What’s Trending: Last Friday in July

Opening celebration at the Olympics is catching most of the buzz today and the Dog Days of Summer are definitely full-on.  Still too much heat and not enough rain for my pleasure but August is around the corner and hopefully, some cooler weather.  If nothing else, I can rely on the Olympics to alter my mood (my heat malaise).

Here’s what I’m trending and of course, my weekly Fall Out issues, in case anyone missed these events.

  • Medicaid: I’m still trending Medicaid and will be for a while.  The news this week was a bit anticlimactic in terms of the revised CBO score, etc.  More interesting was the Volcker report on the state budget crises nationwide (see my post from last Friday on this issue at http://wp.me/ptUlY-bX ).  The Volcker report names the two ton elephant in the statehouse and accurately, conveys the true issues with Medicaid.  Regardless of the CBO score and the modest projected decrease in federal spending, Medicaid expansion for the states deepens the existing wound.  I’m likewise watching carefully, the MCOs and their race for managed Medicaid contracts as state to state, relinquishing programmatic control to one or more private organizations is the trend.  Unfortunately, even a privatization compromise as many states are attempting, doesn’t resolve the structural deficit and funding problems that are Medicaid today.  I still can’t figure out why neither party but especially Republicans now, aren’t jumping on the clear need to totally revamp Medicaid.
  • The Economy: Like last week, this trend bears continued watch.  Second quarter GDP numbers came out today and while not indicative of a depression, the results show stagnation; 1.5% growth.  At this level, there is no job creation on the horizon.  Consumer spending dipped dramatically leading to the meager growth numbers.  Bottom line: Consumers don’t like the picture, housing numbers are weak, job growth is non-existent and the net to healthcare providers is continued constraint on volume and increases in Medicaid enrollment.  This outlook is a state’s worst scenario as without revenue increases via taxes (income, sales, property primarily), rising plus increasing entitlement demand drags local and regional recovery prospects.  National recovery won’t really begin to take shape until local and regional recovery occurs.  The watch now is whether the Fed opts for additional stimulus in the form of another round of quantitative easing.  Clearly, maintenance of low-interest rates is insufficient to bolster consumer spending or commercial lending, not that there is a big demand for commercial credit at the moment.
  • Mergers and Acquisitions: As a bit of clarity on the ACA’s future arrives, the M&A activity is picking-up and the combinations are interesting.  Much of what I see in the hospital industry is the need to increase efficiency, tighten market presence, and to try to find synergies.  The deals are not really economic yet; primarily strategic.  As states continue to move toward privatization of their Medicaid programs, insurers that are players in the managed Medicaid arena are consolidating looking to build greater network dominance and lever infrastructure investments.  Within existing managed Medicaid programs, it will be interesting to see provider and political reactions to Wellpoint’s acquisition of Amerigroup.  On the post acute side, values have stabilized and thus, cap rates have recovered a bit.  Seniors housing is still the most attractive play, particularly rental projects and Assisted Livings.  CCRCs are yet to arrive to the party with any real volume but I suspect, the next year or two will see more CCRC activity.  My biggest watch on this trend is PBMs and pharmacies as ACO development continues to take shape and networks begin to get operating, consolidation to again, take on size and gain efficiency should occur among pharmacies and PBMs.  Activity here is bound to occur similar to what we recently saw regarding DaVita and HealthPartners; a strategic and synergistic merger to take advantage of the evolving ACO landscape.  Regardless of whether the ACA changes via repeal or other legislative action post November elections, the ACO model will remain viable in some form or fashion.
  • Medicare Rate Season: This is the time of the year where DHHS/CMS announces October 1 rate changes for providers (2013 FY rates).  I’m expecting only modest increases and so far, from information already available, that’s what is occurring.  The provider segment I am most interested in is skilled nursing.  Consensus is in the 1.5% to 2% range; a respite after last year’s rebasing.  Of more interest are the comments made in the actual notice; an opportunity to gain some go-forward information or future expectation.

Here are my Fall Outs for the week (issues worth noting but not worthy of continued watch);

  • Medicare Hospice Rates are going up in 2013 by .05% on average for urban hospices and .04% for rural hospices.  The rates are a function of an increase in the Labor Index minus a productivity factor and minus the continuation of the BNAF phase out (15% for 2013).  2013 begins the requirement for hospices to report quality data on pain and to expand their diagnoses reporting.  Hospices that fail to participate in and provide quality data will see a 2% reduction in their payment rates.
  • Medicare Inpatient and Free-Standing Rehab Rates: Free standing and acute based, inpatient rehab facilities will see a 2.1% increase in Medicare rates effective October 1.  In addition, new reporting requirements on two quality indicators will go into effect – UTIs related to catheter use and new or worsening pressure ulcer/sores.  Pressure data is required on Medicare beneficiaries only while catheter related UTI data is required on all patients, regardless of payer source.
  • Doc Payment Fix Bill in the House: Rep. Mike Burgess from Texas introduced legislation that would extend the current physician fee schedule “patch” in place through 2013, providing Congress with additional time to craft a permanent solution. Without some kind of extension or fix, rates for physicians and any other provider payments tied to the physician fee schedule and calculated via the SGR (Sustainable Growth Rate formula) will decrease by 30% effective January 1.  Hate to say it but this bill is going nowhere.

Leave a Comment