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Healthcare cost-cutting trend ties money to results

By Mary Holloway Richard, Of Counsel

healthcare-shutterstock-02The trend toward decreasing costs in healthcare has seized upon value-based care – tying physician compensation to performance and outcome measures. These measures are also being used in contract negotiations with third party payors and healthcare plans.

Counsel for institutional and non-institutional providers are at the table providing advice about a number of important contractual terms and their ramifications including appropriate and measurable metrics for calculating bonuses and penalties and, if shared savings are at issue, how they should be split. For those who have been involved in negotiations of traditional fee-for-service contracts, this will seem like a fundamental change. It may also seem like a change that narrows the potential for disputes.

However, numerous issues will continue to be important to providers. For example:

  • Are the metrics used as incentives or penalties?
  • Are the selected benchmarks easily measurable and attainable?
  • Do they raise regulatory issues such as potentially impacting volume in an unacceptable way or spawn any other results that could be construed to be anticompetitive?

While these questions have yet to be answered by Oklahoma courts, we can look to decisions from other states and consider ourselves forewarned as to the nuances and potential pitfalls in negotiating and drafting these terms.

2015: The future for hospitals

By Mary Holloway Richard, Of Counsel

doctorIn a recent article in Modern Healthcare, Beth Kutscher identifies a rosier outlook for propriety hospitals than for not-for-profit facilities.

Some of those proprietaries are investor-owned chains, and an important part of their secret of financial health is their access to and reliance upon greater options for marketing services, economies of scale, and other cost saving programs.

Financially positive trends have come on the wings of the Affordable Care Act’s elevated patient volumes, better payor mix and declining expenses associated with bad debts. The proprietaries are concerned with stock prices and earnings and, like a family preparing for continued hard times, they actively pursue all possible ways to decrease expenses, including refinancing higher interest debt.

In largely rural states like Oklahoma, efforts to keep community hospitals alive include shopping for buyers and affiliating with stable hospital systems. However, rural hospitals owned by proprietaries, and even hospitals owned by not-for profit systems, are being taken off the block awaiting a more attractive market.

It is true that we witnessed the acquisition by Community Health Systems, one of the largest publicly-traded companies in the country, of Health Management Associates last year. But even so, CHS may now be eschewing large acquisitions and mergers in favor of other alternatives for financial stabilization.

In healthcare as in other industries, the proprietary sector offers important motivation for the not-for-profits.