My colleague, David Johnson wrote this insightful book and I recommend it highly.

Market vs. Medicine: America’s Epic Battle for Better, Affordable Healthcare is a must read for any healthcare business owner- large or small. Get your copy on May 9. Stay tuned for updates. – See more at:


Learn about 4sight Health:
4sight Health operates at the intersection of healthcare economics, strategy and capital formation. The company’s four-stage analytic (Assess. Align. Adapt. Advance.) reflects the bottom-up, evolutionary character of disruptive, market-driven change and guides 4sight Health’s professional services, which include the following:


Regular commentary on market-driven reform
Public speaking
Board education
Strategic advice
Capital formation design and execution
Advancing organizational change
Venture investing: strategic partnerships; capital funding; product/service design
– See more at:

  • Regular commentary on market-driven reform
  • Public speaking
  • Board education
  • Strategic advice
  • Capital formation design and execution
  • Advancing organizational change
  • Venture investing: strategic partnerships; capital funding; product/service design

– See more at:

Learn about the author: David W. Johnson, CEO

Dave is the CEO and founder of 4sight Health.  Mr. Johnson is currently writing Market vs. Medicine: America’s Epic Fight for Better, Affordable Healthcare that will publish on May 9, 2016. He is the author-in-residence at the Health Management Academy, writes the widely-read “Market Corner” commentaries each week and contributes regularly to Huron Consulting’s Perspectives. He is an investor and board member for three early-stage healthcare companies: Bienestar, Curate Health and HealthiPass.

During his 28-year investment-banking career, Mr. Johnson managed over $30 billion in healthcare revenue bonds and led significant strategic advisory engagements for his health system clients. Dave specializes in capital formation, asset-liability management, enterprise risk analytics and new business-model development. His expertise encompasses health policy, academic medicine, economics, statistics, behavioral finance, disruptive innovation, organizational change and complexity theory.

Mr. Johnson holds a Bachelors of Arts degree in English Literature from Colgate University and a Master’s degree in Public Policy from Harvard University. Dave was a Peace Corps Volunteer in Liberia, West Africa and a United States Presidential Management Intern. His civic and professional affiliations have included Harvard Medical School (Visiting Committee); the Chicago Council on Global Affairs (Board, Executive and Finance Committees); the University of Chicago (Harris School of Public Policy’s Visiting Committee and Student Engagement Sub-Committee Chair); the Health Management Academy; Harvard School of Public Health; CHRISTUS Health (Audit
Committee); the British-American Project (U.S. Chair); and Terence Cardinal Cooke Health Center (Finance Committee Chair).

Dave enjoys reading, traveling and has run ten marathons.

– See more at:

Enjoy the book and reach out to David if you have any questions ~ Phil C. Solomon




MACRA – More Changes Coming to Healthcare Delivery

CMSThe 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 reduce 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 appropriate 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

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 builtin 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 utilized in the current VBM program, with additional enhancements based on public input. 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 (CPIA): Reflects professionals’ efforts to improve clinical practice or care delivery resulting in improved outcomes that include at least the following:
  1. Expanded practice access population management;
  2. Care coordination;
  3. Beneficiary engagement; and
  4. 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.  The performance categories reflect the following:

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 nothing 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 illustration below shows the milestones for payment updates and risk/reward compensation.

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

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.

The illustration below shows the timing of updates and revenue requirements for APMs.

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

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: (future program) Population-based payment

  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, 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 or on Twitter @philcsolomon.





dollarThe U.S. Department of Health & Human Services (HHS) Office for Civil Rights (OCR) announced the beginning of the 2016 Phase Two Health Insurance Portability and Accountability Act (HIPAA) Audit Program.  This program is designed to evaluate the compliance efforts of covered entities and their business associates (BA) with the HIPAA Privacy, Security and Breach Notification Rules (HPSBNR).

Phase Two audits will act as an additional regulatory compliance evaluation tool that supports OCR’s current enforcement strategies.  The goal of the Phase Two HIPAA audits is to ascertain best practices and proactively find and mitigate risks and vulnerabilities to protected health information (PHI).  These audits will mainly be desk audits and some will be on-site evaluations.

Why are Phase Two HIPAA Audits so Important?

HIPAA security has become a lightning rod issue in the United States (U.S.) because of the growing threat of cyber-crimes that include computer hacking and identity theft.  From October of 2009 through March 2016 the Secretary of HHS’s Breach of Unsecured Protected Health Information Portal documented over 157 million individuals who were affected by PHI breaches.  Section 13402(e)(4) of the Health Information Technology for Economic and Clinical Health (HITECH), requires the Secretary to post a list and description of breaches of unsecured PHI affecting 500 or more individuals.  Initiating Phase Two audits are a proactive measure led by the OCR to evaluate readiness, compliance and develop a strategy to reduce PHI breaches.

According to a Redspin, in their 2015 Healthcare Breach Report of PHI, the sixth annual analysis of the causes of PHI breaches reported to the OCR, Redspin found that PHI breaches have evolved from typical employee error that includes loss or theft of unencrypted portable computing devices to more sophisticated malicious acts.

“2015 was a watershed (or perhaps a ‘washout’) year in healthcare IT security,” notes the report.  “In previous reports, we warned that ‘the threat from malicious outsiders—hackers—has the potential to wreak havoc on the healthcare industry.’  In 2015, havoc was wrought.”

Nine out of 10 breach incidents were the result of criminal hacking.  Those occurrences amounted to 98 percent of all patient records breached in 2015.  Daniel W. Berger, President of Redspin, said, “Healthcare organizations are under attack.  For those entrusted to protect patient data, the security challenges are now much more difficult.”

The report also indicated that 88 percent of all records breached stemmed from the top three cases in 2015.  Anthem led the pack as the largest healthcare breach in U.S. history, involving 79 million patient medical records.

The statistics on healthcare data breaches continues to be a growing concern.  According to the Identity Theft Resource Center, healthcare data breaches accounted for 35.5 percent of all breaches in 2015 which surprisingly was a drop of 8.6 percent from a record high of 44.1 percent in 2014.

However, the healthcare industry is in no position to celebrate.  While financial data has the greatest number of data breaches, a single PHI record is worth roughly 50 times more than a credit card or Social Security number.  Medical records have detailed demographics and other sensitive information, including commercial and government insurance and prescription data.  Unlike credit card numbers or other financial information, when a theft of PHI happens, the data is irrecoverable.

One in 10 Americans have been affected by large health data breaches, and employee negligence is considered the greatest security risk reported in the 2015 Ponemon Institute’s Fifth Annual Benchmark Study (PIABS) on Patient Privacy and Data Security report. Data breaches in healthcare put patient data at risk and are costly.  Based on the results of the PIABS study, the survey found:

  • The cost to the industry is over $6 billion annually;
  • Over 40 percent of the respondents had more than five data breaches over the past two years;
  • The average cost of a data breach for healthcare organizations is estimated to be more than $2.1 million; and
  • The average cost of a data breach to Business Associates’ (BA) is more than $1 million.

Enforcing HIPAA Privacy and Security Rules by OCR is serious business.  On March 16, 2016, the Feinstein Institute for Medical Research in New York entered into an agreement with the OCR to pay $3.9 million to settle violations of HIPAA rules.  In addition to the penalty, Feinstein agreed to initiate a corrective plan to remediate deficiencies that led to the breach.  This action stemmed from a September of 2012 incident when a laptop was stolen containing unencrypted, electronic PHI from a Feinstein employee’s car.  The laptop contained information on approximately 13,000 Feinstein patients and research participants, including names, dates of birth, addresses, social security numbers, diagnoses, laboratory results, medications and other medical information regarding subjects’ participation in a research study.  This case demonstrates OCRs commitment to enforcing and penalizing those who violate the HIPAA Privacy and Security Rules.

Despite the potential risk of financial exposure, half of all healthcare organizations surveyed in the PIABS report have little or no confidence in their ability to detect all patient data loss or theft.  This is concerning because, for the first time in history, criminal attacks are the number one cause of data breaches in healthcare.  Hacking healthcare’s technology infrastructure is up 125 percent compared to five years ago.  The illustration below highlights the rise in hacking incidents.

Source:  Identity Theft Resource Center Breach Report Hits Near-Record High in 2015,

A new type of cyber-crime has emerged in the health industry affecting healthcare providers who have their data hijacked and held for ransom.  Methodist Hospital, located in Henderson, Kentucky, has become the third healthcare entity in recent weeks to be victimized by ransomware.  The first was Hollywood Presbyterian Medical Center in Los Angeles California, which paid $17,000 to the hackers to regain access to its electronic medical system, and the second known victim was Ottawa Hospital in Ontario, Canada, which had to wipe the system of the affected computers to regain access to its medical data.  It appears that data held for ransom will continue to increase and will pose a serious business threat for covered entities and BAs.

Based on the rise in security threats, it would make sense that healthcare executives would be acutely focused on data security and make it a top priority, but they haven’t.  According to the American College of Healthcare Executives’ (ACHE) annual survey of top issues confronting hospitals in 2015, Chief Executive Officer’s (CEO) ranked the top ten overarching issues affecting their hospitals, and they identified other specific areas of concern.  There was more than 350 community hospital CEOs who participated in the survey.

Implementation of Phase One and Two HIPAA Audits

Phase One of OCR’s PSBNR Audit Program has concluded.  The program established critical national standards for the privacy and security of PHI and the Health Information Technology for Economic and Clinical Health Act (HITECH) and set breach notification requirements to provide greater transparency for individuals whose information may be at risk.

HITECH requires the OCR office to conduct audits of covered entities and BAs assuring adherence of the HPSBNR.  In 2011 and 2012, OCR implemented the Phase One audit program to assess the controls and processes and conducted an extensive evaluation of the effectiveness of the pilot program.  For more information about Phase One audits, you can view the post: OCR Releases Guidance Regarding Patients’ Access to PHI on MiraMed’s website.

Drawing on that experience and the results of the evaluation, OCR has implemented Phase Two of the program.  According to OCR, Phase Two audits are designed to assess compliance with the HPSBNR for covered entities and their business associates.  These audits will supplement OCR’s other enforcement tools, such as complaint investigations and reviews.  OCR is attempting to identify best practices and proactively uncover and address risks and vulnerabilities to protected PHI.

Speaking at the 24th National HIPAA Summit in the District of Columbia on March 21, 2016, OCR Director Jocelyn Samuels announced the Phase Two launch, saying that the effort will comprise more than 200 desk and on-site audits.  Samuels noted that OCR has also developed an audit-specific portal to enable notified entities to submit requested documentation in digital form.

Desk audits will make up the first two rounds of audits, Samuels said.  The first series of desk audits will focus on covered entities, according to an OCR announcement, while the second round of audits will focus on business associates.  By December 2016, all desk audits be completed.  “We’ll be looking at risk analysis and risk management, notices of privacy practices and access and response to requests for access, and content timeliness of notifications,” Samuels said.  Onsite audits, according to OCR, will focus on “a broader scope of requirements” compared to the desk audits.

The audit program, Samuels continued, will give OCR a way to examine different sectors and geographic regions of the industry, as well as different sized entities, to evaluate some of the risks they may be facing before those risks “ripen” into breaches.

“We don’t necessarily get to see these things through the complaints we receive, and by the time we get a breach report, it’s too late to prevent a problem,” she said.  “We really do look at this as a valuable way for us to get out in front of potential problems and to direct our guidance to the issues that we see occurring in ways that we hope will be more useful to the regulated community.”

OCR’s Phase Two audits will increase industry cognizance of compliance requirements and identify where technical assistance is needed due to issues uncovered through the audits.  The goal of the audit program is to give stakeholders the tools and guidance to improve industry compliance, self-evaluation and the prevention of breaches.

Concurrent with the recent Phase Two audit announcement, OCR has provided a list of 12 frequently asked questions on the HHS website to help covered entities and BAs better understand the program.  They are:

1. When Will the Next Round of Audits Commence?

Phase Two of OCR’s HIPAA audit program is currently underway.  OCR has begun to obtain and verify contact information to identify covered entities and business associates of various types and determine which are appropriate to be included in potential auditee pools.  Communications from OCR will be sent via email and may be incorrectly classified as spam.  If your entity’s spam filtering and virus protection are automatically enabled, we expect you to check your junk or spam email folder for emails from OCR;

2. Who Will Be Audited?

Every covered entity and business associate is eligible for an audit.  These include covered individual and organizational providers of health services; health plans of all sizes and functions; healthcare clearinghouses; and a range of business associates of these entities.  We expect covered entities and business associates to provide the auditors their full cooperation and support.

3. On What Basis Will Auditees Be Selected?

For this phase of the audit program, OCR is identifying pools of covered entities and business associates that represent a wide range of health care providers, health plans, health care clearinghouses and business associates.  By looking at a broad spectrum of audit candidates, OCR can better assess HIPAA compliance across the industry–factoring in size, types and operations of potential auditees.  Sampling criteria for auditee selection will include size of the entity, affiliation with other healthcare organizations, the type of entity and its relationship to individuals, whether an organization is public or private, geographic factors, and present enforcement activity with OCR.  OCR will not audit entities with an open complaint investigation or that are currently undergoing a compliance review.

4. How Will the Selection Process Work?

Once entity contact information is obtained, a questionnaire designed to gather data about the size, type, and operations of potential auditees will be sent to covered entities and business associates.  As a part of the pre-audit screening questionnaire, OCR is asking that entities identify their business associates.  We encourage covered entities to prepare a list of each business associate with contact information so that they are able to respond to this request.  OCR will conduct a random sample of entities in the audit pool.  Selected auditees will then be notified of their participation.

If a covered entity or business associate fails to respond to information requests, OCR will use publically available information about the entity to create its audit pool.  An entity that does not respond to OCR may still be selected for an audit or subject to a compliance review.

5. How Will the Audit Program Work?

OCR plans to conduct desk and onsite audits for both covered entities and their business associates.  The first set of audits will be desk audits of covered entities followed by a second round of desk audits of business associates.  These audits will examine compliance with specific requirements of the Privacy, Security, or Breach Notification Rules and auditees will be notified of the subject(s) of their audit in a document request letter.  All desk audits in this phase will be completed by the end of December 2016.

The third set of audits will be onsite and will examine a broader scope of requirements from the HIPAA Rules than desk audits.  Some desk auditees may be subject to a subsequent onsite audit.

The audit process will employ common audit techniques.  Entities selected for an audit will be sent an email notification of their selection and will be asked to provide documents and other data in response to a document request letter.  Audited entities will submit documents online via a new secure audit portal on OCR’s website.  There will be fewer in-person visits during these Phase Two audits than in Phase One, but auditees should be prepared for a site visit when OCR deems it appropriate.  Auditors will review documentation and then develop and share draft findings with the entity.  Auditees will have the opportunity to respond to these draft findings; their written responses will be included in the final audit report.  Audit reports generally describe how the audit was conducted, discuss any findings and contain entity responses to the draft findings.

6. What If an Entity Doesn’t Respond to OCR’s Requests for Information?

If an entity does not respond to requests for information from OCR, including address verification, the pre-screening audit questionnaire and the document request of those selected entities, OCR will use publically available information about the entity to create its audit pool.  An entity that does not respond to OCR may still be selected for an audit or subject to a compliance review.

7. What is the General Timeline for an Audit?

In the coming months, OCR will notify the selected covered entities in writing through email about their selection for a desk audit.  The OCR notification letter will introduce the audit team, explain the audit process and discuss OCR’s expectations in more detail.  In addition, the letter will include initial requests for documentation.  OCR expects covered entities that are the subject of an audit to submit requested information via OCR’s secure portal within 10 business days of the date on the information request.  All documents are to be in digital form and submitted electronically via the secure online portal.

After these documents are received, the auditor will review the information submitted and provide the auditee with draft findings.  Auditees will have 10 business days to review and return written comments, if any, to the auditor.  The auditor will complete a final audit report for each entity within 30 business days after the auditee’s response.  OCR will share a copy of the final report with the audited entity.

While conducting desk audits of covered entities, OCR will replicate the notification and document request process for initiating desk audits of selected business associates.  OCR will share a copy of the final report with the audited business associate.

Similarly, entities will be notified via email of their selection for an onsite audit.  The auditors will schedule an entrance conference and provide more information about the onsite audit process and expectations for the audit.  Each onsite audit will be conducted over three to five days onsite, depending on the size of the entity.  Onsite audits will be more comprehensive than desk audits and cover a wider range of requirements from the HIPAA Rules.  Like the desk audit, entities will have 10 business days to review the draft findings and provide written comments to the auditor.  The auditor will complete a final audit report for each entity within 30 business days after the auditee’s response.  OCR will share a copy of the final report with the audited entity.

8. What Happens After an Audit?

Audits are primarily a compliance improvement activity.  OCR will review and analyze information from the final reports.  The aggregated results of the audits will enable OCR to better understand compliance efforts with particular aspects of the HIPAA Rules.  Generally, OCR will use the audit reports to determine what types of technical assistance should be developed and what types of corrective action would be most helpful.  Through the information gleaned from the audits, OCR will develop tools and guidance to assist the industry in compliance self-evaluation and in preventing breaches.

Should an audit report indicate a serious compliance issue, OCR may initiate a compliance review to further investigate.  OCR will not post a listing of audited entities or the findings of an individual audit which clearly identifies the audited entity.  However, under the Freedom of Information Act (FOIA), OCR may be required to release audit notification letters and other information about these audits upon request by the public.  In the event OCR receives such a request, it will abide by the FOIA regulations.

9. How Will Consumers Be Affected?

The audit program is an important tool to help assure compliance with HIPAA protections, for the benefit of individuals. For example, the audit program may uncover promising practices, or reasons health information breaches are occurring and will help OCR create tools for covered entities and business associates to better protect individually identifiable health information.  Concerns about compliance identified and corrected through an audit will serve to improve the privacy and security of health records.  The technical assistance and promising practices that OCR generates will also assist covered entities and business associates in improving their efforts to keep health records safe and secure.  During the audit process, OCR will continue to accept complaints from individuals and to launch compliance reviews where warranted; covered entities and business associates’ compliance obligations remain in full effect.

10. Will Audits Differ Depending on the Size and Type of Participants?

The audit protocols are designed to work with a broad range of covered entities and business associates, but their application may vary depending on the size and complexity of the entity being audited.

11. Will Auditors Look at State-Specific Privacy and Security Rules in Addition to HIPAA’s Privacy, Security and Breach Notification Rules?

No, the scope of the audit program does not extend beyond the Privacy, Security and Breach Notification Rules.

12. Who is Responsible for Paying the On-Site Auditors?

The Department of Health and Human Services is responsible for the onsite auditors.  Neither covered entities nor their business associates are responsible for the costs of the audit program.


The Phase Two audit program is a work-in-progress.  OCR has indicated that it will post updated audit protocols to reflect the HIPAA Omnibus Rulemaking and can be used as a tool for organizations to conduct their internal self-audits as part of their HIPAA compliance activities.  OCR plans to develop new tools and guidance to assist the industry in compliance, self-evaluation and breach prevention strategies.  The OCRs goal is to evaluate the results and procedures used in the Phase Two audits to develop a permanent audit program.

In preparation of the Phase Two audits, OCR recommends that covered entities and BAs pay extra attention to areas that represent “heightened risk.”  They are:

  • Risk assessment;
  • Individuals’ right to access their PHI;
  • Authorizations;
  • Minimum necessary use and disclosure;
  • Notice of privacy practices;
  • Breach notification and incident response;
  • Access controls;
  • Encryption; and
  • Logging.

Moreover, if covered entities and BAs focus on the following four primary HIPAA compliance actions, the likelihood of a positive outcome to a Phase Two audit is much greater.  They are:

  1. Ensure the confidentiality, integrity and availability of all electronic protected health information the covered entity or business associate creates, receives, maintains, or transmits;
  2. Protect against any reasonably anticipated threats or hazards to the security or integrity of such information;
  3. Protect against any reasonably anticipated uses or disclosures of such information that are not permitted or required under [the regulations]; and
  4. Ensure compliance with [the regulations] by its workforce. 45 CFR §164.306(a).

1. 45 CFR § 164.502(e), 164.504(e), 164.532(d) and (e), A Business Associate is any company or person that is exposed to, handles or works with the data in medical records of the medical entities they are contracted with.


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.  Phil has over 25 years’ experience consulting on a broad range of healthcare initiatives for clinical, financial and revenue cycle performance improvement and has worked with some of the industry’s largest health systems developing executable strategies for revenue enhancement, expense reduction, and clinical transformation. Previously, he was the CEO of a Fast Tech 50, healthcare technology firm, a principal executive at an INC Magazine’s top 500 Fastest Growing Private Companies in the U.S. and he has held various senior leadership positions with national and global business process outsourcing firms. He is an active member of the HFMA Georgia Chapter, has written over 250 articles about revenue cycle optimization and healthcare reform and is often featured as a speaker at industry educational events. You can reach him at, 404-849-8065 or on Twitter @philcsolomon.


Population Health’s Under Developed Capabilities 

Despite remarkable medical advances, Americans are sicker today than ever.  With slow inevitability, individuals and society are accepting responsibility for improving our national health.  Addressing obesity and the chronic disease it spawns (see graphic) is America’s principal health challenge.  A  factsheet by the Partnership to Fight Chronic obDisease details  scope and impact.  133 million Americans have chronic disease.  It accounts for 81% of hospital admissions, 91% of prescriptions and 76% of physician visits.  As chronic disease swells, healthcare spending climbs, national productivity declines and income inequality expands.  Unfortunately, the U.S. system lacks the care management capabilities to fight obesity and diminish chronic disease.  Health companies that develop these capabilities will experience expansive demand for their services.

Population Health Conundrums: Structural; Behavioral and Environmental
Our lifestyle causes unprecedented and increasing levels of disease, disability and medical expenditure. Significant structural, biological, and environmental factors contribute. While daunting, addressing the health system’s structural challenges is easier than overcoming the biological and environmental realities that shape modern living.

Structural: Chronic disease consumes over 70% of U.S. healthcare expenditure. Unfortunately, treatment, not prevention, reigns. There is ample money for amputating feet, but little to manage the diabetes causing the condition. Perverse financial incentives support treatment-centric delivery with the following structural flaws:

• Overtreatment
• Payment for medical activity, not outcomes
• Disproportionate specialty care
• Excessive medical error
• Excessive end-of-life care
• Excessive malpractice insurance and litigation
• Underinvestment in primary care

To their credit, enlightened health systems are attacking the system’s structural flaws by incorporating evidenced-based solutions. They’re making real progress. Unfortunately, it’s not enough. Advancing population health requires modifying deep-seated biologically and environmentally-based behaviors.

Biological: To survive in the Serengeti, humans learned to walk long distances, think on our feet, live in cooperative communities, respond quickly to threats and eat mostly plants. Evolution enabled humans to live off the land and avoid saber-toothed tigers, but did not equip us for office work, abundant food and prolonged stress. Our “modern” lifestyle causes heart disease, cancer, osteoporosis, depression and dementia. Compounding the challenge, America’s growtreatment-centric health system responds to disease, not its sources:

• Inactivity: too much sedentary work and entertainment
• Chronic Stress: “fight or flight” mechanisms trigger prolonged adrenalin and cortisol release that damage immune systems
• Overeating: more die from too much food than too little
• Sugar, Fat, Salt: unhealthy processed foods short-circuit the body’s systems for regulating nutrient consumption
• Sleep Deprivation: impairs decision-making and weakens the immune system
Environmental: Most human behavior is habitual. We respond without thinking to environmental cues carved into our neural circuitry. This works well except when our habits (e.g. afternoon cookies) reinforce unhealthy behaviors. Overcoming bad habits require developing new neural pathways that ignore salient environmental cues and redirect behavior. This is difficult because the old neural pathways don’t disappear. Ask anyone who has tried to quit smoking.

Environmental stresses include:
• Stimulus Overload: constant bombardment of sophisticated emotional messaging
• Isolation: “wired” to live in close-knit, social communities, isolated individuals experience more depression and Food kiddisease.
• Inequality: low-income individuals are disproportionately obese and suffer from chronic disease, stress-related illness and depression. Complex environmental factors relating to food access, economic insecurity and dysfunctional communities drive this pathology.
• Expectations: belief that pharmacological and medical breakthroughs will compensate for unhealthy lifestyle choices.

Population Health’s Four Levels

Population health has four distinct and increasingly complex levels: chronic disease management; predictive analytics; lifestyle management and lifestyle transformation. They interconnect and require different forms of societal, institutional and individual commitment.

I. Chronic Disease Management: Reducing the impact of existing chronic disease on the U.S. health system is imperative. This begins with “hotspotters,” the heaviest users of healthcare users. In a November Harvard Business Review blog , Scott Pingree details Intermountain Healthcare’s program to understand and treat their hotspotters, the five percent of patients consuming 51% percent of care services. Detailed surveys of these high-cost patients reveal inadequate care coordination, poor life quality, care plan misunderstanding, significant mental illness and “self-care” failure. In response, Intermountain has initiated pilot programs to improve its overall adult care strategy and achieve better outcomes for high-cost patients with personalized and holistic solutions that combine coordinated medical treatment with mental health services, monitoring, training and lifestyle coaching. Their goal is to treat chronic disease’s root causes as well as its symptoms.

II. Predictive Analytics: Proactively treating patients for chronic disease (before they become “hotspotters”) prevents hospitalization, lowers costs and improves life quality. Preventive care requires active monitoring and engaged customers. In 2004, UPMC’s Health Plan began using predictive analytics, coaching and wellness programs to improve employee health. They are adept at identifying employees at high-risk of hospital admission and treating their chronic diseases before they require invasive care. In addition to low premium increases (1.1% in 2011), the Health Plan has reduced days lost to illness and injury by 9%. Keeping trained caregivers working improves quality and lowers costs.

III. Lifestyle Management: Given the importance of environmental cues and strong communities in changing habitual behaviors, organizations should promote employee health and wellness. Under Dr. Michael Roizen’s leadership, the Cleveland Clinic inaugurated its Wellness Institute in January 2008 to engage its communities in healthy life choices. Employing “carrot and stick” strategies, the Clinic has introduced active monitoring, eliminated unhealthy meals and snacks, prohibited smoking, promoted fitness, encouraged weight loss, supported stress reduction and rebated health insurance premiums to healthy employees. Early results validate the investment. Employees have lost over 400,000 pounds. Employee utilization of healthcare services has declined – hard evidence that wellness programs can be cost-effective.

IV. Lifestyle Transformation: Overcoming habitual behaviors that trigger chronic disease requires individual lifestyle transformatidron. Most people who try to eat better and exercise more fail. Within two years, 90% of by-pass surgery patients revert to the behaviors that caused their cardiac disease. While difficult, change is not impossible. Dr. Dean Ornish treats chronic cardiac patients with strict diets, meditation and exercise. 80% of his patients still follow the program after three years. His regimen actually reverses heart disease. Ornish achieves this success by teaching good habits, making participants feel better and creating ongoing support networks. Lifestyle transformation occurs individually, but it occurs more often within conducive environments and encouraging communities.

A Good Start

In December, Oxeon Partners published a report on Village Practice Management (“VPM”). VPM is an efficient Houston primary care practice with a big vision: to become the nation’s largest primary care company with physician owners who provide effective care management by aligning productivity and compensation. VPM’s Houston practice has 55% fewer hospital admissions, 45% fewer readmissions and 50% lower costs than comparable practices. Their physicians see 50% more patients per day. VPM’s seasoned leadership team believes their model is scalable and transportable to other markets. Moreover, they’re ready to undertake full risk-based contracting supported by efficient specialty care networks.

Care management companies like VPM will thrive by meeting the care needs of distinct populations. While their efforts are vital, they are not enough. If obesity and chronic disease continue to increase, medical expenditures will skyrocket and our nation’s health will decline. Addressing America’s obesity crisis requires universal participation by individuals, communities, schools, employers, religious/social organizations and governments. Chronic disease management and predictive analytics provide a good start. American society also must tackle lifestyle management and transformation. We cannot afford to fail.

To learn more contact: David Johnson


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.  Phil has over 25 years’ experience consulting on a broad range of healthcare initiatives for clinical, financial and revenue cycle performance improvement and has worked with some of the industry’s largest health systems developing executable strategies for revenue enhancement, expense reduction, and clinical transformation. Previously, he was the CEO of a Fast Tech 50, healthcare technology firm, a principal executive at an INC Magazine’s top 500 Fastest Growing Private Companies in the U.S. and he has held various senior leadership positions with national and global business process outsourcing firms. He is an active member of the HFMA Georgia Chapter, has written over 250 articles about revenue cycle optimization and healthcare reform and is often featured as a speaker at industry educational events. You can reach him at, 404-849-8065 or on Twitter @philcsolomon.



Healthcare Can Learn A Lot from Disney About How to Satisfy Patients 

Do you remember when you first discovered the magic of Disney? Whether you’re a child or adult, chances are the Disney experience changed the perception of how a consumer should be treated.  Disney follows three philosophical tenants to make sure they consistently deliver the world-class service that consumers have become accustomed to receiving:

  1. Move your service from good to great
  2. Redefine your customer service approach
  3. Be courteous. It’s the right thing to do

With more than 90 years of world-renowned customer service, no one understands how to treat people better than Disney and healthcare revenue cycle executives can learn a lot about providing outstanding patient satisfaction and customer service from them.

What exactly are the things Disney does differently?  It’s not the things they do entirely different; it is that they think differently.  Disney pays extraordinary attention to the details surrounding general business processes and places emphasis on methods that are different from typical corporate customer service best practices.  Their core service philosophy includes three key areas of focus which have helped them deliver on the Disney promise to “create happiness through magical experiences.”  They are:

  1. Leadership: Leaders establish, operationalize and sustain the values and vision by which their organizations thrive;
  2. Employee Engagement: It is possible to create a workforce that consistently demonstrates desired behaviors; and
  3. Service: Exceptional service is achievable for every organization because exceptional service is “architected” from underlying systems and processes.

The service strategies Disney employs are readily transferable to any healthcare provider’s environment, especially as it relates to the revenue cycle.

The healthcare industry has relied upon continuing medical education and training to enhance the knowledge and skills of clinicians and, ultimately, to improve clinical outcomes.  But using such a disciplined approach to improving patient experience is relatively new to many organizations.  As the relationship between clinical outcomes and patient experience has become more established, a growing number of patient experience programs have moved beyond focusing primarily on training nurses to include physicians and a host of non-clinical staff who serve in a variety of front and back-office roles. These functions are a part of a provider’s revenue cycle; and they include coding of services, verification of insurance, third-party payer contracting, financial counseling, billing, follow-up, payment and collections.

A recent report by Jason Wolf, executive director of The Beryl Institute, titled “The Revenue Cycle:  An Essential Component in Improving Patient Experience,”1 has found revenue cycle processes can have a significant impact on patient experience.  According to the report, hospitals interested in improving the total patient experience should include revenue cycle processes in their administrative training initiatives.

“Healthcare organizations must recognize that efforts to improve patient encounters–whether in quality, safety or experience–require an investment in action and commitment throughout the entire organization, not just in the clinical setting,” said Wolf.  “Improving the patient experience is a systemic issue where patient perceptions can be affected by cross-departmental conversations on how improvement efforts can affect both financial performance and outcomes.  You could perform well in the four walls of the clinical experience, but if the revenue cycle process fails or the bill comes in and the patient or his family members feel they are treated with disrespect by revenue cycle representatives, that ultimately reflects on the institution overall,” he said.  Wolf goes on to say that people are more apt to pay when they feel they are treated with dignity.

From a revenue cycle standpoint, providing an excellent patient experience doesn’t directly come from providing a stress-free billing experience or interfacing with useful technology such as a payment portal or telephone Interactive Voice Response system.  It is the result of understanding patient expectations and employing the proper guidelines, strategies and customer service standards to make sure positive patient interactions.

Since the passing of the Patient Protection and Affordable Care Act (ACA) in 2010, hospitals and health systems have shown greater interest in managing consumer perceptions about the healthcare delivery experience.  The new value-based reimbursement system and its revenue drivers have hospital finance executives focusing on patient satisfaction more than ever before.

The Hospital Consumer Assessment of Healthcare Providers and Systems (HCAHPS) surveys, which measure patient evaluation of the services they receive, are an essential part in the calculation of value-based incentive payments to providers under the ACA.  The HCAHPS survey focuses mostly on clinical care and the facility environment, but consumers also are asked to give an overall rating of the hospital and whether they’d recommend it to others.  Survey respondents shared their experiences about the clinical treatment they received and provided feedback about their non-clinical experiences with the hospital’s revenue cycle during the billing and collections process.  Providers should be concerned about more than just business and finance.  The non-tangible acts a hospital’s staff can put forth will have as great if not more significant impact on patient satisfaction than how easy is it to understand their billing statement or how many payment options they have available to them.

When people think about the revenue cycle, they usually think about the financial aspect of a patient interaction, such as the billing process.  The revenue cycle encompasses interactions that affect patient satisfaction long before a bill is sent out.  Positive impressions begin before, during and after care is provided.  And they don’t all focus on dollars and cents.  The best time to start to manage the patient’s expectations about their healthcare journey should begin before a patient steps through the hospital’s doors; they should clearly understand their financial obligations and how the billing process works.  The earlier the communication with a patient begins, the easier it will be to keep up a high level of patient satisfaction, regardless of the clinical outcomes.

The link between patient satisfaction and staff satisfaction is one of the most important for fostering engagement and ultimately creating a culture of patient experience excellence, and that one doesn’t exist without the other in a successful program.2

In the August 2015 edition of the Patient Experience:  Cultural Transformation to Move Beyond HCAHPS, Mike Murphy, president and CEO of Sharp HealthCare, a non-profit healthcare system serving Southern California, says that staff satisfaction is a critical aspect of providing an exceptional patient experience. “Our vision statement talks about Sharp being the best place to work, the best place to practice medicine and the best place to receive care.  We intentionally talk about being the best place to work because we need to create an environment where our people are happy working and doing great things and focused on making the difference for our patients.”3

Experiencing industry-leading patient satisfaction is only possible if a provider’s staff is highly motivated and well-trained.  Timothy R. Clark, author of The 5 Ways That Highly Engaged Employees are Different, understands how to build high performing teams that deliver the best customer care results.  As Clark says, “Highly engaged employees make the customer experience.  Disengaged employees break it.”

Revenue cycle employees must be motivated and trained to deliver top customer service.  In a May 2015 article in Healthcare Finance titled “Revenue Cycle Tips:  Improve Customer Service, Boost Collections,” Diane Stover-Hopkins, Certified Experience Economy Expert & co-author of “Wake Up and Smell the Innovation,” knows how to train a provider’s staff.  She outlined seven do’s and don’ts designed to positively influence patient satisfaction results through staff training:

  1. Don’t limit customer experience training to online offerings. This doesn’t allow for personalized engagement, staff storytelling and dynamic memory making;
  2. Do take the time to incorporate patient stories where caregivers or business office staff went above and beyond to delight patients;
  3. Don’t underestimate the power of senior leader involvement. Ensure there is a consistent, inspirational “leader’s voice” that emphasizes the importance of the patient experience.  Ensure staff at all levels see leaders honoring great service and addressing poor performance;
  4. Do try to tap into staff motivation for choosing healthcare as a career.  Try to connect staff with their purpose-making a difference for patients;
  5. Don’t launch patient experience programs that ignore the differences between clinical and financial experiences and alternative One size doesn’t fit all;
  6. Do train and nurture internal experts to help the patient experience tools and aspirations stay readily available and vital in spite of conflicting priorities; and
  7. Do incorporate all five senses whenever possible when building experience design skills so that the training content is memorable.  Ensure every staff member will have a compelling story to tell their family about what they learned.


Under the ACA, the financial stability of a healthcare enterprise is now affected by HCAHPS surveys, which influence Medicare’s calculation of value-based incentive payments to providers by measuring patient satisfaction.  The revenue cycle has many patient touchpoints that influence the delivery of best practice customer care and have an effect on patient satisfaction and ultimately the enterprise’s compensation.  Revenue cycle departmental strategies must pay extraordinary attention to the details surrounding administrative training initiatives, leadership guidance, employee engagement and customer service exceptions to experience industry-leading patient satisfaction.

Delivering quality healthcare services is complex and challenging. Experiencing high levels of patient satisfaction requires that all employees deliver on the organization’s promises.  Doing so is easier said than done because one poor patient interaction can ruin the entire experience.  Maya Angelou, an American author and civil rights activist, offered the best single piece of advice when treating a customer or patient.  She said, “People will forget what you said, or what you did.  They may even forget your name, but they will never forget how you made them feel.”

Beyond the financial remuneration, a patient provides a healthcare provider; its reputation can suffer when they receive poor patient feedback.  An unhappy patient will tell between 9-15 people about their bad experience.  In fact, 13 percent of dissatisfied patients will tell over 20 people about their poor experience.  Losing one patient to the competition is bad enough, but losing 20 patients for every dissatisfied patient could be catostrophic.4

 “The Revenue Cycle: An Essential Component in Improving Patient Experience,” is available for download at

  1. Mike Murphy, president and CEO of Sharp HealthCare, Healthleaders Media article, Patient Experience: Cultural Transformation to Move Beyond HCAHPS,
  2. Mike Murphy, president and CEO of Sharp HealthCare, Healthleaders Media article, Patient Experience: Cultural Transformation to Move Beyond HCAHPS,
  3. White House Office of Consumer Affairs report,


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.  Phil has over 25 years’ experience consulting on a broad range of healthcare initiatives for clinical, financial and revenue cycle performance improvement and has worked with some of the industry’s largest health systems developing executable strategies for revenue enhancement, expense reduction, and clinical transformation. Previously, he was the CEO of a Fast Tech 50, healthcare technology firm, a principal executive at an INC Magazine’s top 500 Fastest Growing Private Companies in the U.S. and he has held various senior leadership positions with national and global business process outsourcing firms. He is an active member of the HFMA Georgia Chapter, has written over 250 articles about revenue cycle optimization and healthcare reform and is often featured as a speaker at industry educational events. You can reach him at, 404-849-8065 or on Twitter @philcsolomon.


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Revenue Cycle NewsTelemedicine arrangements that generate revenue, not just cost savings while improving patient care and satisfaction

Value-based Care and telemedicine are key components in the health care industry as a way to generate additional revenue, cut costs and enhance patient satisfaction. One of the biggest changes to health care in the last decade, telemedicine is experiencing rapid growth and deployment across a variety of applications.

The quick market adoption of telemedicine is fueled by powerful economic, social, and political forces — most notably, the growing consumer demand for more affordable and accessible care. These forces are pushing health care providers to grow and adapt their business models to the new health care marketplace.

Simultaneously changing is the misconception that telemedicine creates a financial strain or relies on grant funding. Smart health system leadership are creating sustainable telemedicine arrangements that generate revenue, not just cost savings, while improving patient care and satisfaction. Research conducted by the American Telemedicine Association reveals that telemedicine saves money for patients, providers, and payers compared to traditional health care practices, particularly by helping reduce the frequency and duration of hospital visits.

It is expected that the global telemedicine market will expand at a compound annual growth rate of 14.3 percent through 2020, eventually reaching $36.2 billion, as compared to $14.3 billion in 2014. And while the growing demand for convenience, innovation, and a personalized health care experience may be the greatest factor, other forces are at work as well.

These five trends will drive telemedicine’s continued growth and transformation of health care delivery in 2016:

1. Expanding Reimbursement and Payment Opportunities

Both private and government payers will continue to expand telemedicine coverage as consumers gain experience with the technology and increasingly demand access to telemedicine-based services. Some health plans have already begun bolstering their coverage of telemedicine, which they view as a form of value-based care that can improve the patient experience and offer substantial cost savings. On the government side, 2016 will particularly see more coverage among Medicaid managed care organizations and Medicare Advantage plans.

While Foley’s 2014 telemedicine survey revealed that reimbursement was the primary obstacle to telemedicine implementation, new laws requiring coverage of telemedicine-based services have been implemented at the state level, and 2016 will be the year these laws drive implementation in those states. Similarly, providers are becoming increasingly receptive to exploring payment models beyond fee-for-service reimbursement, and 2016 will continue the growth of these arrangements. Examples include institution-to-institution contracts and greater willingness by patients to pay out-of-pocket for these convenient, valuable services.

2. Uptick in International Arrangements

In 2016, more U.S. hospitals and health care providers will forge ties with overseas medical institutions, spreading U.S. health care expertise abroad. These cross-border partnerships will provide access to more patients, create additional revenue and help bolster international brands.According to the American Telemedicine Association, more than 200 academic medical centers in the U.S. already offer video-based consulting in other parts of the world. While many of these are pilot programs, 2016 will see a maturation and commercialization of much of these international arrangements, as they are a win-win for participants in both countries.

The growing purchasing power of middle-class populations in countries like China is giving more patients the means and opportunity to pursue treatment from Western medical centers. We have seen both for-profit and non-profit models for international telemedicine — hospitals partnering with organizations in the developing world to expand health care availability or offering commercial care to customers in nations with areas of concentrated wealth but lacking the capabilities and access of Western health care.

3. Continued Momentum at the State Level

State governments across the U.S. are leading the way in telemedicine expansion. According to a study by the Center for Connected Health Policy, during the 2015 legislative session, more than 200 pieces of telemedicine-related legislation were introduced in 42 states. Currently, 29 states and the District of Columbia have enacted laws requiring that health plans cover telemedicine services. In 2016, we will see more bills supporting health insurance coverage for telemedicine-based services introduced in various state legislatures.

While state lawmakers are leading the way in incorporating telemedicine into the health care system, two recent developments point to a burgeoning interest at the federal level. The Centers for Medicare and Medicaid Services (CMS) is considering expansion of Medicare coverage for telemedicine, and a bill working its way through the U.S. House of Representatives would pay physicians for delivering telemedicine services to Medicare beneficiaries in any location.

4. Retail Clinics and Employer Onsite Health Centers on the Rise

A recent Towers Watson study found that more than 35 percent of employers with onsite health facilities offer telemedicine services, and another 12 percent plan to add these services in the next two years. Other studies suggest that nearly 70 percent of employers will offer telemedicine services as an employee benefit by 2017. The growth of nation-spanning telemedicine companies such as MDLIVE and the now publicly-traded Teladoc, which offer health services tailored to the specific needs of employers and other groups, is a reflection of the demand for these services.

Additionally, consumers are increasingly willing to visit retail medical clinics and pay out-of-pocket for the convenience and multiple benefits of telemedicine services when telemedicine is not covered by their insurance plans. Both CVS Health and Walgreens have publicly announced plans to incorporate telemedicine-based service components in their brick and mortar locations.

5. More ACOs Using Technology to Improve Care and Cut Costs

2016 will be the year of telemedicine and ACOs. Since the advent of Medicare Accountable Care Organizations (ACOs), the number of Medicare beneficiaries served has consistently grown from year to year, and early indications suggest the number of beneficiaries served by ACOs is likely to continue to increase in 2016. These organizations present an ideal avenue for the growth of telemedicine.

While CMS offers heavy cost-reduction incentives in the form of shared-saving payments, only 27 percent of ACOs achieved enough savings to qualify for those incentives last year. Meanwhile, only 20 percent of ACOs use telemedicine services, according to a recent study. We believe the widespread need to hit the incentive payment metrics, coupled with the low adoption rate will lead to significantly greater telemedicine use among ACOs in 2016.

Visit Foley’s health care blog “Health Care Law Today” 


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


Patient Payment Liability Just Ain’t What it Used to Be

Baseball is America’s past-time and Yogi Berra was one of its most colorful heroes.  Berra was an 18-time All-Star, appeared in 14 World Series as a member of the New York Yankees and won 10 championships.  He was a sportswriter’s favorite because he had countless expressions and phrases that were memorable because most of them didn’t make any sense.  A warmhearted personality, he became famous for delivering brilliantly awkward sayings, such as: “90 percent of the game of baseball is half mental” and “the future ain’t what is used to be.”

Today, the future of healthcare just “ain’t what is used to be.”  The development of our healthcare system began in 1901 with the election of President Theodore Roosevelt.  He supported universal health insurance because he believed that “no country could be strong whose people were sick and poor.”1  The efforts to initiate healthcare coverage, however, took place outside of government.  In 1906, the American Association for Labor Legislation (AALL) led the campaign for health insurance.

Today, escalating healthcare costs has become the catalyst for significant changes in the delivery and payment of healthcare services.  The Affordable Care Act (ACA), signed into law by President Obama on March 23, 2010, can take the lion’s share of credit for changing how consumers now pay for health services.  For the past ten years, healthcare costs have exceeded U.S. economic growth by an average of 2.5 percent annually.  The anticipated average annual growth rate for healthcare costs is 5.7 percent per year through 2023, well above gross domestic product (GDP), average wages and productivity gains.2  Improving economic conditions, the impact of the ACA’s insurance coverage expansions and an aging population is expected to continue to drive healthcare expenditure growth.3  Average annual growth of out-of-pocket healthcare expenditures are projected to rise to 5.5 percent by 2023 from 3.2 percent in 2013.4

A growing approach to mitigating the rising cost of healthcare are High Deductible Health Plans (HDHP).  Insurers and employers have initiated these health plans with the goal of reducing their financial exposure.  HDHP’s plans shift the majority of the financial responsibility to the healthcare consumer.

Based on recent statistics listed in a McKinsey Quarterly article, “The Next Wave of Change for U.S. Healthcare Payments,”there has been a ten-fold increase in HDHP plans in the past seven years to more than 11.4 million people, and they are growing.  According to America’s Health Insurance Plans, the growth in HDHPs is a major contributor to current expectations for growing patient payment liability from $250 billion in 2009 to $420 billion in 2015, a 68 percent increase over a five-year period.6

Increasing Patient Liability

The ACA, with its comprehensive health insurance reforms, has initiated a growing trend that has placed more financial accountability on the shoulders of consumers.  Hospitals and health systems are embracing consumerism and are preparing for greater levels of out-of-pocket (OOP) patient liability.

Increased patient responsibility for healthcare services has providers concerned, and for good reason.  Patient liability or self-pay, is now the third largest payer behind Medicare and Medicaid.7   As a result, both patient liability and bad debt are on the rise and healthcare providers are facing unprecedented revenue and margin pressure.

Providers must adjust their financial practices to meet the demands of the growing revenue cycle trend and become more adept at collecting patient liabilities while at the same time improving patient satisfaction.  The growing challenge that OOPs present for providers is just one of many priorities healthcare executives have to juggle.  All stakeholders responsible for solving these challenges must learn to circumnavigate the financial realities of our new healthcare delivery system. Had Yogi Berra worked in healthcare, he might respond to the changes in the industry with another of his famous comments:  “It’s déjà vu all over again.”

As patient accountability increases under HDHPs, patient payment liability has skyrocketed.  Payment responsibility for non-insured patients is now growing at 19 percent per year.8  And, for insured patients, McKinsey Quarterly has estimated that the rate of bad debt is increasing at well over 30 percent each year in some hospitals.9  Consumers now pay more in healthcare costs than employers, and consumer bad debt for medical expenses was $65 billion in 2010 and rising.10

Regardless of whether coverage exists under a traditional or high deductible plan, consumers now shoulder a greater cost burden.  Providers must now collect a high proportion of payments directly from the consumer, not the insurer.  Patients are being billed for costs they normally are not expecting and often for sizable amounts.

Revenue Cycle: A Shifting Paradigm

Our healthcare compensation system has begun to reward providers for delivering more value.  No longer is a provider’s compensation tied to the volume of patients it can service.  This shift impacts how patient care is administered, how physicians and hospitals are paid and how healthcare companies approach the industry.

Healthcare organizations of all sizes must transform their revenue cycle strategies to become more patient friendly.  The traditional focus on payers will no longer suffice as providers must address patient collections like never before.  In short, they need to find effective ways to collect more of the money owed by patients or risk their organizations good financial health.

Current revenue cycle processes are not traditionally set up to address consumer payment needs, which can have a significant effect on the patient experience and satisfaction levels.  Emphasis on the patient experience touches all areas of healthcare and the revenue cycle is no exception.  Patient dissatisfaction with financial processes can negatively impact satisfaction scores and bottom-line results.

Changes in the Payment Role for Providers

As the patient responsibility trend continues to grow, healthcare organizations must attempt to balance effective revenue cycle management processes with efforts to improve the patient experience.  Providers must change how patient payments are collected; however, some of these changes will not be easy to implement.  Highlighted below are some of the unique challenges in the payment process providers need to be preparing for:

  • Many payment processes are not engineered for simple and efficient patient payments.
  • The process of transacting directly with consumers presents a whole new set of challenges for providers who must now calculate patient responsibility as a first step towards rationalizing their payments systems.
  • Patient responsibility is a compound of two sub-components:  eligibility and estimation.

Often, providers are calculating a propensity to pay score, whether the patient is insured or not.  If an insured patient has a high deductible balance or if the patient is totally responsible for the bill, a combination of other transactions such as cost, mortgage balance inquiry and address verification can help determine a patient’s propensity to pay.  Given these insights into payment options, it will assist in determining if a patient is a candidate for a payment plan or charity care.

  • Patient responsibility determination must happen after a provider ascertains their eligibility status, plus the amount the patient owes for their co-pay, deductible balance and the information on their estimated fees.
  • The healthcare provider needs to provide the patient with all of this information as well as establish a payment method as soon as possible, ideally while the patient is still present.11

Strategies to Address Growing Patient Liabilities

There are emerging issues with collecting patient obligations that have necessitated changes in how providers accept patient payments.  Healthcare payment systems are transforming the methods consumers now make their payments for the care they receive. A provider’s financial strategies for collecting patient balances will begin to look more like how consumers purchase electronics or furniture at a large national chain or on-line retailer.  In his article, “Four Big Patient Payment Trends Shaping Healthcare Revenue Collection,” 12  Brian Watson outlined four new approaches providers can initiate to keep up with growing patient liabilities.  They are:

  1. Provider-Facilitated Patient Financing

With the rise in patient payment liability, many patients simply lack the financial ability to pay for their out-of-pocket healthcare debt.  Providers that offer patient-friendly financing options–such as structured, interest-free payment plans help consumers avoid unexpected expenses and smooth liabilities over an extended period.  A medical loan often enables patients to pay an outstanding balance in small increments over time.

  1. Consumers Payments Using Multiple Channels to Pay

Consumers increasingly are bill payment omnivores, flip-flopping between payment options based upon things like availability of funds, the size of the outstanding balance and proximity to the due date.  Recent research suggests the average U.S. household 13 uses three different bill payment methods each month.  And, their preferences for paying the same biller aren’t always consistent on a month-to-month basis.  For example, 42 percent of consumers will use a different payment channel than they did last month to pay the same bill.14

To meet consumer preferences about bill payment, providers must consider balancing traditional options such as mail-in remittance, payment by phone and—with developing channels like online and mobile.  Offering multi-channel payment options will increase patient satisfaction and accelerate revenue collection by giving patients the ability to pay bills how they want, using a channel where they are most comfortable.

  1. Consumers Embracing Online and Mobile Payment Tools

Given consumers’ bill payment patterns, a multi-channel approach makes a lot of sense for providers.  It ensures that no matter a patient’s preference, they’ll be able to make a payment quickly and easily.  Online and mobile billing tools are better suited to today’s increasingly retail oriented healthcare payment environment.  Patients can pay immediately anytime and from anywhere which allows providers to collect and post payments faster, more efficiently and without manual processing errors.

  1. Rise in Guest Pay Options for Provider Websites

Guest pay websites don’t require consumers to create a username or password to access payment tools—or even log-in to the site.  Patients can enter identifying account information from a statement and can make a payment in minutes.

Completing a guest payment is easy, fast and convenient.  So it’s not hard to see why adoption is skyrocketing.  In 2014, 28 percent of consumers used a guest pay option at a biller’s website, up from just seven percent in 2013.15

Guest pay websites are an ideal fit for patient payments.  For most consumers, healthcare is a service that is consumed irregularly:  patients go to see a doctor if they’re unwell or for periodic checkups or test.  Because encounters often fall into the bucket of sporadic billing rather than each month, like a mortgage or mobile phone bill, guest pay websites offer patients the simplicity and convenience of online payment, but without the hassles of registration or passwords.


Yogi Berra would often say “If you don’t know where you are going, you might wind up someplace else.”  Healthcare thought leaders know exactly where the industry is going.  Like never before, the path to financial viability for providers now lies squarely on the shoulders of the patient.

The healthcare industry will continue to evolve, and it’s more important than ever to put the needs of the patient first. As patient payment liability continues to grow through HDHP’s and state and federal insurance marketplaces, providers must develop new ways to collect for services rendered.  With the advent of healthcare consumerism and the growing trend towards clinical and financial transparency, patients have more control of how their care is administered and paid.

Emergent healthcare payment options help patients better anticipate manage and track the costs of their care. Similar to retail establishments, healthcare is moving towards offering new patient options and expanded payment channels that will meet consumer demands while enabling easy, fast, whenever/wherever financial transactions.

Hospitals and health systems must put into place new methods for serving patients in a friendlier manner with higher levels of patient satisfaction if they want to successfully compete in this rapidly changing healthcare environment.

  1. Physicians for a National Healthcare system program, A Brief History: Universal Health Care Efforts in the US,
  2. Andrea M. Sisko et al., “National health expenditure projections, 2013–23: Faster growth expected with expanded coverage and improving economy,” Health Affairs, published online before print, September 2014,
  3. Patricia Buckley, “The United States: Working toward a recovery that can stand on its own,” Global Economic Outlook Q3 2013, Deloitte University Press, 2013,
  4. Andrea M. Sisko et al., “National health expenditure projections, 2013–23.”,
  5. McKinsey Quarterly, “The Next Wave of Change for US Healthcare Payments,” May 2010,
  6. AHIP Center for Policy and Research, 2005-2011 HSA/HDHP Census Reports; June 2011 report, p. 2
  7. Innovators Wanted: Mounting Patient Financial Responsibility Driving Provider Demand for Positive Disruption and Change (Part 1 in a 3 Part Series),
  8. McKinsey Quarterly, “The Next Wave of Change for US Healthcare Payments,” May 2010, pages 4 and 7,
  9. McKinsey Quarterly, “The Next Wave of Change for US Healthcare Payments,” May 2010, pages 4 and 7,
  10. Insurance Journal, Employees’ Share of Health Insurance Costs Rising,
  11. P. Morgan white paper; “Key Trends in Healthcare Patient Payments”,
  12. 4 Big Patient Payment Trends Shaping Healthcare Revenue Collection, Brian Watson,
  13. 2014 Billing Household Survey from Fiserv
  14. 2014 Billing Household Survey from Fiserv
  15. 2014 Billing Household Survey from Fiserv


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 global 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




Medicare’s Recovery Audit Contractor (RAC) program was implemented nationwide for Medicare Parts A and B in January 2010 

The Affordable Care Act calls for the program to be expanded to cover Medicare Advantage plans, and last month CMS released a draft Scope of Work to “solicit comment on, and interest in CMS entering into a contract with RACs to identify underpayments and overpayments, and recouping overpayments associated with diagnosis data submitted to the Centers for Medicare & Medicaid Services (CMS) by Medicare Advantage Organizations.”  Up to now, CMS has conducted limited audits of MA Plans covering only about five percent of Medicare Advantage Organization Contracts.  The Scope of Work document outlines plans to significantly expand those audits by contracting with RACs, who currently audit only Medicare Part A & B payments.

RACs are paid based on amounts recovered and currently earn anywhere from nine to 12.5 percent of recouped overpayments on average.  Many providers view RACs as administrative burdens and argue that independence and fairness cannot be achieved in a system in which auditors have a financial incentive to find errors.  On the other hand, CMS contends that RACs help to ensure taxpayer money is being spent appropriately.

Medicare Advantage plans (sometimes referred to as Medicare Part C) are Medicare-approved private health insurance plans offering seniors an alternative to traditional Medicare.  In recent years they have signed up more than 17 million members, about one-third of those eligible for Medicare.  Medicare Advantage plans provide all Medicare Part A (hospital insurance) and Medicare Part B (medical insurance) coverage and generally offer additional benefits, such as vision, dental and hearing, and many include prescription drug coverage.

Pricing to enrollees varies by plan provider, based on the services and type of plan chosen.  Since 2004, the government has paid the health plans using a risk score it calculates for each patient based on diseases reported by the health plans. Medicare expects to pay higher rates for sicker people and less for those in good health.  But overspending tied to fast-rising risk scores has cost taxpayers billions of dollars in recent years, as the Center for Public Integrity reported in a series of articles published last year, leading to widespread suspicions that some risk scores are being purposefully inflated.  CMS relies on diagnosis information reported by Medicare Advantage organizations to determine the health conditions for each beneficiary.  CMS then uses the Hierarchical Condition Category risk adjustment model to calculate risk scores.

All diagnosis codes submitted to CMS for Medicare Advantage risk adjustment must meet a number of requirements.  They must:

  • Be documented in the medical record
  • Be documented as a result of a face-to-face visit
  • Come from acceptable data sources (
  • Be submitted at least once during the risk adjustment data reporting period
  • Be coded according to the ICD Clinical Modification Guidelines for Coding and Reporting

CMS currently conducts “comprehensive” Risk Adjustment Data Validation (RADV) audits to determine if diagnoses for risk scores submitted by Medicare Advantage plans are legitimate.  CMS reports that errors and omissions in the diagnosis data submitted by Medicare Advantage organizations account for the overall 9.5 percent rate of improper payments in Medicare Part C.  Up to now, CMS audits have not been “condition specific”; however, under the current proposal, in addition to the comprehensive audits, RACs would also conduct “condition-specific” RADV audits focusing on specific medical codes or health conditions, such as diabetes, that have high rates of payment errors.  The ultimate goal is to have all Medicare Advantage contracts subject to either a comprehensive or condition-specific audit for each payment year.

Comments on the Medicare Advantage RAC program must be received by 10:00 a.m. EST on February 1, 2016.  CMS said it will determine the next steps for procurement of a Part C RAC after reviewing all comments received by that date.

Read more posts at MiraMed


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 global 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



CMS to Administer Penalties for Excess Readmissions 

Revenue Cycle News

Once patients are discharged from the hospital, they have no desire to return.  Hospitals also would prefer patients not be readmitted due to medical issues associated with their hospital stay.

Patient readmissions are a major problem plaguing the U.S. healthcare system and policymakers are taking steps to reduce them.  The efforts to reduce re-hospitalizations begin at the hospital and end with the transition of patients to their home and their community.  But while improving a patient’s transition from hospital to home is important, it is just one factor in preventing readmissions.

The typical cause of a readmission is often the swift deterioration in the patient’s condition, related to the patient’s primary diagnosis and/or comorbidities.  Readmissions can also be attributed to the disintegration and fragmentation of our healthcare system that begins when a patient meets their primary care-provider and continues after discharge.  Readmissions may result from inadequate treatment or sub-par care of the primary issue or may be caused by poor coordination of services at the time of discharge and afterward.

The hospital can affect treatments provided in-house; however, they have no control over the patient and how diligent they are following their treatment plan post-discharge.

Hospital readmissions have become a watershed issue for health providers because of the increasingly important impact they have on a hospital’s financial position.  Providers must be prepared to make the adjustments required to ascertain the root causes for readmissions and develop plans to reduce them.  With a concentrated and proactive effort it is clear that readmissions can be significantly reduced.1

New tools are becoming available to hospitals to manage their readmissions.  The Agency for Healthcare Research and Quality (AHRQ) has introduced a national database for hospital readmissions which will assist hospitals in measuring and benchmarking their results against similar hospitals or healthcare systems.

Readmission Measurements and Standards

Section 3025 of the Affordable Care Act added section 1886(q) to the Social Security Act2 which established the Hospital Readmissions Reduction Program.  This requires Centers for Medicare and Medicaid Services (CMS) to reduce payments to Inpatient Prospective Payment Systems (IPPS) hospitals with excess readmissions, effective for discharges beginning October 1, 2012.  The regulations that implement this provision are in subpart I of 42 Code of Federal Regulations (CFR) part 412 (§412.150 through §412.154).

CMS recently released the Fiscal Year 2016 IPPS for Acute Care Hospitals and the Long Term Care Hospital (LTCH) Prospective Payment System Policy Changes for 2016.  CMS outlined the following policies with regard to the readmission measures under the Hospital Readmissions Reduction Program:

  • Readmission is defined as an admission to a subsection (d)3 hospital within 30 days of a discharge from the same or another subsection (d) hospital;
  • Adopted readmission measures for the applicable conditions of acute myocardial infarction (AMI), heart failure (HF) and pneumonia (PN).
  • Established a methodology to calculate the excess readmission ratio for each applicable condition, which is used, in part, to calculate the readmission payment adjustment.  A hospital’s excess readmission ratio is a measure of a hospital’s readmission performance compared to the national average for the hospital’s set of patients with that applicable condition.
  • Established a policy of using the risk adjustment methodology endorsed by the National Quality Forum (NQF) for the readmissions measures to calculate the excess readmission ratios, which includes adjustment for factors that are clinically relevant including certain patient demographic characteristics, comorbidities and patient frailty.
  • Established an applicable period of three years of discharge data and the use of a minimum of 25 cases to calculate a hospital’s excess readmission ratio for each applicable condition.

Readmission Trends for 2009-2013

Developing national data benchmarks for hospital readmissions helps to identify those patient segments with comparatively high readmission rates for targeted improvement efforts.  Monitoring variations in these benchmarks over time allows officials to track and report on advancements made toward reducing readmissions.

As of October 1, 2012 and under the Hospital Readmissions Reduction Program, CMS is required to reduce payments to IPPS hospitals with excess readmissions.  Monitoring readmission trending is more important today than ever.  While there are severe financial repercussions for increased readmissions, they are becoming a key factor in assessing the overarching performance of the entire healthcare system.

Hospitals have taken various measures to reduce hospital readmissions.  For example, Partnership for Patients, a national initiative sponsored by the Department of Health and Human Services, is tracking changes in all-cause 30-day hospital readmissions.4  Reduction efforts range from re-engineering discharge practices and improving care transition to building community-wide partnerships for addressing health and social service needs.5

The most recently tracked readmission trends include:

  • Readmissions among all patients covered by Medicare declined from 18.1 per 100 admissions in 2011 to 17.3 per 100 in 2013.
  • Readmission rates among patients who were covered by private insurance or Medicaid did not change appreciably from 2011 to 2013.
  • The 30-day all-cause readmission rate was consistently highest among patients covered by Medicare.
  • Among uninsured individuals, both the number and rate of readmissions increased between 2009 and 2013 (10.6 percent increase in readmission count and 8.9 percent increase in readmission rate).
  • The readmission rate among nonmaternal patients aged 1 – 20 years increased substantially between 2009 and 2013: 22 percent increase for uninsured patients, 15 percent increase for those with private insurance and eight percent increase for Medicaid patients.
  • The overall readmission rate for all expected payers combined did not change appreciably.  From 2009 to 2013, the readmission rate for all payers combined stayed at about 14.0 per 100 admissions.
  • The average cost of a readmission was higher than the average cost of an index admission for all types of payers:
    • Five percent higher for patients covered by Medicare;
    • 11 percent higher for uninsured patients; and
    • 30 percent higher for patients covered by Medicaid or private insurance.

The readmission trends outlined above provide a macro overview of the segments of the population that are affected by readmissions.  However, without actionable data hospitals cannot improve readmissions if they don’t know the underlying cause of the problem.

Until now, hospitals did not have a database in which to evaluate their readmission statistics against similar hospitals.  In 2016, AHRQ introduced a national database tracking hospital readmissions.  The data is available through 2013 and it comprises information on 97 percent of all U.S. hospital discharges.

The AHRQ National Readmission Database

The AHRQ Nationwide Readmissions Database (NRD) is the first all-payer database for monitoring hospital readmissions.  Hospital administrators, policymakers and clinicians are able to use the new database in their analyses and decision-making.

The NRD is part of the AHRQ-sponsored Healthcare Cost and Utilization Project (HCUP) and includes various administrative billing data drawn from the HCUP State Inpatient Databases.

The new database will be used to create estimates of national readmission rates for all payers and the uninsured.  The NRD was constructed from 21 states’ data with reliable and verified patient numbers.

The key features of the NRD include:

  • A large sample size, which provides sufficient data for analysis across hospital types and the study of readmissions for relatively uncommon disorders and procedures;
  • Discharge data from 21 geographically dispersed states, accounting for 49.3 percent of the total U.S. resident population and 49.1 percent of all U.S. hospitalizations;
  • Designed to be flexible to various types of analyses of readmissions in the U.S. for all types of payers and the uninsured;
  • Criteria to determine the relationship between multiple hospital admissions for an individual patient in a calendar year is left to the analyst using the NRD;
  • Outcomes of interest include national readmission rates, reasons for returning to the hospital for care and the hospital costs for discharges with and without readmissions; and
  • The NRD is designed to support national readmission analyses and cannot be used for regional, state or hospital-specific analyses.

Are Hospitals Prepared to Reduce Readmissions?

Hospitals now have the required data to evaluate readmissions, but are they prepared to act upon it?  According to an anonymous survey of 320 C-suite, senior-level and quality professionals from hospitals conducted by Q-Centrix,6 the percentage of hospitals penalized for readmissions has increased each year since CMS began imposing them, reaching a high of 78 percent in 2015.  The most recent survey results indicate that only 55 percent of those surveyed expected to be penalized in 2016.

Since 2009, great strides have been made to reduce 30-day all-cause hospital readmission rates for heart failure, pneumonia and myocardial infarction.  This year, CMS penalties will extend to acute COPD and elective hip and knee replacements.  Given the historical trend and the three additional diagnoses recently added, the percentage of hospitals penalized will likely be much higher than 55 percent.

The senior-level executives that responded to the survey indicated that:

  • Nearly three-quarters of hospitals describe themselves as “somewhat” or “extremely” confident in their ability to reduce readmissions;
  • 15 percent of quality and compliance professionals are extremely confident they will reduce readmissions; and
  • 23 percent of C-suite executives are extremely confident they will reduce readmissions.

On average, the respondents are employing:

  • 4.5 different reduction strategies;
  • 92 percent are initiating a medication reconciliation process;
  • 87 percent are educating patients and patient caregivers with better pre-discharge instructions; and
  • 84 percent are conducting phone calls or other communication to patients post-discharge.

Unfortunately, three percent of the survey respondents have no formal strategy at all.

Readmissions Reduction Strategies

Readmissions are typically characterized as planned or unplanned events and related or unrelated to the initial admission within a 30-day period.  In order to assist with readmission reduction efforts, the American Hospital Association (AHA) developed a framework to help policymakers and providers consider the different types of readmissions.7  They are:

  • A planned readmission related to the initial admission;
  • A planned readmission unrelated to the initial admission;
  • An unplanned readmission unrelated to the initial admission; and
  • An unplanned readmission related to the initial admission.

The most viable scenario for reducing readmissions is the unplanned readmission related to the initial admission.  That said, the AHA suggests that public policy efforts should be focused on this category of care to reduce readmissions.

Regardless of the care provided, re-hospitalizations for some patients are unavoidable.  Hospitals cannot influence the occurrence of unplanned, unrelated readmissions because they cannot be anticipated or prevented.  However, some readmissions may be prevented through proactive hospital practices, such as:

  • Readmissions clinically related to a prior admission are possibly preventable if one or more actions are taken;
  • Delivery of quality care in the initial hospitalization;
  • Adequate discharge planning;
  • Comprehensive post-discharge follow-up; and
  • Focused coordination from inpatient and outpatient providers.

What Can Patients Do to Avoid Readmissions?

No patient wants to be admitted into a hospital.  And they certainly want to recover from their illness as quickly as possible.  While the bulk of responsibility for care lies with the hospital or provider, patients can positively influence their own recovery and reduce the chances of being readmitted.  In April 2014, a Consumer Reports investigation titled How to Avoid Hospital Re-admissions outlined six steps patients can take to reduce the chance of being readmitted.  They are:

  1. See a discharge planner.  The patient and/or their primary care giver should discuss the steps that should be taken when they are released from the hospital.
  2. Determine if you’re really ready to go home.  Hospitals and insurance companies have strong financial incentives to discharge patients as soon as possible.  A patient should discuss an extension of their stay with their doctor if they don’t feel ready to go home.  If the doctor isn’t able to extend the stay, patients must appeal to the discharge planner or a hospital patient advocate.
  3. Get a discharge summary.  The patient should ask for a clear written statement of what they should do when they get home—for example, how to care for surgical wounds or a broken bone covered by a cast, how active they should be, and when they can shower, drive a car, return to work and resume a normal diet.
  4. Get a discharge list of medication.  Patients should ask about medications that they should continue after returning home, including their purpose and side effects, and if they should resume or eliminate drugs taken before admission.
  5. Get late test results.  Make sure the doctor releases test results to the patient while they are hospitalized, especially those administered 24-hours before leaving the hospital.
  6. Schedule a doctor’s appointment.  Patients should proactively seek to make a follow-up appointment with their doctor to review their progress.

There are additional efforts patients can take to improve their chances of a rapid recovery and lessen the possibility of readmission.  The most important post-discharge action a patient can take is to ensure that they have open, clear and timely communication with their doctor.  By doing so, it will greatly reduce the chance of a re-hospitalization or a trip to the emergency room.


Given the increasing governmental and public scrutiny to control healthcare costs, improve the quality of clinical outcomes and receive the largest financial incentives available, hospitals are acutely focused on readmission reduction strategies.  The effectiveness of reducing readmissions will depend on the integrity of the benchmarking data available, the validity of the methods used for analyzing the data and the steps taken by the hospital and the patient to lower readmission incidences.

Developing national benchmarks for hospital readmissions will help identify those patient populations with relatively high readmission rates for targeted improvement efforts.  Tracking the changes from benchmarking data over time will allow stakeholders to make the adjustments needed to reduce readmissions.

1Medicare Payment Advisory Commission (2007) Report to the Congress: promoting greater efficiency,
2Section 3025 of the Affordable Care Act establishes the Readmission Reduction Program and adds paragraph (q) to Section 1886 of the Social Security Act
3Hospitals are eligible to participate in the Medicare EHR Incentive Programs: “Subsection (d) hospitals” in the 50 states or DC that are paid under the Inpatient Prospective Payment System (IPPS) Critical Access Hospitals (CAHs),
4U.S. Department of Health and Human Services, National Quality Strategy. 2013 Annual Progress Report to Congress: National Strategy for Quality Improvement in Health Care. July 2013, Updated July 2014.  Accessed November 13, 2015.
5Agency for Healthcare Research and Quality. Hospital Guide to Reducing Medicaid Readmissions. August 2014. Rockville, MD: Agency for Healthcare Research and Quality.  Accessed November 13, 2015.
6Higher Stakes, Troubling Trends and New Ways to Take Control – Readmission Reduction,
7Examining the Drivers of Readmissions and Reducing Unnecessary Readmissions for Better Patient Care, TrendWatch, September 2011,


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 or on Twitter @philcsolomon.


TCPA Healthcare Hits Hard and Dukes it Out With the FCC over TCPA

The Federal Communications Commission (FCC) issued a Declaratory Ruling and Order (Declaratory Ruling)1 on July 10, 2015, in response to 21 separate requests2 seeking clarifications to the Telephone Consumer Protection Act (TCPA).3 The Declaratory Ruling has grave implications for any organization that uses an autodialer or prerecorded messages to make non-emergency calls to wireless phones without obtaining the consumer’s prior express consent.

The healthcare industry got into the ring with the FCC and won significant concessions to the TCPA further clarifying its governance with healthcare. After a hard-fought boxing match, the July 10th ruling will allow healthcare entities greater flexibility in communicating with their patients.

The TCPA, ratified in 1991, was created to protect consumers from unsolicited telemarketing calls, faxes, and text messages. TCPA identifies the requirements by which a business may promote its products and services to consumers. Unambiguously, the TCPA prohibits the use of automated dialing systems that use live operators and pre-recorded voice messages without obtaining the recipient’s prior consent.

The types of communications restricted by the TCPA are:

1. Auto-dialed calls: An auto-dialed call is a phone call, involving a live person or pre-recorded message, that is placed using an “auto-dialer,” or automatic-telephone-dialing-system, that can produce, store and call telephone numbers using a random or sequential number generator;
2. Robocalls calls: A robocall is a phone call that uses an “auto-dialer” system to deliver a pre-recorded telemarketing message; and
3. Text messages: A text message is sent via a short message service (SMS) and messages containing image, video and sound content that are called multimedia messaging service (MMS). The TCPA considered these types of communications “calls” and they have the same requirements as other calling formats.
On October 16, 2013, the FCC revised its TCPA guidelines; further restricting telemarketing calls.4 Adjustment of the TCPA requires the prior written consent for most automated telemarketing communications, particularly those made to cellphones.

Since the healthcare industry is dissimilar to any other business or organization, the FCC’s July 10, 2015, Order outlines an assortment of healthcare-specific exemptions to the TCPA for some important healthcare calls.5 These exemptions are restricted to some requirements and conditions and do not provide an overarching exemption to TCPA liability.

A critical clarification was addressed from a petition filed by the American Association of Healthcare Administrative Management (AAHAM) in October 2014 regarding “free, pro-consumer healthcare-related messages” and under what circumstances such messages are exempt from the TCPA’s requirement for prior expressed consent.6 This petition sought clarification on exemptions that are currently found in the TCPA for calls subject to the Health Information Portability and Accountability Act (HIPAA).7

The HIPAA exemption in the TCPA regulations now extends to advertising and marketing calls to cell phones and residential landline phone numbers. The exemption provides for calls that deliver a healthcare message made by or on behalf of a “covered entity” or its “business associate,” as those terms are defined in HIPAA and do not require the prior express written consent of the called party. What has been confusing is whether non-telemarketing calls (i.e., informational or transactional calls) that deliver healthcare messages require any consent at all. The FCC’s response to the AAHAM petition8 helps to answer that question.

AAHAM requested that the FCC clarify how calls can be made subject to the HIPAA exemption, an individual’s voluntary provision of his or her cellular telephone number to a healthcare provider constitutes prior express consent to be called on that number. The FCC has previously declared in other contexts that an individual’s provision of his or her cell phone number is effectively an invitation to be called on that number, as long as the calls or texts are limited in scope to the purpose the number was provided in the first place. In its July 10, 2015, Ruling, the FCC extended that reasoning to calls and texts in the healthcare context and agreed that healthcare providers can rely on the voluntary provision of a cell phone number as constituting prior express consent under the TCPA. This exemption is tied specifically to HIPAA and its defined terms. Thus, only HIPAA-covered entities and their business associates, as those terms are defined in HIPAA, can make healthcare calls subject to this exemption. As with other types of calls, this HIPAA healthcare exemption is also limited in scope: the calls must be within the scope of the consent given and not regarding some unrelated topic.

The National Association of Healthcare Access Management (NAHAM),9 a national organization, supporting healthcare providers through education programs and the availability of subject matter expertise, prepared and distributed a checklist of five best practices and standards that offer their members guidelines to follow so they will be in compliance with TCPA. The checklist includes:

1. An individual’s provision of his or her cell phone number is effectively an invitation to be contacted at that number, as long as the calls or texts are limited in scope to the purpose the number was provided in the first place. Healthcare providers can rely on the voluntary provision of a cell phone number as constituting prior express consent under the TCPA.
2. In situations where a patient is incapacitated and unable to provide a telephone number directly to a healthcare provider, a third party HIPAA-covered intermediary is allowed to provide a number. Consent by a third party on behalf of an incapacitated individual will end when the individual is no longer incapacitated, at which time the provider must get prior express consent from the individual being called.
3. Non-telemarketing healthcare calls, for which the called party is not charged, are exempt from the prior express consent requirement. The FCC provided these examples:
– Appointment and exam confirmations and reminders;
– Wellness check-ups;
– Hospital pre-registration instructions;
– Pre-operative instructions;
– Lab results;
-Post-discharge follow-up intended to prevent readmission and prescription notifications; and
– Home healthcare instructions.

4. Healthcare calls related to accounting, billing and debt-collection or containing other financial content are not part of this exemption.

5. The content of the exempt calls continues to be subject to HIPAA privacy rules. The FCC reiterates that for purposes of these TCPA exemptions:
– Calls must be free to the end user;
– Calls must be made by or on behalf of a healthcare provider;
– Calls can only be made or sent to the cell phone number provided by the patient;
– Calls or texts must state the name and contact information of the healthcare provider;
– Calls or texts must be “concise” (one minute or less for voice calls and 160 characters or less for text messages);
– Healthcare providers may only make one exempt call or send one exempt text per day (per recipient), with a weekly limit of three total calls or texts (per recipient);
– Healthcare providers must offer recipients an opportunity to opt-out of receiving these types of calls or texts, and honor those opt-outs immediately; and
– The exclusive method for opting out of text messages is for the recipient to reply with the word “STOP.” Recipients must be given this instruction.

Litigation risk under the TCPA can be substantial. Because the TCPA provides for strict liability and statutory damages of $500 per violation (and up to $1,500 if the violation is deemed willful or knowing) with no maximum cap on recovery, potential exposure in a TCPA class action can quickly escalate. For example, the top four TCPA settlements in 2014 totaled more than $175 million.10

Latest Update: The Fight Continues
On November 25th, joint petitioners ACA International, Sirius XM, PACE,, ExactTarget, Consumer Bankers Association, U.S. Chamber of Commerce, Vibes Media and Portfolio Recovery Associates came out swinging as they filed their opening brief11 in the consolidated appeal12 of the FCC’s July 10, 2015, Declaratory Ruling and Order in the United States Court of Appeals for the District of Columbia Circuit. The joint petitioners argue that FCC’s recent Order “rewrote the TCPA,” “jeopardizes desirable communications that Congress never intended to ban,” and “encourage(s) massive TCPA class actions seeking crippling statutory damages.”
While the litigation in the United States Court of Appeals goes on, what can healthcare do to protect itself from receiving a TCPA knock-out punch?

Given the limitations and constraints set out by the FCC in its Declaratory Ruling, healthcare entities should:
– Review their policies regarding the collection and use of phone numbers provided by consumers;
– Ensure that the processes for collecting phone numbers distinguish between wireless and residential numbers, when necessary, and that any subsequent use of a wireless number meets the requirements of the Declaratory Ruling;
– Review potential methods to make sure that their list of wireless numbers is current and up-to-date; and
– Check the messaging that is taking place in those wireless calls to ensure that the calls are meeting the requirements above.

This clarification from the FCC helps to identify better which healthcare-related calls do not require consent, and which still might require the prior expressed consent of the patient. All healthcare organizations intending to follow newly created exemptions through automated calling or text messaging should pay specific attention to the details of these new requirements and be on the lookout for potential litigation risk.

1. In the Matter of Rules and Regulations Implementing the Telephone Consumer Protection Act of 1991, Declaratory Ruling and Order, FCC 15-72, CG Docket No. 02-278, WC Docket No. 07-135, (rel. July 10, 2015),
2. Various organizations filed a total of 21 petitions with the FCC.
4. See In the Matter of Rules and Regulations Implementing the Telephone Consumer Protection Act of 1991, FCC Report and Order, CG Docket No. 02-278 (Feb. 15, 2012) (“2012 Report and Order”),
5. TCPA Omnibus Declaratory Ruling and Order,
6. Clarification addressed a petition filed by the American Association of Healthcare Administrative Management,
7. HIPAA definition,
8. AHAM petition to FCC,
9. National Association of Healthcare Access Management,
10. Sutherland Legal Alerts,
11. Opening brief for consolidated appeal,
12. Joint Petitioners File Initial Brief in Consolidated Appeal of FCC’s TCPA Order,


Phil C. Solomon is the publisher of Revenue Cycle News, a healthcare business information blog.  He serves as the Vice President of Global Services for MiraMed, a global healthcare Business Processing 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 for the company’s business process outsourcing and revenue cycle service lines. Phil has over 25 years of experience consulting on a broad range of healthcare revenue cycle initiatives for revenue enhancement, expense reduction, and clinical transformation.  He is industry thought leader, strategist, author and featured speaker.  Phil can be reached at