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In the News: August 30–September 6

Long-Term Acute Care Hospitals Under Siege as Post-Acute Care Grows

A recent Modern Healthcare article highlights the latest study from the National Bureau of Economic Research that suggests the Centers for Medicare and Medicaid Services (CMS) reduce payment for long-term acute care hospitals (LTACHs). According to the study, skilled nursing facilities, which receive significantly lower payments from CMS than LTACHs, have essentially the same outcomes as LTACHs in mortality and length of stay. Given this finding, the study’s authors suggest cutting CMS payments to LTACHs to lower out-of-pocket costs for patients and save approximately $4.6 billion in taxpayer money.

While CMS has taken steps to reduce the spending growth of LTACHs in recent years, the economists in this study suggest ending LTACHs altogether with this reduction in payment, especially since it is documented that LTACHs are primarily for-profit and have stated profit margins ranging from 16% to 29% in the past. The American Hospital Association has disagreed with the study’s recommendation, arguing that it does not take into consideration the 2015 law changing how LTACHs were paid and overlooks the necessary role LTACHs play in health care.

Post-acute care (PAC) is becoming increasingly important, as it is projected to have double-digit growth over the next 10 years. Sg2 believes that as PAC volumes shift to lower cost sites, it is imperative for health systems to overcome these complications to ensure proper postdischarge placement for patients. To learn more about how to plan for PAC in this time of transformation, read the recent Sg2 publication Post-Acute Care: Planning Ahead of the Continuing Care Curve.


US Government and Tech Companies Work to Expand Telehealth Access in Rural Areas

A recent article published in the Health Tech Magazine discusses the potential of telehealth in providing access to primary care providers and specialists within rural communities. A significant barrier in ensuring the availability of telehealth in rural areas is the absence of high-speed broadband connection. To address this issue, the Federal Communications Commission recently approved $100 million for the Connected Care Pilot Program—an initiative intended to enhance telemedicine access and improve telecommunication infrastructure for rural communities.

In addition to efforts by the US government, technology companies are also making efforts toward improving access to telemedicine. For example, Microsoft is committed to have 23.4 million rural Americans connected by the year 2022 as part of a rural broadband strategy.

With a projected 9% growth in outpatient demand in rural markets in the next 10 years—mainly due to a higher percentage of older patients requiring chronic care management—Sg2 believes health systems have an opportunity to provide virtual access options to meet this demand. To learn strategies on how health systems can connect virtually with rural consumers, see the Sg2 Expert Insight Help Rural Consumers and Fuel Downstream Growth With 4 Virtual Options.


Limitations on Hospital Cost Cutting as Revenue Continues to Decline

A recent Modern Healthcare article describes the financial landscape of the health care industry and the subsequent challenges facing not-for-profit hospitals. Despite the uptick in merger and acquisition activity across the health care sector, many hospitals are reporting operating losses stemming from annual revenue growth rates declining faster than annual expense growth.

To buffer the ongoing revenue losses from their traditional business, health systems have invested in alternative areas, including expanding managed care plans and investing more in direct contracting opportunities. In a financial landscape where Medicaid payments are becoming a larger percentage of gross revenue and health systems are hitting cost-cutting ceilings, health systems must continually look to nontraditional revenue sources.

As the health care industry continues to face mounting financial pressures, Sg2 encourages health systems to critically examine their market to understand potential short- and long-term growth opportunities. To learn more about how health systems can find opportunities in short-term revenue growth, read the Sg2 Letter Short-Term Revenue—Your Game to Win.

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As of February 11, 2016, Vizient, Inc. has completed its purchase of MedAssets Sg2 and spend and clinical resource management segments from Pamplona Capital Management, LLC. MedAssets revenue cycle business will continue to operate as a wholly-owned subsidiary of Pamplona Capital Management LLP.

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