Volume 29

#1 More Canaries in the Coal Mine As APP Folds

Physician staffing firm American Physician Partners (APP) will close operations at the end of this month, becoming the second staffing group to go bankrupt in recent months. According to Bloomberg, the shutdown will involve transitioning existing contracts to current competitors starting July 31. APP's closure follows Envision Healthcare’s bankruptcy (debt restructuring). That firm blamed the No Surprises Act (NSA) for its financial struggles. Indeed, last year a $520 million refinancing deal fell through due to investor concerns about falling reimbursement after the No Surprises Act.

So What’s the Big Deal? Healthcare services provider groups like APP and Envision will continue to face significant headwinds with declining reimbursements and increasing costs. As I said in the article linked above, we are now seeing a chorus of canaries in the coal mine. Attributing all financial losses and headwinds to the NSA misses broader reimbursement and expense concerns. Rising interest rates and labor costs, paired with declining government and non-government payer reimbursements, have placed these companies in a bind. Expect to see more problems and closures.

# 2 Death by a 1000 Cuts

The Biden administration has proposed a physician fee schedule for 2024 that has doctors very concerned since it includes a significant 3.34% decrease in its conversion factor. According to a press release by the Centers for Medicare and Medicaid Services (CMS), the proposed rule would result in a 1.25% decrease in overall payments compared to 2023. CMS has set the conversion factor at $32.75, representing a $1.14 reduction from the previous year. The conversion factor plays a crucial role in CMS's calculation of payouts for physicians in Medicare since it determines the value assigned to the relative value unit. CMS also indicated that while primary care and certain services may receive pay hikes under its proposal, achieving budget neutrality would necessitate cuts in other areas.

So What’s the Big Deal? As per usual, due to budget neutrality rules, what CMS giveth, CMS taketh away. And once again, the physician fee schedule will take a haircut. When paired with rising costs to manage practices and declining private payer reimbursement, the financial status of many physician practices and practice management groups will become more precarious. I expect to see other practice management groups go through similar challenges with liquidation, bankruptcy, and debt restructuring activities.

#3 Outsourcing Revenue Cycle Management

According to a KLAS report, ambulatory provider organizations are turning to outsourcing for their revenue cycle management services due to challenges arising from changing payer requirements and workforce shortages. Respondents from these clinics expressed concerns about recent alterations in payer requirements, which have led to confusion and increased workload. The list of challenges includes extended accounts receivable (A/R) days, an uptick in denials, and considerable time spent on processing appeals and seeking guidance from payers regarding coverage policies.

So What’s The Big Deal? As payers evolve their reimbursement processes, providers encounter complexities that affect their financial operations and increase administrative burdens. The reported rise in A/R days, denials, and appeal processing time underscores the urgency for efficient revenue cycle management solutions. Outsourcing revenue cycle management services can be a viable strategy for healthcare executives to navigate these challenges. By leveraging the expertise and resources of specialized service providers, healthcare organizations can enhance their revenue collection processes, streamline operations, and achieve improved financial performance. In addition, outsourcing can alleviate the strain on in-house teams, allowing them to focus on delivering quality patient care.

#4 New Guidelines for Mergers

Proposed updates to U.S. merger guidelines by federal antitrust agencies have caught the attention of antitrust experts (especially in healthcare), who see these revisions as empowering regulators to more effectively tackle consolidation in the healthcare industry. The revised guidelines, presented by the Federal Trade Commission (FTC) and Department of Justice, introduce new dimensions that could enable regulators to examine vertical and cross-market deals more closely. The anticipated impact on merger activity is expected to be significant, with a chilling effect in the short term. Legal experts caution that corporations will closely monitor how the challenges associated with mergers and acquisitions play out in the court system before making further moves.

So What’s The Big Deal? The proposed updates to U.S. merger guidelines signal a heightened focus on addressing consolidation within healthcare. As regulators gain enhanced tools to assess vertical and cross-market deals, healthcare executives should be prepared for increased scrutiny and potential regulatory challenges when considering mergers and acquisitions. Healthcare organizations contemplating consolidation should be cautious and conduct thorough assessments of potential impacts and risks.

#5 The FTC Turns Its Eyes to PBMs

The FTC was busy this past month. In addition to the merger rules, it voted to release a statement advising against the use of outdated advocacy statements and studies concerning pharmacy benefit managers (PBMs) in the current market scenario. This move comes as a response to PBMs' continued reliance on older FTC advocacy materials that opposed mandatory transparency and disclosure requirements for PBMs. The statement cautions against relying on the FTC's prior conclusions, especially in light of the ongoing study of the PBM industry by the FTC that aims to gain insights into the industry’s practices and operations.

So What’s the Big Deal? The FTC's decision to issue this statement highlights the growing concern that vertical integration between payers, pharmacies, and PBMs may be anti-competitive. Vertical integration has been the mechanism by which many PBMs and insurers have gained control over the care continuum for patients. While the FTC previously found requiring transparency with PBMs could be viewed as anti-competitive, that no longer appears to be the case. (Transparency, after all, should promote competition.) As the healthcare landscape evolves, it is essential to acknowledge that previous conclusions may not accurately represent the current market realities and practices within the PBM industry.

#6 HIPAA Violations with Data Tracking

More from the FTC: With the U.S. Department of Health and Human Services (HHS), the FTC issued a warning letter to 130 health systems and telehealth providers that raised concerns about the privacy risks associated with third-party tracking technology. The letter specifically highlighted the possible usage of Meta/Facebook and Google Analytics tracking technologies by these providers. The agencies emphasized that using such technologies could potentially lead to violations of the Health Insurance Portability and Accountability Act of 1996 (HIPAA) and the FTC Health Breach Notification Rule. HHS and the FTC urged healthcare organizations to exercise utmost caution when using these technologies and to ensure personal health information is not being disclosed in an unauthorized manner.

So What’s The Big Deal? This warning reflects the growing importance of data privacy and security in the healthcare industry, particularly when incorporating third-party tracking technologies. As the healthcare landscape continues to integrate digital solutions, executives should take proactive steps to safeguard patient information and ensure compliance with privacy laws. Conducting thorough assessments of third-party vendors, their data collection practices, and their adherence to privacy standards can mitigate potential privacy risks. Implementing robust data protection measures and providing proper training to staff regarding the appropriate use of tracking technologies will also help maintain patient trust and reduce the risk of data breaches.

#7 Building a Pandemic Response for the Future

While COVID may be “over” in the minds of most, the Senate Health, Education, Labor, and Pensions (HELP) Committee has voted 17-3 to advance pandemic preparedness legislation for a full Senate vote. The bill includes crucial provisions that will enhance the national Personal Protective Equipment (PPE) stockpile and drug supply readiness. The House Energy and Commerce Committee also has voted to move its version of this bill to the House floor. Notably, the House version lacks any provisions to address drug shortages, so it is different from the Senate's version.

So What’s the Big Deal? We’ve been there, done that, and didn’t have the requisite PPE. Frankly, none of us want to repeat another pandemic without the necessary personal protective equipment. While this legislation is a good first step to protect us in the event of another pandemic, there are some significant gaps in the proposed legislation – lack of drug stockpile provisions and medical liability protections. While the legislative sausage making is far from over, there does appear to be bicameral and bipartisan agreement that something will get passed.

#8 Teladoc Expands AI Use for Documentation

Teladoc Health is strengthening its collaboration with Microsoft so it can incorporate artificial intelligence (AI) tools for clinical documentation into its telehealth platform tailored for hospitals and health systems. This expansion involves the integration of Microsoft Azure's OpenAI Service and Cognitive Services, along with Microsoft-owned Nuance's Dragon Ambient eXperience, into Teladoc's Solo platform. This move will give physicians access to automatic transcription of clinical notes during virtual patient exams. It also will streamline the documentation process.

So What’s The Big Deal? The collaboration between Teladoc Health and Microsoft marks a significant step forward in leveraging AI technology to enhance telehealth services for hospitals and health systems. By integrating AI-powered clinical documentation tools into their platform, Teladoc aims to simplify the workflow for physicians during virtual patient exams, allowing them to focus more on patient care rather than manual note-taking. The utilization of GPT-4 in DAX Express also shows the potential for AI language models to streamline medical scribing processes since it could save time and resources for healthcare providers.

#9 Generative AI Is Coming. Plan Accordingly.

According to a new report by McKinsey, generative artificial intelligence (AI) holds significant potential in the healthcare industry by leveraging the wealth of unstructured data to ease the provider documentation burden and enhance patient-health plan relationships. The report highlights various applications of generative AI, such as helping payers swiftly access benefits information for their members and assisting call center workers in managing conversations related to claims denials. For providers, AI can facilitate the conversion of patient interactions into clinical notes, generate discharge summaries, and address administrative queries within health systems. But to be clear: the report does urge healthcare leaders to proactively plan and mitigate risks associated with implementing generative AI. Data fidelity and accuracy are paramount. Executives must assess the quality of their AI tech stacks and address potential issues like bias and privacy concerns.

So What’s The Big Deal? McKinsey rightly underscores the importance of careful planning and risk management. Ensuring data fidelity and accuracy will help avoid potential pitfalls such as bias and privacy concerns. As healthcare executives explore the adoption of generative AI, they should remain vigilant in assessing their tech infrastructure and implementing robust measures to safeguard data integrity and patient privacy. A thoughtful and responsible approach to integrating generative AI can unlock significant benefits for the industry, enhancing care delivery and outcomes.

#10 Millions Lose Medicaid

According to the Kaiser Family Foundation, more than 3 million individuals have experienced Medicaid disenrollment. Experts have raised concerns that more than half of those affected lost coverage due to "procedural" reasons, primarily attributed to issues related to proper paperwork submission.

So What’s The Big Deal? This report highlights a concerning trend in Medicaid disenrollments that has affected a substantial number of beneficiaries across multiple states. The 40% disenrollment rate for individuals with completed renewals signals potential challenges in the renewal process, raising questions about access to timely information and the renewal application process. Understanding the reasons behind these disenrollments is crucial for healthcare executives to identify areas that require improvement and ensure continuity of care for vulnerable populations. As more beneficiaries lose health insurance, there are significant concerns about access to care for these patients. The lack of health insurance access also could result in lower reimbursement rates for clinicians.

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Adam Brown