Higher staffing costs drove Cleveland Clinic’s Q2 loss

 

• The Cleveland Clinic reported a second-quarter operating loss of $183.5 million, compared to income of $339.5 million in the prior-year period, mainly due to sharp growth in labor expenses to address staffing shortages, the hospital system said in its financial documents. Its operating margin fell to negative 5.9%, from a margin of 10.5% a year ago.
• Costs for salaries, wages, benefits, overtime pay and greater use of agency nurses and other temporary personnel caused a 15.1% jump in the system’s second-quarter operating expenses from a year ago, the Cleveland Clinic said.
• Supplies, pharmaceuticals and other non-labor expenses have also grown costlier, while a soft recovery in volumes after patients postponed nonessential care during the omicron surge at the start of the year also dragged on operations. Cleveland Clinic said its revenues fell 2.7% to $3.13 billion in the second quarter.

Rapidly rising labor costs have become a familiar culprit behind the steep drops in operating results across the hospital sector in the first half of the year. One after another, systems including Advocate Aurora Health, Mayo Clinic, Intermountain Healthcare, Sutter Health, Kaiser Permanente, Providence and Mass General Brigham have reported weaker results in the second quarter.

With staffing expenses still marching higher and federal relief no longer available to help offset declining income, hospitals nationwide are reporting some of the worst operating margins since the COVID-19 pandemic began, advisory firm Kaufman Hall said in a report out this week. Fitch Ratings, in revising its outlook for the hospital sector earlier this month to “deteriorating,” said the biggest impediment has been labor.

The Cleveland Clinic reported that its elevated expenses in the second quarter were primarily due to higher personnel costs. Salaries, wages and benefits rose 15.8% from a year ago, with salaries alone up 16.7%, lifted by higher overtime, premium pay and agency costs. The system boosted its number of full-time equivalent employees by 4.4%, while annual salary adjustments averaged 3%.

Supply expenses increased 11.5% in the second quarter, and pharmaceutical costs rose 11.7%, reflecting both inflation and greater use in outpatient areas including retail and specialty pharmacy. Purchased services and other fees increased 26.2%, mainly related to information technology initiatives.

The system’s non-operating losses were $603.5 million in the second quarter, mainly due to lower investment returns, reversing a non-operating gain of $564.9 million in the year-ago period.

Net patient service revenue rose 1.1%, benefiting from rate increases on managed care contracts that became effective this year. Acute admissions decreased 4.1%, total surgical cases increased 1.9% and outpatient evaluation and management visits increased 2.9%.

https://www.healthcaredive.com/news/cleveland-clinic-q2-labor-costs/630884/

Ambulatory, hospitals, physician offices led August healthcare job gains

 

• The healthcare sector added 48,000 jobs in August, according to preliminary data out Friday from the Bureau of Labor Statistics.
• Ambulatory services added about 22,000 jobs. Offices of physicians and hospitals also saw notable gains, with both adding about 15,000 jobs during the month.
• Employment in the sector is now down 0.2%, or 37,000 jobs, from February 2020, right before the pandemic began in the U.S.

Over the course of this year, the healthcare sector has added 412,000 jobs — though it still hasn’t fully recovered all jobs that were lost at the start of the COVID-19 pandemic, according to the BLS.

The industry added 48,000 jobs in August, compared to about 70,000 jobs in July and about 60,000 jobs in June.

While staffing challenges have strapped providers throughout the pandemic amid burnout, recruitment and retention issues, ambulatory services led the pack with job gains in August, followed by hospitals and offices of physicians.

Hospitals added 15,000 jobs in August after adding about 14,000 jobs in July and about 19,000 jobs in June, according to BLS data.

Offices of physicians also added 15,000 jobs in August, after adding about 12,000 jobs in July and about 8,000 jobs in June.

The only sector within healthcare to lose jobs in August was home health services, which lost about 1,800 jobs.

Nursing and residential care facilities added about 12,000 jobs during the month.

https://www.healthcaredive.com/news/healthcare-job-gains-BLS-jobs-report-august/631136/

New rural hospital designation still needs tweaks and more flexibility, stakeholders say

 To staunch the losses of rural hospital closures that endanger access to care for millions, federal regulators are hoping some facilities opt in to a new payment model, but providers say they want more flexibilities and clarity before making the pivot. 

Rural stakeholders say they’re excited about the new model that provides needed flexibilities for rural operators to stay open, but say more tweaks are needed to address the realities of providing care in rural America. 

The new rule “maybe gets halfway there,” Jennifer Findley, vice president of education and special projects at the Kansas Hospital Association, told Healthcare Dive. “It’s not as much as we were hoping for but it does give some more flexibility than what you have today.”

The need for a new model

There have been growing concerns about rural hospital closures over the past decade. 

About 138 rural hospitals closed between 2010 and October 2021, many of which are located in the South, according to a brief from the National Advisory Committee on Rural Health and Human Services.   

Those closures cut off access to care for many rural Americans, who tend to be older, sicker and poorer than their urban counterparts. Overall, about 20% of Americans live in a rural area, according to research funded by the Federal Office of Rural Health Policy. 

In many rural communities, there simply isn’t enough volume to financially support a traditional hospital with inpatient services, which has fueled cries for more flexibility. 

The intent behind the new designation is to relax some of the regulatory burdens faced by rural hospitals, like the requirement that hospitals must provide inpatient services in order to receive Medicare payments, a critical funding stream many providers couldn’t forgo.

That’s a pain point for many rural hospitals that have very low patient volumes. 

“We have 40-some hospitals who on any given day have like two patients,” Findley said. Kansas is expected to have the most facilities convert to the new designation, according to a prior report from the North Carolina Rural Health Research Program.

Communities need other options than full-service hospitals to ensure continued access to services, the MedPAC, the group that advises Congress on Medicare policy, has said.

MedPAC urged Congress in 2018 to allow rural facilities to operate as stand-alone emergency departments, omitting inpatient services altogether, after finding that about 130 rural hospitals averaged less than one admission per day across all payers in 2016.

Under the new designation, hospitals will have to end inpatient services, but must maintain emergency services 24 hours per day, seven days a week.

While that is a welcome change, Kansas stakeholders are concerned that other elements of the proposed rule are still too prescriptive or unclear. 

The need for flexibility

Rural operators want to be able to use existing space and staff to provide the services their communities need, stakeholders told Healthcare Dive.  

Findley says rural operators want to avoid rigid rules around the use of space and staff in order to be nimble and efficient with resources.

One area of frustration in the rule is how skilled-nursing beds can be used. Under the proposed model, hospitals would have to set up a separate operation that can’t be folded into the rural hospital or included in the new payment model.

It again raises questions about the continued viability of this type of service due to low patient volumes. 

There are questions around whether the facilities can continue in the 340B program and if rural health clinics can continue to use current payment methodologies. 

Transportation is another area of concern because many rural areas rely on voluntary emergency medical services. Findley and her group had hoped additional funding would be available for transportation, but it wasn’t included in the proposed rule.

Altering the payment model pivot

Rural operators are now modeling whether they can afford to switch to the new model.

Under the proposed rule, hospitals will be paid under the outpatient payment system and will get to tack on an additional 5% for the care they provide. Plus, they’ll receive a monthly facility payment, which is higher than anticipated, Carrie Cochran-McClain, chief policy officer of the National Rural Health Association, told Healthcare Dive.

That will likely make it more financially feasible for some, Cochran-McClain said. Still, it isn’t intended for every provider.    

“It’s not in any way, intended to be a panacea for all rural hospitals and all rural hospitals’ financial concerns,” Cochran-McClain said. “Most of the facilities that make this transition are going to be ones that are really struggling financially,”

Almost 70 hospitals are expected to convert to the new designation and almost half are concentrated in four states: Kansas, Texas, Nebraska and Oklahoma, according to a prior analysis. 

Hospitals will be able to start receiving payments next year under the new designation, but states must first pass legislation to allow for the operation of these new hospitals, a potential hurdle for some operators.

Federal regulators have received more than 3,500 comments on the proposed rule, which were due this week.  

“I still think it’s a really exciting opportunity. I think we just might need to make a few tweaks to make it even better,” Findley said.  

https://www.healthcaredive.com/news/new-rural-hospital-designation-still-needs-some-tweaks-and-more-flexibility/630062/

MA plans to CMS: Controversial audit rule could wreck popular program

 The Biden administration needs to back off a massive overhaul to risk adjustment audits for Medicare Advantage (MA) plans, according to insurers that say the proposal unfairly targets prior audits dating back a decade. 

Insurer advocacy groups and providers submitted comments to a request for information on how to improve the MA program. Insurers turned their ire on changes to Risk Adjustment Data Validation (RADV) audits, while providers sought to alleviate prior authorization burdens. 

“The RADV proposal undermines confidence in CMS’ willingness to be a fair partner with the private sector,” insurance industry group AHIP wrote in comments (PDF), which were due Wednesday. “It injects uncertainty and risk into the system.”

The Centers for Medicare & Medicaid Services (CMS) proposed a rule in 2018 that changed how RADV audits are conducted. Plans are audited to ensure the diagnosis data match what was submitted by the plan, and any discrepancy could result in the plan repaying Medicare. 

Currently, CMS examines a sample of enrollees and extrapolates from the results to the entire plan. The agency, however, includes a “fee-for-service adjuster” that sets a permissible level of payment errors based on a similar rate in fee-for-service. This adjuster limits the amount that CMS can recoup for overpayments, according to consulting firm Avalere.

However, the 2018 rule would get rid of this “fee-for-service” adjuster, arguing that errors in fee-for-service claims data don’t necessarily have any systemic effect on MA payments, Avalere added.

CMS has so far declined to finalize the rule but has said it aims to release a final RADV audit rule later this fall. AHIP and other groups said that any final rule needs to stay as far away from the 2018 proposal as possible. 

“Stakeholders have raised significant concerns that the rule as proposed has potential to create disruption for plans and providers, which may, in turn, affect premiums and benefits for beneficiaries,” said the MA advocacy group Better Medicare Alliance in comments. 

AHIP was also concerned that the rule would apply retroactively to “hundreds of RADV audits, some that date back to plan year 2011 and have data more than a decade old,” it said. “Retroactive rulemaking is unfair, inappropriate and legally impermissible.”

The MA program has received scrutiny from lawmakers and critics in recent months over the impact of coding practices on government spending. 

An analysis from the Medicare Payment Advisory Commission, for example, charges that plans have relied on chart reviews and health risk assessments to increase diagnosis codes to inflate risk scores and get higher quality bonuses.

AHIP said it is wrong to compare the appropriateness of MA coding to traditional Medicare because “the MA payment system promotes more accurate coding to support coordinated and integrated care. While diagnosis codes submitted by MA plans for their enrollees’ medical conditions are used by CMS to determine enrollee risk scores, and comprehensive coding of enrollee health conditions is important for quality of care in MA, coding is often considered less important by providers in the original Medicare program.”

An area that had some agreement between payers and providers is to improve on prior authorization in a way that eases physician burden. 

“Requiring electronic prior authorization will simplify the process and reduce patient and provider burden,” the Better Medicare Alliance wrote. “Moreover, increasing transparency around prior authorization processes can help policymakers and stakeholders better understand the process.”

The Medical Group Management Association (MGMA) also wrote in comments that CMS needs to expand a previous rule that required electronic prior authorization for some plans but not for MA. 

“By limiting the application of the previous rule to a small subset of health plans, MGMA believed it would do little to alleviate prior authorization burden,” the group’s comments said. “Preferably, the rule should cover MA plans and modify the original timeframe for which plans must respond.”

CMS had proposed health plans must respond to groups within 72 hours of making an urgent prior authorization request and seven days for a standard request. 

Both of those time frames are “entirely too long,” MGMA said.

https://www.fiercehealthcare.com/payers/ma-plans-cms-controversial-audit-rule-could-wreck-popular-program-if-finalized

MedPAC explores standardized plan options in Medicare Advantage

 Affordable Care Act (ACA) plans may not be the only ones to introduce standardized options, as a key advisory panel wants to apply a similar strategy to the popular Medicare Advantage (MA) program. 

The Medicare Payment Advisory Commission (MedPAC), which advises Congress on Medicare issues, is researching how standardized benefit options would work for MA. The goal is to include the findings in an annual report to Congress next year and explore how standardization could help simplify choice for seniors. 

“I think there’s some reasonable evidence about the challenges of choice,” said Michael Chernew, the commission chair, during the panel’s Thursday meeting.

MA plans are required to offer services under Medicare Parts A and B, but there are some differences based on cost-sharing and other supplemental benefit packages. The MA program has gained in popularity in recent years and with it an abundance of plan choices for seniors.

Commission staff gave an example of how standardized benefit packages work by breaking out three options based on how generous they were for cost-sharing. What types of plans would be subject to the standard package would have to be decided and could be vital.

“This requirement would aim to ensure a minimum level of access to standardized plans, but its impact could be limited if the plans that insurers are required to offer are unpopular,” said MedPAC staff member Eric Rollins.

Letting insurers offer both nonstandardized and the standard options could also help reduce any disruption for existing enrollees but could reduce any gains from standardization, he added. Only offering the standardized benefit plans, on the other hand, could cause too much disruption.

There could be a benefit to insurers, though, by avoiding paying a broker that guides seniors through different plan options. 

“There’s a huge financial incentive for them,” said commission member Lynn Barr.

However, some commission members were concerned about the impact standardization could have on plan innovation. 

“I think it is very difficult to get innovation through consensus and even worse consensus that has to go through a bureaucratic process,” said commission member Gregory Poulsen. “We lose the ability to have laboratories for innovation.”

The research comes as MA plans are facing scrutiny over their marketing practices. Sen. Ron Wyden, D-Oregon, launched a probe last month on aggressive marketing tools used to steer seniors to plans.

ACA plans are going to have standardized plan options starting next year, and MediGap plans already have standard options. However, the standardization effort for the ACA exchanges has drawn significant opposition from insurers, which say the new rules could stifle innovation.

https://www.fiercehealthcare.com/payers/medpac-explores-standardized-plan-options-medicare-advantage

Use of Lilly, Regeneron COVID-19 antibodies 'widespread' after FDA ban

 Staring down waning efficacy in the face of the coronavirus’s omicron variant, the FDA early this year put the kibosh on a pair of monoclonal antibody (mAb) combo therapies from Eli Lilly and Regeneron. Even still, the meds' use remained “widespread” in the U.S. this past winter, potentially costing the nation tens of millions for treatments that were unlikely to offer much benefit to patients.

Use of Eli Lilly’s bamlanivimab-etesevimab and Regeneron’s casirivimab-imdevimab peaked during the week of Dec. 22, 2021, when 91,036 total doses were reported, according to a new JAMA Network study. While mAb use “gradually declined” after FDA deauthorization and dropped throughout the remainder of the study period—which ran until June 29—Lilly's and Regeneron’s antibody combos continued to be administered after FDA deauthorization on Jan. 24, the study authors note.

Despite the FDA revising Lilly's and Regeneron’s authorizations, however, hospitals and health systems administered more than 158,000 doses of these mAbs in early 2022, the JAMA study contends. Given that Medicare mAb payments range from $450 to $750 per dose, spending on these deauthorized treatments likely eclipsed $71 million, the study continues.

“Whether deauthorized treatments will be covered by payers and whether the FDA will take regulatory action against entities violating its guidance remains unknown,” the study authors continued.

As for why use of Lilly's and Regeneron’s banned antibodies remained so ubiquitous, the JAMA study pinned the blame—in part—on conflicting state government guidance and lack of hospital awareness of the deauthorization.

The study authors note that “although the FDA announcements clearly stated that these mAbs were no longer authorized for use,” it didn’t fully revoke the meds’ emergency nods “because of the possibility that future COVID-19 variants could retain susceptibility.” This could have in turn led to “misinterpretation” by healthcare professionals.

Overall, there was “wide variability in mAb administration by state,” the study found. New York and Florida, for instance, were the biggest users, accounting for 20% and 24% of mAb administration for the period, respectively. Wisconsin and Arizona were next in line but handed out less that half of New York's total, whiles states like Vermont and New Hampshire logged no prescriptions. 

Looking at the variability in a different way by assessing use as a percentage of each state's remaining supply, 15 states administered up to 10% of their supply while 11 states doled out more than 50% of their leftover antibody stocks.

JAMA ran its study from Oct. 27, 2021, to June 29, 2022, collecting data from the U.S. Department of Health and Human Services and state hospitals. All U.S. hospitals and health systems must report the number of therapeutic mAb courses administered in the prior week as well as the amount currently on hand, the study authors explained.

All is not lost for Lilly on the COVID-19 front, meanwhile. Lilly nabbed authorization for its omicron-busting antibody bebtelovimab back in February, and it recently laid plans to deploy the drug on the commercial market.

Regeneron, for its part, recently axed a clutch of trials weighing its antibody combo, dubbed REGEN-COV, across a range of patients and clinical stages. The company terminated the trials, which ranged from early to late stage, because of “[e]merging SARS-CoV-2 variants impacting susceptibility to study drug,” recent updates on ClinicalTrials.gov state.

https://www.fiercepharma.com/pharma/use-lilly-regeneron-covid-19-antibodies-widespread-after-fda-ban-potentially-costing-us-more

FTC appeals ruling in case challenging Illumina's acquisition of GRAIL

 The Federal Trade Commission (FTC) on Friday filed a notice of appeal in its case challenging Illumina's multibillion-dollar acquisition of cancer detection company GRAIL.

Ticker	Security	Last	Change	Change %
ILMN	ILLUMINA INC.	196.07	-4.55	-2.27%
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The notice of appeal, published on the FTC website, comes a day after an administrative law judge ruled in the DNA sequencing firm's favor. Illumina said Thursday that the judge "rejected the FTC's position that the deal would adversely affect competition in a putative market for multi-cancer early detection (MCED) tests."

Illumina announced in September 2020 that it would acquire GRAIL, a subsidiary it had previously spun off. Roughly a year later, the company completed the $7.1-billion deal amid pending regulatory challenges from the FTC and the European Commission. The FTC first sought to challenge the acquisition in late March 2021.

FOX Business reached out to Illumina for comment on the FTC's move to appeal. In a press release Thursday, the DNA sequencing firm's general counsel, Charles Dadswell, said the GRAIL acquisition is "procompetitive, will advance innovation, lower healthcare costs and save lives."

https://www.foxbusiness.com/markets/ftc-appeals-ruling-case-challenging-illumina-acquisition-grail