The Centers for Medicare and Medicaid Service’s (CMS) Hierarchical Condition Category (HCC) risk adjustment model calculates risk scores, which will adjust capitated payments made for aged and disabled beneficiaries enrolled in Medicare Advantage (MA) and other plans.

The CMS-HCC model design uses two risk segments with separate coefficients to reflect the cost patterns of beneficiaries.  The community model represents those who live in the community less than 90 days as opposed to an institution.  Beneficiaries residing in an institution for 90 days or more fall into the long-term care category, which incurs an additional risk adjustment.  By design, both models predict healthcare costs for beneficiaries.

The CMS-HCC risk adjustment model looks at prospective data to predetermine the cost for the next year.  CMS pays a per-member per-month fee to the payer based on the prospective years’ risk scores.  Providers must identify all chronic conditions and/or severe diagnoses their patients have in a given year to substantiate a “base year” health profile for each patient that predicts costs in the following year.

The Path to Gaining Incremental Revenue

Few providers have the resources and are proficient enough in risk adjustment modeling to mitigate all of the compliance risks that they face.  This creates a problem for providers because there are significant dollars at risk for their enterprises.  In order to reduce risks, providers either hire expert HCC auditors as an internal resource or look to outside firms who are experts at executing risk adjustment and HCC auditing.  Many companies are capable of providing this

In order to reduce risks, providers either hire expert HCC auditors as an internal resource or look to outside firms who are experts at executing risk adjustment and HCC auditing.  Many companies are capable of providing this service however; the best practice approach is to work with a company who can guide provider’s to keep up with CMS’s requirements for compliance while monitoring healthcare outcomes.

It is important to maximize revenue and increase the bottom line.  HCCs are one area that can have an immediate positive financial impact for a provider. I recommend you look into HCC coding auditing to be sure you are being reimbursed accurately.  If you have questions, I can be reached at or at 404-849-8065.


Phil C. Solomon is the publisher of Revenue Cycle News, a healthcare business information blog and serves as the Vice President of Marketing Strategy for MiraMed, a healthcare revenue cycle outsourcing company.  As an executive leader, he is responsible for creating and executing sales and marketing strategies which drive new business development and client engagement. Phil has over 25 years’ experience consulting on a broad range of healthcare initiatives for clinical and revenue cycle performance improvement.  He has worked with industry’s largest health systems developing executable strategies for revenue enhancement, expense reduction, and clinical transformation. He can be reached at


A physician’s responsibility is to provide the best possible care for sick patients.  A key for delivering quality healthcare is open communication between the physician and patient to discuss issues and develop a care plan.  Today, providing quality care is becoming more difficult due to increasing patient loads and administrative challenges.  This dilemma has become a catalyst for the growth of medical scribes (often referred to as scribes).

Scribes help physicians by documenting the patient encounter and retrieving diagnostic results, nursing notes and other information recorded in the patient’s electronic record.  The introduction of electronic health records (EHRs) has created an overload of documentation. The associated clerical responsibilities slow physicians down and take them away from one-on-one patient care.  To relieve their documentation overload, physicians have turned to scribe services for assistance.

The Rules Governing Scribes

Scribe companies operate with few requirements.  There are virtually no regulations required outside of the healthcare industry and the main bodies that regulate healthcare. The Centers for Medicare and Medicaid Services (CMS) and The Joint Commission (TJC), have no rules or guidelines that limit, endorse or prohibit the use of scribes.  TJC permits scribes to document previously determined and approved physicians’ dictation and activities but does not authorize scribes to act independently, except obtaining past family social history and a review of systems, a technique providers use to gain the patient’s medical history.  CMS does not provide official guidelines on the use of scribes and does not bar non-physician providers, such as physician assistants, nurse practitioners and clinical nurse specialists, from using scribes.

With few rules governing scribes, the value proposition for physicians is enticing; however, using scribes is not without risk.  When a physician is removed from a part of the care continuum, it opens the door to miscommunication that can negatively affect patient care.  Since the industry is minimally regulated, and with only a high school diploma required, scribes are not required to have medical backgrounds or to become certified.  That said, there is a potential for scribes to misinterpret a physician’s instructions and make documentation mistakes that would negatively affect patient care.  However, even with these risks, the industry segment has grown rapidly, and physician acceptance has been high.

The Role of a Medical Scribe

A medical scribe is a paraprofessional who specializes in charting physician-patient encounters in real time during medical examinations.  They are called clinical scribes, emergency room or emergency department scribes or just scribes.  A scribe can work on-site at a hospital or clinic or remotely from an HIPAA-secure facility.  Medical scribes who work at off-site locations are known as virtual medical scribes.

Scribes can generate referral letters for physicians, manage and sort medical documents within the EHR system, and assist with e-prescribing.  Essentially, scribes are data care managers who enable physicians, medical assistants and nurses to focus on patient intake and care.  By managing data for physicians in real time, scribes free the physician to spend more time with the patient and improve productivity.

A scribe must be trained in health information management technologies to support their work.  They follow a physician through their work day and chart patient encounters using a medical office’s EHR.  EHRs can be shared across various healthcare settings and made available through network-connected information systems or other information networks and exchanges.  They include an array of data, including demographics, medical history, medication and allergies, immunization status, laboratory test results, radiology images, vital signs and personal data, such as age, weight and billing information.

The role of a scribe entails more than shadowing a physician and capturing patient interactions. According to the American Healthcare Documentation Professional Group, scribes:

  1. Accurately and thoroughly document medical visits and procedures as they are being performed by the physician, including, but not limited, to:
  • Patient medical history and physical exam;
  • Procedures and treatments performed by healthcare professionals, including nurses and physician assistants;
  • Patient education and explanations of risks and benefits;
  • Physician-dictated diagnoses, prescriptions and instructions for patient or family members for self-care and follow-up; and
  • Referral letters as directed by the physician.
  1. Prepare referral letters as directed by the physician via dictation or summary of the medical record. Also, they ensure that letters are mailed or faxed on a daily basis to all physicians involved in a patient’s care, research contact information for referring physicians, coordinate referrals and prepare operative reports.
  2. Provide quality control oversight by spotting mistakes or inconsistencies in medical documentation. Since information documented in the medical record must be approved by a physician, scribes must ensure that all clinical data, lab or other test results and the physicians’ interpretation of the results are recorded accurately in the medical record.  Scribes must comply with specific standards that apply to the style of medical records and to the legal and ethical requirements for preparing medical documents and for keeping patient information confidential.
  3. Scribes collect, organize and catalog data for the physician quality reporting system (PQRS) and other quality improvement efforts and assist in developing and maintaining systems to track patient follow-up and compliance.

Physicians Cope with EHRs Added Administrative Tasks

In the 1980s computers became a mainstream addition to small business operations.  Physicians, typically operating as a small business, initially pushed back on the concept of using computers to help run their practices because of their cost, complexity and lengthy learning curve.  However, price compression and the creation of Windows-based, user-friendly interfaces quelled their concerns.  Small business computers became widely accepted by physicians to help them manage the vast demands of providing patient care.

During that same decade, computer systems for medical applications began evolving into fully automated EHRs.   EHRs became available to physicians to manage the clinical side of their businesses.  Like all computerized technologies, EHRs have experienced rapid transformation over the past 20 years. Improvements in the technology have greatly accelerated since the January 2009 passage of the Health Information Technology for Economic and Clinical Health Act (HITECH), a $30 billion effort to transform healthcare delivery through the widespread use of EHR technology.

For decades, physicians hoped EHRs would help them manage the overwhelming demands of practicing medicine.  Instead, for some physicians, EHRs have become more of a hindrance than a solution to the problem they set out to solve.

Today, the administrative tasks associated with EHRs are cutting into the physicians have to spend with patients. According to a time-motion study conducted by the American Medical Association (AMA) and published in the Annals of Internal Medicine (AIM), nearly half a physician’s work day is now occupied by EHR data entry.  Also, from 2011 to 2014, 54 percent of study participants said they experienced some signs of burnout, an increase of 46 percent over the three-year period. Today, the administrative and clerical burden of working with EHRs is widely recognized as a leading cause of physician burnout.

Physicians are coping with their new administrative duties, but they are not happy about it.  The demands of data capture with EHRs have become a real impairment to practicing medicine.  In 2004, only 20.8 percent of physician offices used EHRs.  As of 2015, nearly 9 in 10 (87 percent) of office-based physicians had adopted an EHR system.  The expansion of EHRs is not indicative of the satisfaction level of the physicians who use them.  A 2013 study, Factors Affecting Physician Professional Satisfaction and Their Implications for Patient Care, Health Systems, and Health Policy, published jointly in October by the AMA and RAND Corporation, found that EHRs were a major contributor to physician dissatisfaction.

The study indicated that for many physicians, the current state of EHR technology significantly worsened their professional satisfaction.  The factors associated with EHRs that were a common source of frustration included poor usability, time-consuming data entry, interference with face-to-face patient care, an inefficient and less fulfilling work environment, the inability to exchange health information and disintegration of clinical documentation.


The financial implications for the use of medical scribes in care delivery are substantial. Physician services are 21 percent of health expenditures in the U.S. and are the catalyst for the care cycle. They are highly compensated individuals who are being asked to do more with declining reimbursement.  Any change that improves physician productivity and efficiency (without impairing quality or physician or patient satisfaction) should have significant financial benefits for physicians, patients and the entire healthcare system.

EHRs enable the electronic documentation of diagnosis and treatment plans for patients.  They offer the ability to capture information that meets the requirements of meaningful use and value-based care reimbursement models.  Conversely, EHRs have added a new level of administrative burden on the physician’s shoulders that has taken a toll on physicians.  Scribes have rapidly emerged to relieve physicians of much of this administrative responsibility. Using scribes offers the opportunity to increase physician productivity and reduce job dissatisfaction and burnout.   The use of scribes could help physicians maximize the value of EHRs, improve their financial returns, and ultimately, enhance the quality of patient care.


Phil C. Solomon is the publisher of Revenue Cycle News, a healthcare business information blog and serves as the Vice President of Global Services for MiraMed, a healthcare revenue cycle outsourcing company.  As an executive leader, he is responsible for creating and executing sales and marketing strategies which drive new business development and client engagement. Phil has over 25 years’ experience consulting on a broad range of healthcare initiatives for clinical and revenue cycle performance improvement.  He has worked with industry’s largest health systems developing executable strategies for revenue enhancement, expense reduction, and clinical transformation. He can be reached at


Interesting Facts About The Business of Healthcare

If you have a question about the hospitals and the healthcare industry, you will probably find the answer here.  This article will give you some interesting facts about the industry in 2017.

Healthcare makes up a large part of the Gross Domestic Product (GDP) in the US.  It is a monetary measure of the market value of all goods and services produced in a year is a primary indicator used to gauge the health of a country’s economy.  Healthcare’s economic system has a profound effect on business in America.

Healthcare spending increased 5.8 percent in 2015 to a total of $3.2 trillion, according to CMS’ Office of the Actuary.  Healthcare spending accounted for 17.8 percent of the (GDP) in 2015, up from 17.4 percent in 2014.  Compare that to healthcare spending in 1960, when the GDP was 5.2 percent and where total spending was just $27.5 billion. When broken down to the individual consumer level, between 1960 and 2014, healthcare spending in the United States increased from an average of $146/person per year to $9,532 (by 65 times).  Things have changed quite a bit in 55 years.  These statistics demonstrate just how big an impact healthcare has on the country’s economy.


Healthcare Spending Defined

It is made up of all monies paid to health care providers—hospitals, outpatient centers, Veterans Affairs, doctor and dentist practices, physical therapists, nursing homes, home health services and on-site care at places such as schools and work sites.

Also, retail sales of prescription and nonprescription drugs, premiums paid to health insurers, and revenues of makers of medical devices, surgical equipment, and durable medical equipment.  Spending also includes the escalating amounts paid by consumers for out-of-pocket payments for insurance premiums, deductibles, and co-payments, along with costs not covered by insurance.

Hospitals by the Numbers

The American Hospital Association (AHA) conducts an annual survey of hospitals in the US.  The data below contains a sample of statistics from the 2015 AHA Annual Survey.  The AHA is the industry’s complete source for aggregate hospital data and trend analysis.  The data below encompasses information about for-profit and not-for-profit hospitals.


  Total Number of All U.S. Registered * Hospitals 5,564
         Number of U.S. Community ** Hospitals 4,862
               Number of Nongovernment Not-for-Profit Community Hospitals 2,845
               Number of Investor-Owned (For-Profit) Community Hospitals 1,034
               Number of State and Local Government Community Hospitals 983
        Number of Federal Government Hospitals 212
        Number of Nonfederal Psychiatric Hospitals 401
        Number of Nonfederal Long Term Care Hospitals 79
        Number of Hospital Units of Institutions
(Prison Hospitals, College Infirmaries, Etc.)
  Total Staffed Beds in All U.S. Registered * Hospitals 897,961
        Staffed Beds in Community** Hospitals 782,188
  Total Admissions in All U.S. Registered * Hospitals 35,061,292
        Admissions in Community** Hospitals 33,260,348
  Total Expenses for All U.S. Registered * Hospitals $936,531,524,400
        Expenses for Community** Hospitals $851,514,523,144
  Number of Rural Community** Hospitals 1,829
  Number of Urban Community** Hospitals 3,033
  Number of Community Hospitals in a System *** 3,198
  Number of Community Hospitals in a Network **** 1,677

The following includes excerpts from Becker’s Hospital Review report: 50 things to know about the hospital industry in 2017, US News & World Report Best Hospitals Rankings and Statista’s Statistics and Facts about US Physicians.

Hospital Mergers and Acquisitions (M&A) and the Hospital Marketplace

Combined M&A activity experienced a reduction in 2016 compared to 2015.  There were 102 hospital transactions announced in 2016 compared to 112 in 2015.  The mergers and acquisition activity seems fitting because many healthcare organizations have concerns about their financial viability in the marketplace.

Of the 102 reported mergers and acquisitions, 75 involved nonprofit hospitals and 27 involved for-profit hospital buyers.

The five largest for-profit hospital operators, based on the number of hospitals, include:

  • Hospital Corporation of America (Nashville, Tenn.) — 169
  • Community Health Systems (Brentwood, Tenn.) — 158
  • Tenet Healthcare (Dallas, Texas.) — 79
  • LifePoint Health (Brentwood, Tenn.) — 72
  • Prime Healthcare Services (Ontario, Calif.) — 44

The five largest nonprofit hospital systems, based on the number of hospitals, include:

  • Ascension Health (St. Louis, Mo.) — 141
  • Catholic Health Initiatives (Englewood, Colo.) — 103
  • Trinity Health (Livonia, Mich.) — 92
  • Baylor, Scott & White (Dallas, Texas) — 48
  • Adventist Health Systems (Altamonte Springs, Fla.) — 46

The top five states with the most hospitals, according to Kaiser Health Facts, are:

  • Texas—404
  • California—342
  • Florida—210
  • Illinois—188
  • Pennsylvania—186

The following health systems own the short-term acute care hospitals in the United States.  They are:

  • HCA (Nashville, Tenn.) —167
  • Community Health Systems (Franklin, Tenn.) — 149
  • Department of Veterans Affairs (Washington, D.C.) — 141
  • Ascension Health (St. Louis) — 84
  • Tenet Healthcare (Dallas) — 62

Top Hospitals in the US

For 27 years, US News & World Report has published its best hospitals rankings to help patients make informed health care decisions.  They compared nearly 5,000 medical centers nationwide in 25 specialties, procedures and conditions.

This year, the Mayo Clinic led the field as the number one rated hospital in the country.  Below is a listing of the top 20 hospitals in 2016-2017.

  1. Mayo Clinic, Minnesota
  2. Cleveland Clinic, Cleveland
  3. Massachusetts General Hospital, Boston
  4. Johns Hopkins Hospital, Baltimore
  5. UCLA Medical Center, Los Angeles
  6. New York-Presbyterian University Hospital, New York
  7. UCSF Medical Center, San Francisco
  8. Northwestern Memorial Hospital, Chicago
  9. Hospitals of the University of Pennsylvania-Penn Presbyterian, Philadelphia
  10. NYU Langone Medical Center, New York
  11. Barnes-Jewish Hospital/Washington University, St. Louis
  12. UPMC Presbyterian Shadyside, Pittsburgh
  13. Brigham and Women’s Hospital, Boston
  14. Stanford Health Care-Stanford Hospital, City of Stanford
  15. Mount Sinai Hospital, New York
  16. Duke University Hospital, Durham
  17. Cedars-Sinai Medical Center, Los Angeles
  18. University of Michigan Hospitals and Health Centers, Ann Arbor
  19. Houston Methodist Hospital, Houston
  20. University of Colorado Hospital, Aurora

Hospital and Clinical Expenditures

Hospital expenditures increased by 4.1 percent to $971.8 billion in 2014, up from the 3.5 percent growth in 2013, according to CMS.  Physician and clinical services expenditures rose 4.6 percent to $603.7 billion in 2014, higher than the 2.5 percent growth rate in 2013.

Payments and Revenue

The average cost per inpatient day in state/local government hospitals across the U.S. was $1,974 in 2014, the latest year for which data is available, according to Kaiser State Health Facts. The average cost per inpatient day was $2,346 in nonprofit hospitals and $1,798 in for-profit hospitals.

For 2012, the latest data available, the average operating margin for a nonprofit hospital was 2.6 percent, according to Moody’s Investors Service.

In 2015, government payers underpaid hospitals for medical services by $57.8 billion, according to the American Hospital Association.  That year, under Medicare, hospitals received payment of 88 cents on the dollar for time spent caring for Medicare patients.  Under Medicaid, hospitals received payment of 90 cents for every dollar for Medicaid patients.

From 1990 through 2015, US hospitals’ uncompensated care costs totaled $704.7 billion, according to a recent American Hospital Association report.  From 2000 to 2015, National uncompensated care costs reached a high of $45.9 billion in 2012, which represented 6.1 percent of total expenses.  In 2015, total uncompensated care costs were $35.7 billion, representing 4.2 percent of total expenses—the lowest level in 26 years.

A greater number of hospitals and health systems are engaging in alternative payment models with the goal of fully transitioning to a value-based care reimbursement system.  Nationally, hospitals reported about 50 percent of reimbursement relate to a form of value measurement in 2016, up 4 percent from 2014.  Of hospitals involved in value-based contracts, 22 percent reported meeting their goal to reduce administrative costs, 26 percent reported meeting goals to reduce healthcare costs, 30 percent reported meeting care coordination goals and 40 percent reported meeting goals for improving patient outcomes.

Physicians in the US

In 2015, there were 809,845 active doctors of medicine in the US.  This figure included approximately 150,000 inactive and some 50 unclassified physicians.  Washington DC, Massachusetts and Maryland have the highest number of physicians per civilian population.  Among specialists, psychiatrists are the most prevalent physicians.  Roughly, one-quarter of all active physicians is educated abroad.

Compensation for physicians varies across specialties.  Orthopedics and Cardiology include the highest-earning physicians with salaries of $440,000 and $410,000 annually.  The highest-paid physicians live in the north-central part of the country, where the mean compensation is near $300,000 per year.

Even with high earning potential, there are physician shortages in certain areas of the country.  The Association of American Medical Colleges (AAMC) estimates that the US physician shortage will be as high as 94,700 by 2025.

Physician shortages are anticipated to come from three broad categories: primary care, medical specialties, and surgical specialties.  By 2025, AAMC estimated a shortfall of between 14,900 and 35,600 primary care physicians.  Non-primary care specialties many also experience a shortfall as high as 60,300 physicians.

One area that affects physicians is burnout.  It has become increasingly prevalent among US physicians.  Nearly 50 percent of physicians reported frequent or constant feelings of professional burnout in the past year, according to a 2016 survey by Merritt Hawkins.  Physicians who experienced burnout attributed their job dissatisfaction to two major sources: EHR data entry and increased clerical requirements under ICD-10.  There is a good reason for their concerns.  On average, 50 percent of their time is spent entering data into Electronic Health Records and completing clerical work.  They spend only 27 percent of work hours interacting with patients, according to a 2016 study in Annals of Internal Medicine.


Delivering healthcare is “not what it used to be.”  There have been major business model changes over the past 20 years as we have moved from lower cost insurance plans, to volume-based care and recently towards value-based and patient-centric care.

Increasing health insurance premiums and out-of-pocket patient liability have put a strain on patients, physicians, and the entire healthcare system.  These changes have left the public and policy makers wondering how health reform is going to affect the industry in the future.  With our aging population, costs increases and the American Health Care Act implementation, it is anyone’s guess what new challenges the country will face.  Many believe there is light at the end of the tunnel.  Many are skeptical of that.  No matter what people think, everyone can agree on one thing; they hope the light isn’t an oncoming train.


Phil C. Solomon is the publisher of Revenue Cycle News, a healthcare business information blog and serves as the Vice President of Global Services for MiraMed, a healthcare revenue cycle outsourcing company.  As an executive leader, he is responsible for creating and executing sales and marketing strategies which drive new business development and client engagement. Phil has over 25 years’ experience consulting on a broad range of healthcare initiatives for clinical and revenue cycle performance improvement.  He has worked with industry’s largest health systems developing executable strategies for revenue enhancement, expense reduction, and clinical transformation. He can be reached at


American Health Care ActThe House proposal to “repeal and replace” the Affordable Care Act (ACA), the landmark and controversial legislation that is a signature of President Barack Obama’s administration, indicates that the nation’s healthcare system could be heading for yet another upheaval.  March 21, 2017 marked the seventh anniversary of the ACA.  Although there is still a high degree of uncertainty regarding what the final repeal-and-replace legislation will look like, or when it will appear, any changes to the ACA will have important implications for hospitals, health systems, healthcare professionals and patients.

It is too early to know how the American Health Care Act (AHCA)—the proposed legislation adopted by the two House Committees of jurisdiction on March 9, 2017 and passed out of the Budget Committee on March 16th—will impact healthcare organizations.  (The ACA certainly had its own share of controversies before it became law.)  We provide the following summary of the proposal’s major provisions and responses from organized medicine, healthcare policy experts and the hospital industry primarily to keep you informed, and we will continue to provide updates as new developments arise.

The Hard Numbers

A report by the nonpartisan Congressional Budget Office (CBO) released on March 13, 2017 offers an independent analysis of how the legislation would affect health insurance coverage and access to healthcare for millions of Americans.

The CBO and the Joint Committee on Taxation together estimate that, in 2018, 14 million more people would be uninsured under the legislation than under current law. Most of that increase would stem from repealing the penalties associated with the individual mandate.  Some of those currently covered would choose not to have insurance because they choose to carry coverage under current law only to avoid paying the penalties, and some people would forgo insurance in response to higher premiums.  According to the CBO, by 2026, the replacement bill would reduce the federal budget deficit by $337 billion, but leave 24 million Americans uninsured.

“The largest savings would come from reductions in outlays for Medicaid and from the elimination of the Affordable Care Act’s (ACA’s) subsidies for nongroup health insurance,” the report stated.  The savings would be even greater if it were not for the AHCA’s increasing spending in other areas:  “The largest costs would come from repealing many of the changes the ACA made to the Internal Revenue Code—including an increase in the Hospital Insurance payroll tax rate for high-income taxpayers, a surtax on those taxpayers’ net investment income, and annual fees imposed on health insurers—and from the establishment of a new tax credit for health insurance.”

In a statement, Tom Price, MD, recently appointed secretary of Health and Human Services, questioned the assumptions used in the CBO analysis—including the CBO’s estimates of how many Americans would drop insurance coverage if the individual mandate were repealed.  Secretary Price argued the AHCA would give patients “meaningful access to care” by enabling market forces to lower the cost of care and reduce premiums and deductibles. These market forces would ultimately give patients the coverage and access they need and that their doctors recommend, he said. President Donald Trump said “more competition and less regulation will finally bring down the cost of care, and bring it down significantly.  Unfortunately, it takes a while to get there because you have to let that marketplace kick in.”

The CBO acknowledged the uncertainty, without going so far as to assume that healthcare prices to consumers would be forced downward, and qualified its estimates by noting that:  “The ways in which federal agencies, states, insurers, employers, individuals, doctors, hospitals and other affected parties would respond to the changes made by the legislation are all difficult to predict, so the estimates in this report are uncertain.  But CBO and [the Joint Committee on Taxation] have endeavored to develop estimates that are in the middle of the distribution of potential outcomes.”

In a response to the CBO report, House Speaker Paul Ryan stressed that the plan “is not about forcing people to buy expensive, one-size-fits-all coverage.  It is about giving people more choices and better access to a plan they want and can afford.  When people have more choices, costs go down.  That’s what this report shows.  And, as we have long said, there will be a stable transition so that no one has the rug pulled out from under them.”

Key Provisions

In brief, the American Health Care Act (AHCA), as the bill is called, proposes to:

  • Eliminate the individual mandate requiring people who can afford it to purchase health insurance. The individual mandate, a cornerstone of the ACA, was designed to keep health insurance costs lower for sicker and older individuals by creating the broadest possible risk pools.  Under the Republican bill, people who choose not to purchase insurance would not pay a penalty.  However, the plan would provide an incentive to purchase and maintain coverage by imposing a penalty, payable to the insurer, for lapses.
  • Repeal the employer mandate of the ACA, which requires businesses with 50 or more full-time equivalent employees to provide health insurance to at least 95 percent of their full-time employees and dependents up to the age of 26, or pay a penalty.
  • Repeal subsidies provided under the ACA to help lower-income patients cover the cost of deductibles and co-payments.
  • Retain the ACA’s expanded Medicaid coverage (which raised the eligibility cutoff to 138 percent of the poverty level) in 30 states until 2020.
  • Cap federal Medicaid funding per enrollee beginning in 2020, based on state Medicaid expenditures in 2016.
  • Distribute tax credits to offset the cost of premiums and deductibles using age, rather than income, to calculate how much people receive.  Individuals earning less than $75,000 per year and households earning less than $150,000 per year would receive tax credits.  These credits would be $2,000 for an individual under the age of 30 and twice that for individuals over the age of 60. Unlike subsidies, they would be payable in the year following the year of coverage.  These numbers contrast with the ACA provisions, which provide upfront subsidies to enable households earning up to 138 percent of the poverty level to purchase insurance on the health exchanges.  The bill would also expand the health plans that qualify for subsidies.  An analysis by the Kaiser Family Foundation indicates that these changes could have significant implications for different populations.
  • Promote the use of health savings accounts as a means of paying for the costs of medical care by increasing annual limits to $6,550 for individuals and $13,100 for families starting in 2018 (an increase from the ACA limits for 2017 of $3,400 for individuals and $6,750 for families).
  • Increase the amount that insurers can charge older Americans.  The bill allows insurers to charge older Americans five times as much as younger ones, compared with ACA’s provision, which allows insurers to charge older Americans only three times that of younger beneficiaries.
  • Retain the following provisions of the ACA: prohibitions on annual and lifetime limits; dependent coverage until the age of 26; coverage for pre-existing conditions; and provision of 10 essential health benefits, including maternity care and preventive services.
  • Eliminate the Prevention and Public Health Fund.
  • Repeal taxes on drug manufacturers, insurers, medical device manufacturers and high-income households.  The Congressional Joint Committee on Taxation estimates the repeal of these taxes would result in revenue losses for the federal government over 10 years of approximately $25 billion, $145 billion, $20 billion and $270 billion, respectively.

Strong Opposition

The AHCA has drawn widespread concern and criticism from multiple quarters.  Conservative groups, including Heritage Action, the Cato Institute, Americans for Prosperity, FreedomWorks and the Tea Party Patriots all oppose the bill on the grounds that only complete repeal of the ACA will suffice, without replacement.  The medical and healthcare communities, which have zeroed in on the large number of Americans who, the CBO analysis indicates, would become uninsured, are resolute in their opposition, at least for now.  Many believe the proposal would benefit the wealthy at the expense of the poor, and that these disparities would create an enormous burden for hospitals and healthcare providers.  Proponents feel ongoing improvements in the U.S. economy and higher employment rates would offset these potential problems.

Criticisms revolve primarily around the bill’s reduced tax credits for individuals purchasing private plans and the proposed per-capita limit on federal contributions to state Medicaid programs, which could stretch state resources and reduce or eliminate healthcare services for many low-income and unemployed Americans.  Many provider organizations have gone public with their concerns.  The bill “would dramatically reverse progress we’ve made in controlling healthcare costs and assuring quality care, and it would gut patient protections, investments in prevention and access to care for the most vulnerable Americans,” George C. Benjamin, MD, executive director of the American Public Health Association, said in a statement.  The American Nurses Association also strongly opposed the proposal.

In a letter to Congressional leaders, James L. Madara, MD, executive vice president and CEO of the American Medical Association, acknowledged problems with the ACA, but said those problems must be addressed.  “We cannot support the AHCA as drafted because of the expected decline in health insurance coverage and the potential harm it would cause to vulnerable patient populations,” he stated.

A letter from Rick Pollack, president and CEO of the American Hospital Association echoed the AMA’s concerns.  “It appears that the effort to restructure the Medicaid program will have the effect of making significant reductions in a program that provides services to our most vulnerable populations, and already pays providers significantly less than the cost of providing care,” he said.  The AHA suggested the expanded use of Medicaid waiver programs to help states expand coverage and develop innovative models of care to improve services.  (Medicaid waiver programs allow patients who would otherwise be in an institution, nursing home or hospital to receive long-term care in the community.)

AARP®, which represents 38 million Americans over the age of 50, also came out against the bill, citing a report showing that the Medicare Part A Trust fund is solvent until 2028 largely due to the ACA, and that the current bill, which would remove these provisions, would increase costs and reduce benefits for many older Americans.  The organization estimates the bill’s tax credit changes and age rating could increase premiums by as much as $3,600 for a 55-year-old earning $25,000, $7,000 for a 64-year-old earning $25,000 and $8,400 for a 64-year-old earning $15,000 annually.

A January article on the Health Affairs blog warned that the large increase in uninsured Americans would remove coverage for substance abuse treatment and prevention from millions, creating a gap in services that could worsen the opioid epidemic.  “In the three states with the highest drug overdose deaths—Kentucky, New Hampshire and West Virginia—a repeal would about triple the uninsured rate,” noted Lisa Clemans-Cope.

Clearly, the AHCA has reopened an intense national debate about whether healthcare should be a right or a choice.  Based on the analyses we’ve seen thus far, providers could potentially find themselves caring for a larger number of uninsured and under-insured patients.  The CBO analysis points to two populations that could fuel this trend: young, healthy individuals who opt not to purchase health insurance and an increase in uninsured low-income patients.

You will find this post and other communications on the MiraMed website. Please note that this post is for your information and education only and does not represent a position either for or against the proposal.


Phil C. Solomon is the publisher of Revenue Cycle News, a healthcare business information blog and serves as the Vice President of Marketing Strategy for MiraMed, a healthcare revenue cycle outsourcing company.  As an executive leader, he is responsible for creating and executing sales and marketing strategies which drive new business development and client engagement. Phil has over 25 years’ experience consulting on a broad range of healthcare initiatives for clinical and revenue cycle performance improvement.  He has worked with industry’s largest health systems developing executable strategies for revenue enhancement, expense reduction, and clinical transformation. He can be reached at


Since the adoption of the Affordable Care Act (ACA) and the subsequent rules changes that have taken effect, comprehending the changes to the healthcare industry has become a difficult task for anyone, let alone consumers.  Keeping up with the transformation is difficult, even for industry insiders.  Recent news reports demonstrate this:

·       Aetna is pulling out of the various state insurance exchanges, as are United Healthcare, Humana and many of the Blue Cross/Blue Shield regional insurers.  Insurance companies are losing big money in the exchanges as their costs are exceeding income by over five percent, according to McKinsey’s Center for U.S. Health System Reform.

·       A federal judge recently squelched Aetna’s $37 billion bid to acquire Humana.  The ruling indicated that combining the companies would stifle competition.

·       Healthcare spending is rising at a faster clip than at any time since the 2007 recession, with costs rising faster than most consumers can handle.  Patients are struggling to pay their medical bills, with no relief in sight.

·       Employers and consumers continue to spend more on healthcare each year, with consumers ultimately paying the price as they deal with rising healthcare costs.

Healthcare Spending – By the Numbers

Americans spent $3.2 trillion on healthcare in 2015, or $9,990 per person.  Healthcare spending increased to 5.5 percent in 2015, which is lower than previous annual growth rates, but slightly higher than the 5.3 percent increase recorded in 2014.  Industry experts at the Centers for Medicare and Medicaid Services (CMS) predict that U.S. healthcare spending will grow at least 5.7 percent annually between 2014 and 2024.

CMS stated that the spending increase in 2015 was mainly due to expanded coverage of individuals who signed up for the ACA insurance coverage program or who took advantage of the expansion of Medicaid.  These factors have created a demand for more hospital and clinic services as well as prescription drugs, which has caused increased spending.

According to governmental actuaries, healthcare spending represents a significant portion of the U.S. economy.  In 2015, it made up 17.8 percent of the gross domestic product (GDP), and experts estimate it will increase to 20.1 percent by 2025.  The   rise in spending has economists worried that appropriate actions are not enough to slow down healthcare’s growth.

While the initial impact linked to the ACA’s coverage expansion is waning, the increase in health spending is in direct correlation with changes in economic growth.  Rising medical costs and services required for an aging population are the main contributors to spending growth.

National Health Expenditures Today and in the Future

In 2015, 28.7 percent of total healthcare spending came from the federal government while consumer households contributed 27.7 percent.  The private business share of health spending accounted for 19.9 percent of total healthcare spending, state and local governments accounted for 17.1 percent, and other private revenues accounted for 6.7 percent.

The totals of National Health Expenditures (NHE) are broken out into seven categories:

1.        Medicare spending grew 4.5 percent to $646.2 billion in 2015 or 20 percent of total NHE;

2.        Medicaid spending grew 9.7 percent to $545.1 billion in 2015 or 17 percent of total NHE;

3.        Private health insurance spending grew 7.2 percent to $1,072.1 billion in 2015 or 33 percent of total NHE;

4.        Out-of-pocket spending grew 2.6 percent to $338.1 billion in 2015 or 11 percent of total NHE;

5.        Hospital expenditures grew 5.6 percent to $1,036.1 billion in 2015, faster than the 4.6 percent growth in 2014;

6.        Physician and clinical services expenditures grew 6.3 percent to $634.9 billion in 2015, a faster growth than the 4.8 percent in 2014; and

7.        Prescription drug spending increased 9.0 percent to $324.6 billion in 2015, slower than the 12.4 percent growth in 2014.

What can we expect for healthcare spending in the future?  CMS outlined its estimates for 2015 to 2025 spending as follows:

·       For 2015-25, health spending is projected to grow at an average rate of 5.8 percent per year.

·       Health spending is projected to grow 1.3 percentage points faster than the GDP per year over this period; as a result, the health share of GDP is expected to grow from 17.5 percent in 2014 to 20.1 percent by 2025.

·       Given the ACA’s coverage expansions and premium subsidies together with population aging, federal, state and local governments are projected to finance 47 percent of national health spending by 2025 (from 45 percent in 2014).

·       Health spending growth is faster than in the recent past due to the effects of the ACA’s coverage expansions, stronger than expected economic growth, and population aging.  Growth is still slower than the growth experienced over the past two decades.

·       After 5.3 percent growth in 2014, national health spending is projected to have grown 5.5 percent in 2015.

·       The persisting effects of coverage expansions under the ACA influenced  spending changes in 2016.

·       Health spending growth is expected to accelerate and average 5.7 percent for 2017 through 2019 because of gradual increases in economy-wide and medical-specific prices.  Projected average growth of 6.0 percent is anticipated for 2020 through 2025.  Growth in spending for Medicare is notably strong as enrollment growth among baby boomers returns to higher utilization rates of Medicare services that more closely resemble their historical average. Those above will drive a 7.6 percent average growth.  Projected average growth of 6.1 percent in Medicaid is driven primarily by the changing profile of that program’s population, as an increasingly higher share of beneficiaries is comprised of comparatively expensive aged and disabled individuals.

Employees Wrestle with Costs that Exceed their Insurance Premiums

Patients are finding that their healthcare costs are rising and there are no short-term solutions in sight.  For most people, out-of-pocket costs including insurance premiums, copays and deductibles have increased to the point that costs for some have largely become unaffordable.  Unfortunately, the growth in out-of-pocket costs comes at a time when wages have remained largely stagnant.

In recent years, the shared cost of healthcare between insurers and consumers has become a growing issue.  Employers have responded to increasing healthcare premiums by sharing more of the costs with their employees and offering new insurance plans that shift more financial risk to workers.  Changes in insurance coverage led to an upsurge in deductibles for people with employer-provided health coverage, from $303 in 2006 to $1,077 in 2015.

Higher insurance costs are financially challenging for the employee as the potential exposure to out-of-pocket costs grows.  To make matters worse, many employees will never reach their deductibles and others may have expenses that far surpass them.  Either way, employees are paying more than ever before.

The growth of employee payments toward deductibles is a key factor of the changes in the cost sharing distribution of payments.  In 2004, deductibles accounted for 24 percent of cost sharing payments, increasing to 47 percent in 2014.  On the other hand, copayments were nearly half of cost sharing payments in 2004, falling to 20 percent in 2014.

The Result of Increased Spending for Consumers

With the changes in out-of-pocket responsibility, many consumers are unable to keep up with their medical bills.  According to a survey from the New York Times and Kaiser Family Foundation, the challenges for patients paying for medical treatments varied based on the actual type of service.  The survey found that of respondents who had problems paying their medical bills, about two-thirds said they were the result of short-term or one-time medical expenses.  Among those who had issues paying their medical bills:

·       65 percent had difficulty paying bills for doctor’s visits;

·       65 percent had difficulty paying for diagnostic tests, such as X-rays;

·       64 percent had difficulty paying for lab fees; and

·       61 percent had difficulty paying for care in the emergency department.

The survey also found that the most common bills that represented the largest share of medical expenses were emergency department visits (21 percent) and hospitalization    (20 percent).

Many patients do not have the financial resources to keep up with their general household bills, let alone their healthcare obligations.  Recent studies                      demonstrate this:

·       Three in four Americans are living paycheck-to-paycheck (McKinsey Quarterly,   May 2015);

·       Nearly half of Americans do not have enough money to cover a $400 emergency expense (Federal Reserve survey);

·       63 percent of consumers cannot afford to pay a $500 car repair or a $1,000 emergency room visit (Bureau of Labor Statistics); and

·       The average consumer who makes under $40,000 per year does not have the            ability to handle any unplanned expense (Consumer Expenditure Survey).

Greater Out-of-pocket Medical Spending Drives Increased Collection Activity

Past due medical bills have become the Achilles heel for consumers.  The result from rising out-of-pocket responsibility is forcing consumers into a head on clash with debt collectors.  If having a medical bill hanging over the head of a consumer isn’t bad  enough, the lack of timely payment can lead to credit problems that can last for years.

A study conducted between December 2014 and March 2015 by the federal Consumer Financial Protection Bureau1 found that past-due medical bills, credit cards and student loans were among the most frequently cited consumer debts.  Of those surveyed, 59 percent reported being contacted by a debt collector for medical services, making  medical debt the most pressing financial issue for most Americans.  To make things worse, they also found that 72 percent of respondents reported that they had two or  more medical debts to pay.

Providers must collect medical debt owed to them while meeting stringent requirements to do so.  The ACA required nonprofit hospitals to take steps to retain their federal nonprofit status2, including establishing written charity care policies. Hospitals must determine whether patients are eligible under their policies and provide it for those who are.  They must follow guidelines outlined in the Internal Revenue Code 501(r), which provides for additional requirements for Charitable Hospitals; such as how much uninsured patients are charged and restricting aggressive billing and collections activities.  Under these rules, nonprofit hospitals are barred from initiating “extraordinary collection actions” (such as reporting to credit bureaus, garnishing wages or placing a lien on property or taking legal action) until 120 days after the first billing statement.  Although the rule does not apply to for-profit hospitals, the regulation introduced an overall federal standard for reporting medical debt.

These guidelines have made it more difficult for providers and their collection agencies  to collect past due medical bills, but it’s no consolation for consumers.  When they are unable to satisfy their medical debts, they can be reported to the credit bureaus.  A credit derogatory can substantially reduce consumers’ credit scores, which can materially affect a patient’s financial standing.  Credit problems created from past due medical bills can often become the last straw for consumers.  Many have no other choice but to file for bankruptcy.

With the trickle down effects from increased healthcare spending and growing patient payment liability, some people have become more reluctant to go for care because of the debt they might incur.  When patients skip medical treatment because of the costs involved, it becomes a contributor for creating a sicker population, which ultimately drives up healthcare spending.


Patients will continue to face a growing financial burden as their healthcare costs increase and their ability to pay for care declines.  Payment responsibility for medical costs continues to shift from employers to employees and those covered under the ACA struggle to pay co-pays and deductibles.  Higher medical costs and spending have an effect on how consumers pay their medical bills.  The current healthcare environment has placed consumers, employers and healthcare providers in a precarious position, one that is not likely to change in the foreseeable future.


  1. Consumer Experiences With Debt Collection: Findings From the CFPB’s Survey on Consumer Views on Debt, January 12, 2017,
  2. Additional Requirements for Charitable Hospitals; Community Health Needs Assessments for Charitable Hospitals,


Phil C. Solomon is the publisher of Revenue Cycle News, a healthcare business information blog and serves as the Vice President of Marketing Strategy for MiraMed, a healthcare revenue cycle outsourcing company.  As an executive leader, he is responsible for creating and executing sales and marketing strategies which drive new business development and client engagement. Phil has over 25 years’ experience consulting on a broad range of healthcare initiatives for clinical and revenue cycle performance improvement.  He has worked with industry’s largest health systems developing executable strategies for revenue enhancement, expense reduction, and clinical transformation. He can be reached at


Understanding OIG Compliance


On October 15, 1976, President Gerald Ford signed into law legislation creating an Office of Inspector General (OIG) at the Department of Health, Education and Welfare (HEW).  HEW OIG would become HHS-OIG in 1980 when the Department was redesignated as the Department of Health and Human Services (HHS).

The OIG and HHS oversee various segments of the healthcare industry, such as hospitals, nursing homes, third-party billers and durable medical equipment suppliers to monitor adherence to applicable statutes, regulations and program requirements.

OIG compliance programs provide oversight toward promoting ethical and lawful corporate conduct that focus on encouraging prevention, detection and resolution of occurrences of conduct that do not meet federal and state law, and a hospital or health system’s business policies.

The OIG, HHS, Association of Healthcare Internal Auditors, American Health Lawyers Association, Health Care Compliance Association created a guide titled Practical Guidance for Health Care Governing Boards on Compliance Oversight that highlighted five key areas that healthcare stakeholders should understand so that they can develop a comprehensive compliance program.  The elements listed below provide hospitals with the overarching elements the OIG relies upon in making conclusions as to the effectiveness of hospital compliance programs.

  1. The compliance function promotes the prevention, detection and resolution of actions that do not conform to legal, policy or business standards. The principles for compliance include:
  • Developing policies and procedures to provide employees guidance;
  • The creation of incentives to promote employee compliance;
  • The development of plans to improve or sustain compliance;
  • The development of metrics to measure execution (particularly by management) of the program; and
  • The implementation of corrective actions and reporting that evaluate and manage the effectiveness of the program.
  1. The legal function advises the organization on the legal and regulatory risks of its business strategies, providing advice and counsel to management about relevant laws and regulations that govern relate to or affect the organization. The function also defends the organization in legal proceedings and initiates legal proceedings against other parties if such action is warranted.
  2. The internal audit function provides an objective evaluation of the existing risk and internal control systems and framework within an organization. Internal audits ensure monitoring functions are working as intended and identify where management monitoring may be required. Internal audits help management develop actions to enhance internal controls, reduce risk to the organization and promote more effective and efficient use of resources.
  3. The human resources function manages the recruiting, screening and hiring of employees; coordinates employee benefits and provides employee training and development opportunities.
  4. The quality improvement function promotes consistent, safe and high-quality practices within health care organizations. This function improves efficiency and health outcomes by measuring and reporting on quality outcomes and recommends necessary changes to clinical processes to management. Quality improvement is critical to maintaining patient-centered care and helping the organization minimize the risk of patient harm.

The Seven Elements of an Effective Compliance Program

The OIG sets minimum standards that all compliance programs should include.  The following are seven critical elements the OIG recommends that should be included in any comprehensive compliance program.  They are:

  1. The development and distribution of written standards of conduct, as well as written policies and procedures that promote the hospital’s commitment to compliance and that address specific areas of potential fraud, such as claims development and submission processes, code gaming, and financial relationships with physicians and other health care professionals;
  2. The designation of a chief compliance officer and other appropriate bodies, e.g., a corporate compliance committee, charged with the responsibility of operating and monitoring the compliance program;
  3. The development and implementation of regular, effective education and training programs;
  4. The maintenance of a process, such as a hotline, to receive complaints and the adoption of procedures to protect the anonymity of complainants and to protect whistleblowers from retaliation;
  5. The development of a system to respond to allegations of improper/illegal activities and the enforcement of appropriate disciplinary action against employees who have violated internal compliance policies, applicable statutes, regulations or federal health care program requirements;
  6. The use of audits and other evaluation techniques to monitor compliance and assist in the reduction of identified problem areas; and
  7. The investigation and remediation of identified systemic problems and the development of policies addressing the retention of sanctions.

Every effective hospital compliance program needs to address the seven elements listed above to mitigate risk areas such as billing for items or services not rendered, providing medically unnecessary services, up-coding, duplicate billing and preparing false cost reports.

 Compliance Responsibilities for Boards

Hospital boards must be fully engaged in their oversight responsibility for compliance.  A key element of effective oversight relies on board members asking the right questions of management to determine the sufficiency and effectiveness of the organization’s compliance program.

Compliance responsibility falls on the shoulders of all levels of management and boards must keep a keen eye on monitoring compliance processes to ensure the proper protections are in place.  With the heightened industry and professional interest in governance and transparency, boards must be diligent.

The report, Practical Guidance for Health Care Governing Boards on Compliance Oversight outlined several important areas a healthcare organization’s board should be assessing.  They are:

  • The roles of, and relationships between, the organization’s audit, compliance and legal departments;
  • The mechanism and processes for issuing reporting within an organization;
  • The approach to identifying regulatory risk; and
  • The methods for encouraging enterprise-wide accountability for compliance goals and objectives.

Typical Types of Fraud and Abuse

Occasional billing mistakes and errors will occur inadvertently or by accident.  When errors are discovered, the prompt remediation of issues must occur.  In those cases, typically no penalties are levied by the OIG unless there is a violation of civil, criminal or administrative law.  To keep your organization safe and in compliance, the following are activities not in keeping with proper compliance guidelines and should be avoided.

  • Billing for services, procedures, and supplies that were not provided;
  • Misrepresentation of services; what was provided; when it was provided; the condition or diagnosis; the charges involved; and the identity of the provider-recipient;
  • Providing unnecessary services or ordering unnecessary tests;
  • Unbundling of claims: billing separately for procedures that normally are covered by a single fee;
  • Double billing: charging more than once for the same service;
  • Up-coding: charging for a more complex service than was performed;
  • Miscoding: using a code number that does not apply to the procedure;
  • Kickbacks: receiving payment or another benefit for making a referral;
  • Performing unnecessary X-rays and tests;
  • Charging insured patients more than uninsured; and
  • Waiving copayments and deductibles.


New forms of reimbursement, such as value-based purchasing, bundled services, global payments, emerging payment models and increasingly available public data and transparency efforts have led to new incentives and greater compliance risks.  Addressing these risks by having a comprehensive compliance program in place is essential for operating a successful healthcare organization.  Governmental prosecutions for fraud and abuse are growing and hospitals cannot risk the possible repercussions that go along with an OIG investigation.  It is important that hospitals establish all-inclusive compliance programs to mitigate risks that could lead to administrative sanctions, penalties and assessments.  Hospitals should develop, review and/or revise their compliance programs to ensure they are making good faith efforts towards complying with the law.


Phil C. Solomon is the publisher of Revenue Cycle News, a healthcare business information blog and serves as the Vice President of Global Services for MiraMed, a healthcare revenue cycle outsourcing company.  As an executive leader, he is responsible for creating and executing sales and marketing strategies which drive new business development and client engagement. Phil has over 25 years’ experience consulting on a broad range of healthcare initiatives for clinical and revenue cycle performance improvement.  He has worked with industry’s largest health systems developing executable strategies for revenue enhancement, expense reduction, and clinical transformation. He can be reached at

This post can be viewed on MiraMed Global Services blog.


One of the greatest technological achievements in the 21st Century was is the creation of the Internet.  Its formation has effectively changed almost every aspect of business and personal communication.

The newest threat to cybersecurity is the proliferation of Internet of Things (IoT)—connected physical and smart devices that have embedded technologies including electronics, software or sensors that allow for network connectivity.  IoT enables objects to collect and exchange data to anything connected to the internet.  With healthcare’s increasing reliance on connected devices that leverage IoT and the growth of Telehealth, providers and facilities are more vulnerable than ever to cyber-attacks.

Internet connectivity has created the potential for IoT.  In 1990, John Romkey created the first IoT device (a toaster that could be turned on and off over the Internet), even before the first web page was ever created.  IoT is spreading faster than expected.  Gartner Inc., an IT research company, reports that beginning in 2017, more than 6.4 billion devices will have IoT connections and they estimate it to rise to more than 20 billion by 2020.

Recently, healthcare security has become the lead story in the news because of its data breaches, major software attacks and a stream of reports about new vulnerabilities in cybersecurity.  These growing problems have catapulted the healthcare industry into the top spot surpassing the financial services sector as the industry with the most number of security incidents.  IBM X-Force named healthcare as the number one industry segment for cyber-attacks in their 2016 IBM X-Force Research Cyber Security Intelligence Index Report.  To base their conclusions, they evaluated billions of security incidents in over 100 countries.

The increasing use of IoT will only add fuel to the industry’s current cybersecurity problems.  Nevertheless, the potential benefits of IoT outweigh the security risks.  Networked IoT devices, such as wearable sensors and home monitoring systems, will increase access to diagnostic testing, comparative treatment, and could significantly reduce medical errors.  These and other attributes are the driving force for the growth of IoT.  Allied Market Research predicts IoT to reach $136.8 billion by 2021, up from $60.4 billion in 2014.

Historically, cybersecurity’s focus in the healthcare industry has been to protect against breaches of patients’ protected health information and most recently, on preventing ransomware attacks.  (Cyber-criminals have been using ransomware to lock health professionals out of their systems and make electronic medical records inaccessible.)  Technology professionals need to be concerned with these threats as well as a host of rapidly developing criminal tactics.

Cyber-crimes Across All Industry Sectors

Cyber-crimes are rising at an unprecedented rate and have affected every industry sector, with healthcare having the largest number of security incidents.  Recently, the exploitation of human vulnerabilities through attacks on systems via email and social media has become rampant.  Hackers use shared information to construct effective spearphishing emails that can be used to socially engineer people into doing things that put computer systems and data at risk.  No industry is immune to hacking.  Even the social media industry-one that employs highly skilled developers and security personnel has experienced serious hacking incidents with worldwide repercussions.  In May 2012, a Russian hacker was responsible for a massive LinkedIn data breach in 2012 where account details of 117 million users were as stolen and leaked online.  The breach allowed a cyber-criminal to buy and use the stolen passwords to hack social media accounts for Google’s CEO Sundar Pichai and Facebook’s CEO Mark Zuckerberg.  In an interesting twist, Facebook exposed over six million users’ personal information that eventually was leaked to the hacking community.  Hackers pounced on the opportunity for financial gain when Facebook decided to buy back the information on the black market to plug holes in their security.  They combined the stolen information with their encrypted data to build in safeguards to eliminate further breaches.

Newfound vulnerabilities such as ransomware have hit numerous industries, with healthcare being the most frequent.  Current estimates from the Cyber Threat Alliance estimated the damage caused by ransomware at $325 million, up 1,800 percent since the Federal Bureau of Investigation’s (FBI) ransomware report in June 2015.

Today, sophisticated hackers do not just steal information; they can access data and change it.  For example, cyber-criminals can take actions such as changing data used in public company reporting that can materially affect business strategies, financial performance and stock prices.

Cyber-attacks containing personal and financial information are concerning but, they pale in comparison to the threat of breaching IoT in healthcare.  As wearable, implantable and connected medical devices are developed and used, the potential to harm patients through hacking IoT devices is becoming a top concern for cybersecurity professionals.

IoT Threats for Healthcare

Healthcare’s IoT security remains a critical issue, with new attacks and vulnerabilities uncovered every day.  As IoT gains traction and acceptance, the capabilities of web-enabled and network-connected products and systems will increase exponentially.  While the rise of connected devices may provide better monitoring and safety for patients, the proliferation of risks associated with IoT increase in tandem.

IoT devices have major security risks because developers and manufacturers are not prepared to handle the issues associated with healthcare cybersecurity and have not created necessary safeguards.  IoT threats offer a different set of challenges because they can have real-life, physical repercussions for patients offering greater and more lethal risks than any other cyber-threat.

The number of cyber-attacks is growing, and so is the cleverness of these attackers.  Therefore, it is vital to evaluate IoT devices and systems for cybersecurity flaws to ensure dependability, decrease downtime and improve security to maintain the health and safety of patients.

IoT Security and Cyber-Defense Readiness

In a February 2016 report, Securing Hospitals; A Research Study and Blueprint, the group Independent Security Evaluators outlined four steps health organizations can take to ensure effective IoT cybersecurity.  They are:

  1. Incident Response

Security breaches will occur, and it is important that the facility staff be prepared to deal with these situations.  The procedures for organizations should include what to do in the event of a security breach and to make sure that the organization’s research and mitigation plans are put in place.

  1. Disaster Recovery

Cybersecurity needs to be a key component to all existing facility’s disaster recovery plan.  These plans need to be reviewed and assessed as a part of an overall preparedness plan.  While disasters are unlikely, they need to be simulated so that the security team has adequate practice in how to respond to these incidents.

  1. Red Teaming

From time to time, it is valuable to test the actual effectiveness of facility and systems security and its teams’ readiness to mitigate its negative effects.  Red teaming is the act of performing announced (or unannounced) attacks to see how teams respond, thereby eradicating failures and other problems that may occur.

  1. Contingency Plans

The typical course of business itself can set events in motion that cause security to fail.  For instance, the turnover of key personnel, the rapid reduction or reallocation of budgets, lawsuits and audits can all drain personnel resources that can adversely affect the security posture of an entire organizational infrastructure.  It is important to have these contingencies identified and contingency plans in place in the event they occur.


IoT devices have the potential to benefit device manufacturers, patients and healthcare professionals.  These devices will make it easier for providers to monitor and treat patients remotely, which means patients will spend less time in hospitals and experience better clinical results.  Healthcare organizations can increase successful IoT use by creating and continually updating a multilayer cybersecurity program designed to safeguard their patients.


Phil C. Solomon is the publisher of Revenue Cycle News, a healthcare business information blog and serves as the Vice President of Marketing Strategy for MiraMed, a healthcare revenue cycle outsourcing company.  As an executive leader, he is responsible for creating and executing sales and marketing strategies which drive new business development and client engagement. Phil has over 25 years’ experience consulting on a broad range of healthcare initiatives for clinical and revenue cycle performance improvement.  He has worked with industry’s largest health systems developing executable strategies for revenue enhancement, expense reduction, and clinical transformation. He can be reached at

photo credit: Tumitu Design


OIG Report Reveals Two-Midnight Rule Vulnerabilities

A study by the Office of Inspector General (OIG) has revealed “vulnerabilities” under the Two-Midnight hospital policy that initially went into effect on October 1, 2013.  In response to the findings, OIG has recommended that the Centers for Medicare and Medicaid Services (CMS) improve oversight of hospital billing under the policy and take steps to increase protections for beneficiaries.  As a result, hospitals are likely to see closer scrutiny to determine whether they are appropriately characterizing inpatient and outpatient stays.

According to the study report, released in December 2016, “Hospitals are billing for many short inpatient stays that are potentially inappropriate under the Two-Midnight policy and some of them indicate that Medicare—and beneficiaries—may be paying differently for similar care.”  The study also found that “An increased number of beneficiaries in outpatient stays pay more and have limited access to [skilled nursing facility] services than they would as inpatients.”

Based on a comparison of Medicare hospital claims for FY 2013 and FY 2014, the study identified inpatient stays using Medicare Part A hospital claims and outpatient stays using Part B claims.  A “short stay” was defined as a stay lasting fewer than two midnights and a “long stay” as one lasting two or more midnights.  Claims for short inpatient stays were evaluated to determine whether they adhered to CMS’s criteria for payment under the Two-Midnight policy.

Cost Savings and Patient Benefits

The Two-Midnight rule was initially created as a strategy for controlling healthcare costs and protecting beneficiaries by reducing the number of long outpatient hospital stays.  The rule requires that patients who stay in the hospital longer than 24 hours be admitted as inpatients for medically necessary reasons.  (For additional background, also see CMS Proposes Eliminating Payback Reduction Under Two-Midnight Rule and New Patient Notification of Observation Status Law and the Extension of Two-Midnight Rule, the Enforcement Delay.)

The policy was designed to address three vulnerabilities in the ways hospitals use inpatient and outpatient stays:  1) improper payments for short inpatient stays; 2) adverse consequences for patients with long outpatient stays, including the inability to meet the requirement of three nights as an inpatient in order to qualify for care in a skilled nursing facility; and 3) inconsistencies across hospitals in the designation of admissions as inpatient or outpatient.

CMS expected that the Two-Midnight policy would accomplish three outcomes:  1) decrease the use of short inpatient stays; 2) decrease the use of long outpatient stays; and 3) promote more appropriate and consistent use of inpatient and outpatient stays among hospitals.

Under the rule, the treating physician is responsible for making the decision to admit a beneficiary to the hospital based on such factors as medical history, symptom severity and anticipated care.

Inpatient stays are generally covered if physicians reasonably expect that the beneficiary’s care will last at least two midnights.  Stays expected to last fewer than two midnights are generally paid on an outpatient basis.  Hospitals are paid for inpatient stays under the Inpatient Prospective Payment System (IPPS), in which each stay is classified according to Medicare Severity Diagnosis and Related Group (MS-DRG).  Outpatient stays are paid for under the Outpatient Prospective Payment System (OPPS).  In 2015, CMS began implementing “comprehensive ambulatory payment classifications,” which provide a single payment rate for a primary service and any related secondary services.  Beneficiaries in these circumstances are responsible for 20 percent of a single amount rather than for 20 percent of the amount for each service.

Under the rule, inpatient stays lasting at least two midnights from the date of admission are presumed appropriate for payment; however, those lasting fewer than two midnights are considered open to review for compliance.  The rule also delineates circumstances under which a short inpatient stay can be considered compliant, including stays with:

  • Inpatient-only procedures
  • Mechanical ventilation initiated during the visit
  • An unforeseen circumstance, such as the beneficiary’s death, transfer to another hospital or leaving against medical advice
  • Two or more midnights in the hospital in which outpatient time prior to admission is added to inpatient time.

CMS made two changes in 2016 that loosened requirements under the rule.  It began to allow case-by-case exceptions for inpatient stays that were shorter than at least two midnights.  It also changed enforcement procedures to consist of small sample reviews of medical records by CMS’s Quality Improvement Organizations, rather than reviews by CMS’s Medicare Administrative Contractors.  Previously, compliance issues were addressed with education and follow-up reviews.  Currently, deficiencies are addressed with education, followed by referral to Recovery Auditors for further review if deficiencies persist.

Major Findings

The study report presents three key findings:

Hospital inpatient stays decreased and outpatient stays increased since the implementation of the Two-Midnight policy.

Hospital inpatient stays decreased by about three percent and outpatient stays increased by about eight percent since the policy’s implementation.  Despite these improvements, the findings continue to raise concerns about the cost of these hospitalizations to Medicare and beneficiaries.

More specifically, short inpatient stays decreased more than long outpatient stays from 2013 to 2014 (by about 10 percent and three percent, respectively).  In addition, long inpatient stays decreased by about two percent and short outpatient stays by 11.6 percent.

Despite the changes in hospital billing, vulnerabilities still exist.

  • Hospitals are billing for many potentially inappropriate short inpatient stays under the Two-Midnight policy. Of the total of approximately 1,000,075,000 short inpatient stays in 2014, 39 percent were potentially inappropriate for payment because the claims did not appear to meet the criteria for an appropriate short inpatient stay.  Although short inpatient stays decreased by almost a third from 2013, there were more than 420,000 of them in 2014, and Medicare paid nearly $2.9 billion for potentially inappropriate short inpatient stays.
  • Medicare pays more for some short inpatient stays than for short outpatient stays, although the stays are for similar reasons. There was significant overlap between the reasons for short inpatient stays and short outpatient stays, although they all lasted fewer than two midnights.  The average paid for short inpatient stays and short outpatient stays related to digestive disorders, for example, was approximately $4,500 and $790, respectively.  The large gaps raise concerns that Medicare is paying differently for similar care.
  • Hospitals continue to bill for a large number of long outpatient stays. Many of these stays likely would have met criteria for inpatient admission.  Because providers have a financial incentive to admit patients as inpatients, the large number of outpatient stays suggests other factors at work.  These factors could include difficulty with safe discharges, confusion about the Two-Midnight rule or delays in care.
  • An increased number of beneficiaries in outpatient stays pay more and have limited access to SNF services following hospitalization than they would as inpatients. 2014 saw an increase of almost 16 percent (50,000 cases) from 2013 in outpatient stays that paid more than the inpatient deductible.  Coronary stent insertion accounted for more than one-quarter of these cases.  In addition, an increased number of these patients did not qualify for SNF services in 2014 compared with 2013.

Hospitals continue to vary in how they use inpatient and outpatient stays.

The Two-Midnight rule’s goal of fostering consistent, appropriate use of inpatient and outpatient stays remains a work in progress.  Although about three percent of all hospital stays were short inpatient stays, the range among hospitals was from about one percent to more than five percent (compared with two and eight percent in 2013).  The variation decreased, but inconsistencies among hospitals persisted.  At six percent of all stays in 2014 (a range of two to almost 11 percent), long outpatient stays remained virtually unchanged from the previous year.

In a departure from the goals of the Two-Midnight policy, some hospitals actually increased their use of short inpatient and long outpatient stays between 2013 and 2014.  In some areas, the gap between the policy’s stated goals and the reality in hospitals was even more stark.  For chest pain, for example, the use of short inpatient stays decreased substantially in 2014 and even dropped to zero at some institutions.  At the same time, 29 percent of hospitals increased their use of short inpatient stays for chest pain.

Next Steps

OIG made the following specific recommendations to CMS, with which the agency agreed:

  • As part of routine analysis of hospital billing, target for review the hospitals with high or increasing numbers of potentially inappropriate short inpatient stays.  “We found that hospitals billed for a large number of potentially inappropriate short inpatient stays; for these stays, Medicare paid a total of almost $2.9 billion.  We also found that hospitals may have financial incentives to use short inpatient stays, and that some hospitals increased their use of these stays, which is inconsistent with the stated goals of the Two-Midnight policy,” the report states.
  • Identify and target for review the short inpatient stays that are potentially inappropriate.  Based on recommendations from OIG, CMS will develop tools to effectively identify these short inpatient stays for review.  “In addition, CMS should encourage and expand hospitals use of an existing code that allows them to indicate on Medicare claims a beneficiary’s time spent as an outpatient prior to inpatient admission.  CMS should use this code to add together the beneficiary’s time as an outpatient and time as an inpatient to determine whether the beneficiary spent at least two midnights in hospital in total,” according to the report.  This code, along with the inpatient-only procedure codes and discharge codes on claims will enable CMS to distinguish potentially inappropriate and appropriate stays.
  • Analyze the potential impacts of counting time spent as an outpatient toward the three-night requirement for SNF services so that beneficiaries receiving similar hospital care have similar access to these services.  CMS will review the impact of counting time spent as an outpatient toward the three-night requirement to qualify for SNF services in order to give beneficiaries access to SNF services whether they are inpatients or outpatients.
  • Explore ways of protecting beneficiaries in outpatient stays from paying more than they would have paid as inpatients.  CMS will assess the extent to which beneficiaries in outpatient stays pay more than they would as inpatients and explore methods and policy changes to ensure more equitable cost-sharing with beneficiaries with similar care needs regardless of whether they are inpatients or outpatients.


The Two-Midnight rule is here to stay, and the work of hospitals to comply with the policy continues.  It’s not too soon to give some critical thought to where your organization might fit in relation to some of these new findings, identify trouble spots and start taking corrective action.

For more interesting posts about healthcare business, visit our website at


Phil C. Solomon is the publisher of Revenue Cycle News, a healthcare business information blog and serves as the Vice President of Marketing Strategy for MiraMed, a healthcare revenue cycle outsourcing company.  As an executive leader, he is responsible for creating and executing sales and marketing strategies which drive new business development and client engagement. Phil has over 25 years’ experience consulting on a broad range of healthcare initiatives for clinical and revenue cycle performance improvement.  He has worked with industry’s largest health systems developing executable strategies for revenue enhancement, expense reduction, and clinical transformation. He can be reached at


Trump’s executive order on the ACA: 5 things to know

This is an excellent summary written by Emily Rappleye of Beckers Hospital Review about President Trump’s position on the ACA and how he and his Cabinet are going to pursue repealing the ACA.

President Donald Trump signed an executive order Friday evening aimed at immediately lessening the economic burden of the ACA as Republican lawmakers work on a repeal and replacement plan. Here are five things to know about the scope of the executive order.

1. The order offers broad guidance. It authorizes states and agencies to make changes “to the maximum extent permitted by the law,” which is somewhat limiting. Not much can be done until the heads of the federal departments that oversee the ACA are officially appointed, according to Timothy Jost, a professor at Lexington, Va.-based Washington and Lee University School of Law. Mr. Jost wrote in a Health Affairs blog, “In sum, nothing happens yet, nor is it likely to happen until the heads of HHS, Treasury, and probably Labor, as well as the CMS Administration and IRS Commissioner are in place; even then it will take a while for changes to be put into motion.”

2. The executive order could end the individual mandate. According to Mr. Jost’s blog, the main way the order can undo the individual mandate is by creating new types of hardship exemptions from the penalty. If this were to happen, it could kill the individual insurance markets, which rely on healthy enrollees to help fund coverage for those with pre-existing conditions. Kellyanne Conway, the counselor to the president, told ABC News Saturday President Trump may stop enforcing the mandate. “[H]e wants to get rid of that Obamacare penalty almost immediately, because that is something that is really strangling a lot of Americans to have to pay a penalty,” she said told George Stephanolopoulos on ABC’s “This Week.”

3. It could also expand Medicaid waivers under the ACA, giving states more flexibility in how they implement the law. In particular, the executive order signals “Section 1115 Medicaid waivers will be granted more liberally, but that was expected, and until they are changed, 1115 waiver regulations promulgated by the Obama administration will continue to apply,” according to Mr. Jost. Section 1115 Medicaid waivers allow states to implement their own budget-neutral expansions of Medicaid and CHIP coverage and determine who and what the programs cover.

4. It encourages the creation of interstate insurance markets. This is one of the main goals listed in the order to be executed to “the maximum extent permitted by law.” The sale of insurance across state lines is allowed under the ACA, according to Mr. Jost’s blog, so it is likely we will see this change. Ms. Conway confirmed this in her interview with ABC Saturday. “[H]e’s going to replace this with a plan that allows you to buy insurance across state lines, that is much more centered around the patient and [improves] access to healthcare,” she said.

5. The order could also undo some taxes under the ACA, according to Politico. These include the tax on health insurers and taxes on pharmaceutical companies. It encourages agencies to delay or waive taxes, fees and penalties created under the law. Many of the revenue-generating taxes of the ACA are already on the chopping block in Congress as it works on drafting a reconciliation bill aimed at axing budget-related parts of the ACA.


Phil C. Solomon is the publisher of Revenue Cycle News, a healthcare business information blog and serves as the Vice President of Global Services for MiraMed, a healthcare revenue cycle outsourcing company.  As an executive leader, he is responsible for creating and executing sales and marketing strategies which drive new business development and client engagement. Phil has over 25 years’ experience consulting on a broad range of healthcare initiatives for clinical and revenue cycle performance improvement.  He has worked with industry’s largest health systems developing executable strategies for revenue enhancement, expense reduction, and clinical transformation. He can be reached at


The passage of the Medicare Access and Children’s Health Insurance Program (CHIP) Reauthorization Act of 2015 (MACRA)1  has contributed to changes in healthcare delivery by redesigning Medicare’s payment and delivery methods for physicians and other clinicians.

MACRA repealed the highly debated sustainable growth rate (SGR) formula which eliminates the 21 percent across-the-board cut in Medicare’s provider payments.  This legislation supports Medicare’s efforts to move rapidly from the current fee-for-service (FFS) reimbursement model toward value-based payments for physician services.

Healthcare in the United States is in the midst of a financial and clinical overhaul driven by new legislation that attempts to improve outcomes and cut costs.  Reinventing our healthcare system across the entire care continuum and getting over 16 million healthcare workers2 to follow new rules and regulations is about as complicated as putting a man on the moon.  Luckily we were successful in that endeavor and we expect to be equally successful implementing healthcare’s sweeping changes.

Industry leaders and policymakers have tried countless incremental fixes designed at improving care and reducing costs—but none has had much impact.  In 2010, the catalyst for reform became law with the passage of the Patient Protection and Affordable Care Act also known as the Affordable Care Act (ACA).The law established a Health Insurance Marketplace4 designed to improve consumer access to affordable healthcare through private payers and provided strong financial incentives in publicly financed healthcare programs tying provider payment to quality of care and efficiency.

Building on the principles set by the ACA and the passing of MACRA, the Centers for Medicare and Medicaid Services (CMS) has targeted 30 percent of Medicare payments to be tied to the quality of care or value through alternative payment models by the end of 2016 and 50 percent by the end of 2018.

As our population ages, it is more important than ever to have the proper provider incentives in place to care for the almost 60 million Americans that are eligible for Medicare today and the projected 80 million beneficiaries that are estimated by 2030.4,5

The MACRA Program  

MACRA provides CMS the leverage required to drive quality measure development with the aim of providing patients with better care while spending more intelligently and improving clinical outcomes.   With the passing of MACRA, there are five significant changes to the Medicare payment system:

  1. Ending the sustainable growth rate formula;
  2. Establishing a new framework for rewarding value;
  3. Creating a built-in period of financial stability for providers;
  4. Combining existing quality reporting programs into one system; and
  5. Providing support for physician practice transformation.

The MACRA legislation is intended to advance CMS’s goal for a value-based payment system.  Called by CMS as the “Path to Value”6 from 2015 through 2021 and beyond, MACRA allows healthcare providers to participate in one of two new quality incentive programs:

  1. Merit-Based Incentive Payment System (MIPS)
  2. Alternative Payment Models (APMs)

With MACRA, a new payment framework consisting of annual fee updates and incentives will be implemented for MIPS and APMs. The schedule for the program is:

  • 1/1/2015 through 6/30/2015: 0 percent update
  • 7/1/2015 through 12/21/2015: 0.5 percent update
  • 2016 through 2019: 0.5 percent update each year (subject to MIPS adjustment beginning in 2019)
  • 2020 through 2025: 0 percent update each year (subject to MIPS and APM adjustment)
  • 2026 and beyond: Annual updates during this period consist of:
  1. A “qualifying APM conversion factor” for professionals participating in qualified APMs is set at 0.75 percent; and
  2. A “non-qualifying APM conversion factor” for all other professionals, set at 0.25 percent.

The Merit-Based Incentive Payment System (MIPS)

The MIPS7 is a new program that combines parts of:

The basis of the program has four fundamental attributes:

  1. Quality: Includes existing measures for quality performance programs, in addition to new measures developed through notice and comment rulemaking by CMS, and actions used by qualified clinical data registries and population-based measures;
  2. Resource Use: Includes measures used in the current VBM program, with other enhancements based on public comments. These refinements must ascertain specific clinical criteria and patient characteristics to include patients in care episode and patient condition groups for resource use measurement purposes.  The process also must develop patient relationship categories and codes that distinguish the relationship with a physician toward a patient at the time of furnishing an item or service;
  3. Clinical Practice Improvement Activities (CPIA): Reflects professionals’ efforts to improve clinical practice or care delivery resulting in improved outcomes that include at least the following: Expanded practice access population management; Care coordination; Beneficiary engagement; and Patient safety and practice assessments in an alternative payment model.
  1. Meaningful Use (MU): Includes meeting current EHR MU requirements, as demonstrated by the utilization of a certified system.

The MIPS program that adjusts payments to providers is entirely voluntary. The fee-for-service8 payment model is still available to those providers who want to follow it.

Beginning in 2017, MIPS will annually measure Medicare Part B providers in four performance categories to derive a “MIPS score” (0 to 100), which can significantly change a provider’s yearly Medicare reimbursement.

MIPS measurements will be updated yearly through public notice, and the results are available on the CMS Physician Compare website.  While it was not the intention of the program, making this data available to consumers is a giant leap in the right direction for more consumer transparency.

Those who are participating in the MIPS program will be eligible for positive, negative or no payment adjustments, plus an opportunity to be awarded additional incentive payment adjustments based on composite performance scores.  Payment adjustment criteria are:

  • Positive Adjustments: Eligible professionals whose composite performance scores are above the threshold will receive a positive payment adjustment, with higher performance scores receiving proportionally larger incentive payments.  The magnitude of positive payment adjustments will vary and will maintain budget neutrality considering the amount of negative payment adjustments (except in certain limited circumstances), with a cap of three times the annual cap for negative payment adjustments.
  • Negative Adjustments: The maximum negative adjustment will be as follows: four percent in 2019, five percent in 2020, seven percent in 2021, and zero percent in 2022 and subsequent years.  The maximum negative adjustment will apply to eligible professionals whose composite performance score falls between zero and one-fourth of the performance threshold and smaller negative adjustments will apply to composite performance scores closer to the limit.  Such negative adjustments will fund positive payment adjustments for professionals with composite performance scores above the threshold.
  • Zero Adjustments: Composite performance scores at the threshold will receive no MIPS payment adjustment.
  • Additional Incentive Payment Adjustment: An additional adjustment will be available for exceptional performance on a linear distribution basis, with better performers receiving larger incentive payments.  The aggregated incentive payments will equal $500 million annually from 2019 through 2024.


The Alternative Payment Models (APM)

MACRA provides incentive payments for EPs participating in certain types of APMs.9  The program is for qualified providers who derive a significant portion of their patients and payments from APMs that include both risk for financial losses and quality measurement.  MACRA requires quality measures used in APMs to be comparable to the quality measures used in MIPS.

Medicare defines any of the following as an APM:

  • An innovative payment model expanded under the Center for Medicare & Medicaid Innovation (CMMI), including Comprehensive Primary Care (CPC) initiative participants;
  • A Medicare Shared Savings Program accountable care organization (ACO);
  • Patient-centered medical homes and bundled payment models; and
  • Medicare Health Care Quality Demonstration Program or Medicare Acute Care Episode Demonstration Program, or another demonstration program required by federal law.

Becoming APM-qualified isn’t easy. Providers must meet additional qualifying principles for APMs.  They require participants to meet all of the following criteria:

  • Uses quality measures comparable to measures under the MIPS;
  • Uses certified electronic health record (EHR) technology;
  • Bears more than minimal financial risk OR is a medical home expanded under the CMMI; and
  • Has increasing percentage of payments linked to value through Medicare or all-payer APMs.


If a provider chooses, they can opt to stay in the fee-for-service program until at least 2025.  That said, CMS is encouraging industry stakeholders to move into the APM program because it incentivizes the delivery of value-based care.  The difference between the fee-for-service program and APM model is:

Category One:  Fee-for-service payment – no link to quality and value;

Category Two:  Fee-for-service payment – link to quality and value; and

  1. Foundational payments for infrastructure and operations
  2. Pay for reporting
  3. Rewards for performance
  4. Penalties for performance

Category Three:  APM built on quality and value fee-for-service architecture; and

  1. APMs with upside gainsharing
  2. APMs with downside risk

Category Four:  Population-based payment (future program); and

  1. Condition-specific population-based- payment
  2. Comprehensive population-based payment

MACRA Countdown to Go-Live

Many changes must occur before the 2019 go-live date.  The illustration below compares high-level implementation milestones and timeframes of the MIPS and APM programs.

Source: Making Way for MACRA: Positioning Your Organization for Payment Reform,

Before the kickoff of MACRA, the completion of many mandated tasks for measurement, development, processes, design and reporting must be in place, including:

  • Policy discussion period for MIPS and APM;
  • Consideration planning and measurement development;
  • Reporting and financial adjustments; and
  • Annual updating of program measures.

The Effects of MACRA for Providers and Healthcare Stakeholders

In his article, Making Way for MACRA Positioning Your Organization for Payment Reform,10 Dave Wofford, a senior manager at ECG Healthcare Management Consultants, highlighted six areas that providers should consider between now and when MACRA kicks-off in 2019:

  1. Changes to CMS’s payment methodologies for nonphysician services should be expected as well.

CMS’s decision to measure and pay differently for physician resource utilization will affect costs in every setting where physicians provide services.  Real changes in physician behavior regarding ordered services will transform services payment.  We anticipate changes will begin to occur around 2022, once CMS has several years of data from this program.

  1. Understanding the relationship between Medicare Parts A and B will become more complicated.

Providers will need to become more sophisticated in understanding how performance under Part B—particularly the resource utilization incentive—will impact reimbursement under Part A.  Therefore, providers must evaluate their Medicare strategy and participation in various programs (e.g., MIPS, APMs, Medicare Advantage) as it may not be effective simply to be a passive participant in Medicare FFS.

  1. Physician practice consolidation and acquisitions will continue.

Many smaller physician practices are unlikely to have the internal resources necessary to take full advantage of, and manage their performance against, MIPS or participate in an APM.  This will likely accelerate consolidation into larger freestanding physician practices or integrated delivery systems.  Additionally, given the impact that MIPS’s resource utilization feature will have on hospital reimbursement, health systems may be even more motivated to employ physicians to shape their incentives appropriately.

  1. Physician compensation and service agreements will need to evolve.

Physician compensation arrangements, as well as professional services agreements, will need to include physician incentives that reflect those being implemented by CMS.  There will need to be a strategy to address the disparate performances from different physicians; certain physicians will have the potential for much lower or higher reimbursement rates.  The question of who (i.e., the physician or the health system) bears the risk and reaps the reward will be a hot topic, especially considering the cost associated with ramping up technology capabilities for tracking the quality metrics built into MIPS.

While these changes will not happen overnight, they will begin to take place within just a few years.  Therefore, assessing the implications of MACRA upon any long-term physician contracts that are currently in negotiation or up for renegotiation should happen shortly.  If necessary, flexibility should be built into the contract language to accommodate future payment incentives.

  1. Commercial contracts will need to be amended.

Many commercial payor contracts contain language that defines reimbursement regarding a percentage of Medicare.  While that has worked well in the traditional FFS world, it will not translate with the introduction of MIPS, and many commercial contracts do not have sufficient flexibility in them to accommodate this new feature.  Therefore, commercial payor contracts should be reviewed to determine their compatibility with MACRA and language should be adjusted as necessary.

  1. Providers can have a voice in shaping the final product.

MACRA involves an extraordinary degree of delegation to CMS in fleshing out the details of the plan and it mandates that stakeholder input is considered in developing these finer points. Therefore, providers should take advantage of the opportunity to make their voices heard during the stakeholder comment and review process.


The passing of MACRA transcends the repealing of the SGR formula and signals the government’s continued desire to evolve payment models that incentivize providers to improve patient care, reduce healthcare costs and make a significant step toward an industry-wide value-based payment system.

Healthcare leaders should stay ahead of the juggernaut of information by monitoring CMS’ release of information detailing how the agency will implement MIPS and the APM incentive payments, including the creation of composite scoring criteria and performance thresholds.


  1. R.2 – Medicare Access and CHIP Reauthorization Act of 2015, 114th Congress (2015-2016)
  2. S. Bureau of Labor Statistics states that there are 16 million medical-related jobs,
  3. Patient Protection and Affordable Care Act,
  4. Health Insurance Marketplace,
  5. The next generation of Medicare beneficiaries,
  6. CMS, Path to Value,
  7. The Merit-Based Incentive Payment System (MIPS),
  8. CMS fee-for-service payment model,
  9. Alternative Payment Models,
  10. Making Way for MACRA: Positioning Your Organization for Payment Reform,


Phil C. Solomon is the publisher of Revenue Cycle News, a healthcare business information blog and serves as the Vice President of Global Services for MiraMed, a healthcare revenue cycle outsourcing company.  As an executive leader, he is responsible for creating and executing sales and marketing strategies which drive new business development and client engagement. Phil has over 25 years’ experience consulting on a broad range of healthcare initiatives for clinical and revenue cycle performance improvement.  He has worked with industry’s largest health systems developing executable strategies for revenue enhancement, expense reduction, and clinical transformation. He can be reached at


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Healthcare Consumerism Has “Won the Day”

by Phil C. Solomon January 10, 2017

Consumerism and Personal Debt Accumulation Merriam-Webster defines consumerism as the promotion of the consumer’s interests and the theory that an increasing consumption of goods is economically desirable.  The United States (U.S.) has become a society of increasing consumerism, where individuals are making increasing levels of purchases for a variety of consumer goods. Retailers and service […]

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Providers Are Leaving Money on the Table – Proper HCC Coding Fixes It

by Phil C. Solomon December 1, 2016

The Centers for Medicare and Medicaid Service’s (CMS) Hierarchical Condition Category (HCC) risk adjustment model calculates risk scores, which will adjust capitated payments made for aged and disabled beneficiaries enrolled in Medicare Advantage (MA) and other plans. The CMS-HCC model design uses two risk segments with separate coefficients to reflect the cost patterns of beneficiaries.  The […]

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