AHA executives explain why 2015 Medicare rates will increase financial burden on hospitals
The controversial reform for next year’s Medicare inpatient payments has hospitals feeling burdened by the amount of financial stress heading their way. This double-down policy has hospital payment systems buckling down to cushion the financial blow in the upcoming year, and the industry is already talking about how to handle the economic hardship.
The 2015 proposal for The Centers for Medicare and Medicaid Services serves Medicare’s hospital inpatient prospective payments, offering a small inpatient increase of 1.3 percent. This proposal also comes with a “market basket” increase of 2.7 percent for hospitals that report on quality metrics and qualify for the EHR incentive program.
“The policies announced today will assist the highly committed professionals working around the clock to deliver the best possible care to Medicare beneficiaries,” said CMS Administrator Marilyn Tavenner in a media release. “This proposed rule is geared toward improving hospital performance while creating an environment for improved Medicare beneficiary care and satisfaction.”
In addition to these reforms, the organization is also suggesting increased reductions for hospital readmissions. Compared to the 2 percent from this year, the agency is calling for a three percent downward adjustment along with a new penalty for hospitals with a large proportion of patients who acquire preventable conditions and infections during their stays. If and when this proposal is approved and put into fruition in 2015, 25 percent of hospitals with the highest hospital-acquired condition rates will see a one percent reduction in inpatient payments.
“The AHA and other advocates and stakeholders are still digesting the 1,600-plus page proposal, but at first glance, argued AHA Executive Vice President Richard Pollack, it seems the requirements ‘would put further stress on vital care for seniors,’ amid “an unprecedented amount of change.”
Additionally, industry experts pose the question to this up-and-coming 2015 policy: how will these hospital reforms affect long-term care institutions? Following the proposal’s suggestions, long-term care hospitals will see a .8 percent rise in its rates, and those hospitals which choose to participate in the program will see a 1.5 percent increase for operating diagnosis-related group payments from a total incentive pool totaling $1.4 billion.
Premier, the group purchasing organization, “is deeply disappointed that CMS failed to address fundamental problems in the two midnight benchmark,” said Blair Childs, senior vice president, in a media release. “This leaves hospitals trying to implement an unclear, unfair policy where they will soon be subject to audits.”
How these organizations perform and respond to these soon-to-be imposed standards will be interesting— to say the least. Whether it is a short-term care or long-term care facility, this double-down policy’s controversial nature will be sure to ruffle feathers within the hospital finance sector, as the public anxiously waits to see if hospital care standards change as a result.
Driving sustainability in medical device production
Environmental protection and stewardship are rapidly rising to the top of the corporate agenda and medical device businesses are no exception. The healthcare sectors of the United States, Australia, Canada, and England combined emit an estimated 748 million metric tons of greenhouse gases each year, an output greater than the carbon emissions of all but six nations worldwide. In order to curb this situation various European standards have been introduced.
The Waste Electrical and Electronic Equipment (WEEE); Restriction on Hazardous Substances (RoHS); Registration, Evaluation, and Authorisation of Chemicals (REACH) and the Energy Using Products (EuP) regulations have all significantly altered manufacturing processes, specific labelling, compliance with disposal restrictions, and creation of instructions for end-of-life management and recycling.
At the moment many medical devices are currently exempt from these regulations but several directives, including RoHS and WEEE, are in the process of being reviewed and could be applicable in future. This is especially relevant for devices that are ‘connected’ and have a digital monitoring component which then brings them under the regulatory purview of authorities that govern devices with electronic components.
Safety, Usability and Sustainability
While medical device manufacturers have been working to respond to increasing demand for environmental sustainability from the market, they also have to contend with a key element of their mission: to ensure safety and usability to healthcare workers and patients. Parenteral and other invasive devices are strictly regulated to help reduce the risk of Healthcare Acquired Infection which typically runs as high as 5% and 8% in most developed countries, according to the European Centre for Disease Prevention and Control. As a result, they typically contain disposable single-use plastic elements.
At the same time, many hospitals and purchasing organisations have started to recognise that sustainable purchasing practices play a pivotal role in reducing costs over time. Many GPOs have appointed and empowered Senior Directors of Environmentally Preferred Sourcing who are successfully implementing the sustainable purchasing business case. In addition global pharmaceutical companies are increasingly creating senior positions with sustainability objectives as key to the role.
Medical device disposal is a particularly burning issue; generally carried out through incineration in the EU, it typically releases nitrous oxide, as well as known carcinogens including polychlorinated biphenyls, furans and dioxins. Some of the strategies trialled by manufacturers to reduce waste matter destined to incineration include sterilisation and reprocessing.
Sterilisation, however, falls short on the environmental front, and may consume more energy and produce more emissions than incineration itself. In the United States for example, 50% of all sterile medical devices are sterilised with ethylene oxide but since this method releases harmful emissions, the US Food and Drug Administration is now encouraging the development of new methods or technologies. Many other established sterilisation methods use glutaraldehyde that is not only harmful to the environment but also tends to be regulated by strict usage and disposal rules such as COSSH guidelines.
Focus on Recycling
The outlook on recycling is changing significantly thanks to new research and technologies enabling, for example, monomer extraction. Recycled polymers can be broken down to their constituent monomers promoting an almost limitless recyclability of some polymers. In addition to this, Polyvinyl chloride (PVC), renewable polyethylene and polyethylene terephthalate (PET) can be recycled several times without losing critical properties.
Reducing the impact of packaging can also significantly reduce the materials that need to be dealt with through either waste or recycling. Packaging manufacturers are decreasing packaging volume by favouring sealed trays instead of pouches, laser-etching instructions directly on to the tray where regulation permits it, or reducing the number of components required overall. In addition to this, for recycling plans to be successful it important to have a full understanding of the practices surrounding device use and to establish, where possible, closed loop recycling systems that recover the waste materials from hospitals or patients and bring them back into the recycling process.
Sustainable Manufacturing: Technology and Research
Greater employment of fast degrading plastics or material from other sources is a key strategy to reduce harmful pollutants both at production and disposal stage. Bio-based materials can in fact offset the carbon emitted during processing as the monomer source grows, and a growing range of sources for bio based monomers -such as wood pulp or sugar cane- is available. However, when assessing the most suitable material for a part, the entire lifecycle of the product needs to be considered. For example: bio-degradable polymers can contaminate a recycling stream and emit methane when incinerated.
The use of environmentally friendly materials should also be supported by an increase in clean renewable energy sources. Lower energy consumption means fewer carbon emissions but also financial savings, making this an appealing measure for manufacturers. New technologies are proving a major gamechanger on this front, helping manufacturers marry their environmental stewardship with cost savings and efficiency. 3D printing, for example, can help develop optimum product moulds more quickly, refining production parameters to minimise raw materials volumes and maximising output productivity.
Similarly, ‘digital twin’ production software uses inline sensors to create a virtual, real-time mirror of the production environment to enable inline refinements. The objective is to achieve “zero defect”, waste-free manufacturing. In addition to this, LEAN manufacturing methodologies are already helping to optimise inventory management and reduce overproduction.
Sustainability by Design
It is increasingly clear that effective environmental sustainability in the medical device sector cannot exist without a full view of the product life cycle from concept development, material selection, design and engineering to manufacturing, packaging, transportation, sales, use, and end-of-life disposal. These evaluations are typically made for factors such as manufacturing efficiency, time to market, or safety and regulatory compliance, packaging and transportation costs, but should be extended to energy efficiency and environmental impact by means such as life cycle analysis.
In addition to this, with devices rapidly becoming more digitally connected, developers need to be aware that the costs of disposable electronics would simply not be viable, or indeed acceptable in the light of electronics disposal regulations. Design therefore should focus on creating a simple, repeatable interface between the two component sections so as not to impair the functionality or efficacy. As reducing waste and harmful emissions continues to exert businesses and governments globally, the medical devices industry cannot stand by. The environmental but also commercial implications of inaction are too serious and the array of solutions now available is exciting and diverse.