Developments from the past month highlight the short-term and long-term challenges facing the industry. We see everything as progress. Here's our take on the opportunities to maintain and create business value.

Health Care Reform

The nation's health care bill will hit $5.4 Trillion by 2024.

That's up 76 percent from $3.1 trillion in 2014, and a hold a 19.6 percent share of the U.S. gross domestic product (compared with 18 percent today). Health care spending will rise at an average annual rate of 5.8 percent from 2014 to 2024, higher than the 4 percent annual average over the past few years. CMS attributed the higher rate to more people having health insurance coverage because of the Affordable Care Act, an improved overall economy and increased health needs from an aging population.

The takeaway: If the projections hold true, payers and providers will be under even greater pressure to control costs, which likely will accelerate the shift to value-based payment mechanisms.


12 month grace period from denied Medicare Part B claims after ICD-10 takes effect on Oct. 1.

That's the number of months Medicare fiscal intermediaries won't deny Medicare Part B claims from physicians and other practitioners after the ICD-10 diagnostic and procedure code set takes effect on Oct. 1. The one-year grace period (PDF, 198 KB) for doctors was negotiated by CMS and the American Medical Association. Part B claims submitted starting on Oct. 1 will require a valid ICD-10 code. But, as long as codes are in the ballpark and reflect why patients sought care and how they were treated, Medicare will honor the bill.

The takeaway: Good news for physician practices still working out Medicare billing problems related to the transition to ICD-10.

In the year 2030 the Medicare program will be broke.

The trustees said the program will enjoy a surplus (PDF, 2.3 MB) from 2015 through 2023, but then deficit spending takes over for the next seven years until the bank account is empty. Medicare won't wait until 2023 to ensure its financial future.

The takeaway: Payers, providers and suppliers will need to prepare for even more aggressive cost-control measures from the program, which spent $613.3 billion on health care services for its 53.8 million beneficiaries in 2014.

Patient Safety

45% decline in the Medicare inpatient mortality rate from 1999 to 2013. 

In 1999, 1.3% of Medicare patients died while they were in the hospital. By 2013, the Medicare inpatient mortality rate dropped to 0.71%. Not coincidentally, 1999 was the year that the Institute of Medicine released its groundbreaking Too Err Is Human report that said as many as 98,000 patients die each year because of preventable medical errors at hospitals (PDF, 75 KB).

The takeaway: Major progress in avoiding preventable medical errors. With quality data available and required by Medicare, this trend will likely continue.

28% of hospital readmissions tied to patient infections, study finds.

Hospitals seeking strategies to reduce avoidable hospital readmissions may want to focus their attention on infection control. A study published in Clinical Infectious Diseases found that 28 percent of all 30-day readmissions were related to patient infections. The study also found a positive correlation between infection-related readmissions and specific patient risk factors, including patients with comorbidities, long lengths of stay, discharged to a nursing home and living in federal poverty areas.

The takeaway: Those are four ripe targets for infection-control interventions that will pay off for hospitals in terms of lower 30-day readmissions rates.


75 geographic markets will require hospitals to accept bundled payments for hip and knee replacement surgeries under a new Medicare value-based reimbursement program.

The program, which starts Jan. 1, 2016, makes hospitals “accountable” for the cost and quality of all clinical components of a single procedure starting at the time of surgery and ending at 90 days after discharge. Participating hospitals will need new skill sets, processes, technologies and workflows to be successful under the program.

The takeaway: The required capabilities include the ability to coordinate patient care with other providers to avoid complications and readmissions whose additional costs will eat through preset, bundled payments.

45 states failed when it came to giving patients' access to cost information.

After Medicare starts paying hospitals a set fee for a bundled package of clinical services for hip and knee replacements, price transparency is sure to follow. Two groups that support greater healthcare price transparency released their latest annual report grading state laws that give patients access to cost information to help them make decisions about where to receive medical care. Not grading on a curve, Catalyst for Payment Reform and the Health Care Incentives Improvement Institute handed out Fs to 45 states. Two got Cs; two got Bs; only one – New Hampshire – got an A.

The takeaway: Payers and providers that can assume the responsibility for payment clarity themselves may gain a competitive advantage in the market.

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