 30-day readmission as percent of national median. The cost per discharge is 90 percent of national median. An EDW platform, combined with the right analytics applications, delivers the insight and tools you need to achieve these numbers.

The examples I’ve mentioned above are just a few of the ways an EDW can help you perform as a “relatively efficient” organization. But why stop there? Why not set the bar for a truly efficient organization? The sky is the limit.

What Medicare trends are of greatest concern to your organization? What analytics approaches have you tried to better understand the effects of those trends? Let us know. Comment below. Follow Health Catalyst on twitter and find us on facebook.


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