/ en Mon, 28 Apr 2025 21:07:56 -0500 Mon, 28 Apr 25 15:04:37 -0500 /guidesreports/2025-04-28-2024-costs-caring <div class="container"><div class="row"><div class="col-md-8"><h2><span>Introduction</span></h2><p><img src="/sites/default/files/inline-images/Figure-1-Labor-constitutes-largest-percentage-of-hospital-expenses.png" data-entity-uuid="d6c1793f-d4c3-44ea-8ba5-d1f15b6518e2" data-entity-type="file" alt="Figure 1. Labor constitutes largest percentage of hospital expenses. Labor: 60% ($839 Billion); Supplies: 13% ($181 Billion); Drugs: 8% ($115 Billion); Other: 19% ($269 Billion). Note: Average expenses estimated by Strata Decision Technology median 2023 values across all hospital spending. Labor is inclusive of purchased services and professional fees." width="718" height="752" id="figure1" class="align-right">Hospitals and health systems have been at the forefront of a major transformation while at a crossroads of increasing demand for higher acuity care and deepening financial instability. Persistent workforce shortages, severe fractures in the supply chain for drugs and supplies, and high levels of inflation have collectively fueled hospitals’ costs as they care for patients 24/7 (see <a href="#figure1">Figure 1</a>). At the same time, hospitals’ costs have been met with inadequate increases in reimbursement by government payers and increasing administrative burden due to inappropriate commercial health insurer practices.</p><p><strong>Taken together, these issues have created an environment of financial uncertainty where many hospitals and health systems are operating with little to no margin. While recent data suggest that some hospital and health system finances have experienced modest stabilization from historic lows in 2022, the hospital field is still far from where it needs to be to meet the demand for care, invest in new and promising technologies and interventions, and stand ready for the next health care crisis.</strong></p><p><img src="/sites/default/files/inline-images/Figure-2-Inflation-growth-was-more-than-double-the-growth-in-IPPS-reimbursement-2021-2023.png" data-entity-uuid="90ce5355-e63a-4187-bfae-5a641d891486" data-entity-type="file" alt="Figure 2. Inflation growth was more than double the growth in IPPS reimbursement, 2021–2023. Inflation: 12.4%; IPPS Increases: 5.2%. Note: Inflation calculated using annual average CPI-U between 2021 and 2023 from BLS. IPPS increase from FY2020–2023 market basket increases net of other adjustments." width="385" height="705" id="figure2" class="align-left">Fresh off a historically challenging year financially in 2022 in which over half of hospitals closed out the year operating at a loss, many hospitals spent much of 2023 simply struggling to break even.<a href="#fn1"><sup>1</sup></a> Economy-wide inflation grew by 12.4% between 2021 and 2023 – more than two times faster than Medicare reimbursement for hospital inpatient care (see <a href="#figure2">Figure 2</a>).</p><p>Since the start of 2022, the number of days cash on hand for hospitals and health systems has declined by 28.3%, according to data from Strata Decision Technology, which provides data and cloud-based financial planning, decision support and performance analytics solutions.<a href="#fn2"><sup>2</sup></a></p><p>Diverting dollars from their reserves to maintain access to care has required tradeoffs that have limited many hospitals and health systems from investing in updated infrastructure, new medical technology and equipment, and other clinical needs — particularly among those hospitals in severe financial distress.<a href="#fn3"><sup>3</sup></a><sup>,</sup><a href="#fn4"><sup>4</sup></a> For example, the average age of capital investments for medical equipment and infrastructure, after years of remaining relatively flat, increased by 7.1% for all hospitals in 2023, according to data from Strata Decision Technology. While the constraints and burdens of increasing plant age present serious challenges to hospitals and health systems in their own right, the inability to make needed capital investments has contributed to bond rating agencies issuing rating downgrades, making it harder for some hospitals and health systems to borrow money.<a href="#fn5"><sup>5</sup></a> Ongoing reimbursement challenges, made worse by crises like the recent Change Healthcare cyberattack, and increased operating costs create an unsustainable financial environment.<a href="#fn6"><sup>6</sup></a> While these challenges alone could cripple any organization, hospitals and health systems continue to face additional threats from ongoing Medicaid redeterminations increasing uncompensated care<a href="#fn7"><sup>7</sup></a>, regulatory changes that add operational burden, cyberattacks that threaten the health care infrastructure and potential legislation that would further cut Medicare payments to hospitals.</p><p>This report provides a snapshot of the current cost realities facing hospitals and health systems and how they impact their ability to care for patients and communities.</p><h2><span>1. Costs of Providing Essential Services</span></h2><p><img src="/sites/default/files/inline-images/Figure-3-Cumulative-Medicaid-and-Medicare-underpayments.png" data-entity-uuid="1846fd31-a865-4fcb-8de7-b4ca6bf1b3f2" data-entity-type="file" alt="Figure 3. Cumulative Medicaid and Medicare underpayments. 2013 to 2017: -$375 Billion; 2018 to 2022: -$522 Billion. Note: AHA Annual Survey 2013 to 2022 all dollars inflation adjusted to 2022 values using CPI-U from the BLS." width="620" height="672" id="figure3" class="align-right">Hospitals often play the critical — and sometimes only — role in providing access to essential health care services, such as emergency care and behavioral health, which are necessary for the health and well-being of the communities they serve. Further, oftentimes these are services that are not offered by other types of health care providers. In 2022, the most recent year for which data are available, hospitals admitted nearly 137 million patients in emergency departments and delivered over 3.5 million babies.<a href="#fn8"><sup>8</sup></a> Many of these essential services are extremely resource intensive and costly to offer. Further compounding this issue are demographic trends such as an aging population and clinical factors such as higher patient acuity. This has driven a steady rise in the share of inpatient utilization among more clinically complex patients covered by Medicare and Medicaid.<a href="#fn9"><sup>9</sup></a> Not only are inpatient services costlier to provide, but public payer payments for these services fall well below costs. In fact, underpayments from Medicare and Medicaid totaled nearly $130 billion in 2022, and Medicare paid just 82 cents for every dollar hospitals spent caring for patients — resulting in a shortfall of almost $100 billion.<a href="#fn10"><sup>10</sup></a> Troublingly, cumulative underpayments in the second half of the last decade totaled more than half a trillion dollars — a nearly 40% increase compared to the first half even after adjusting for inflation (see <a href="#figure3">Figure 3</a>).</p><p>However, the reimbursement challenges do not end with Medicare and Medicaid Reimbursement for some services consistently fall below costs across all payer types. For example, payments for inpatient behavioral health services were 34.3% below costs across all payers on average in 2023, according to data from Strata Decision Technology (see <a href="#figure4">Figure 4</a>). This is especially concerning given the increased utilization of behavioral health services over the last few years.</p><img src="/sites/default/files/inline-images/Figure-4-Hospital-payments-do-not-cover-the-costs-of-providing-vital-patient-services-20240612.png" data-entity-uuid="96ed5e28-677a-4ba0-8659-407033fe0a56" data-entity-type="file" alt="Figure 4. Hospital payments do not cover the costs of providing vital inpatient services. Average margin on services: Behavioral Health -34.3%; Nephrology -34.1%; Burns and Wounds -24.1%; Pulmonology -19.4%; Infectious Disease -15.3%. Note: AHA analysis of 2023 average service line payment and cost across all payers from Strata Decision Technology. Does not include supplemental payments from Medicaid." width="1565" height="623" id="figure4"><p>In the outpatient setting, average payments for costly burn and wound services were 42.9% below costs across all payers (see <a href="#figure5">Figure 5</a>). These shortfalls have been especially acute for government payers like Medicare. For example, average Medicare margins for behavioral health services were -38.9% in 2023.</p><img src="/sites/default/files/inline-images/Figure-5-Hospital-payments-also-fail-to-cover-the-costs-of-providing-essential-outpatient-services.png" data-entity-uuid="a43ea45f-a309-46a9-9acc-fb54b385b5b2" data-entity-type="file" alt="Figure 5. Hospital payments also fail to cover the costs of providing essential outpatient services. Average margin on services: Burns and wounds -42.9%; Nephrology -32.3%; Behavioral Health -31.7%; Pulmonology -17.5%; Infectious Disease -12.1%. Note: AHA analysis of 2023 average service line payment and cost across all payers from Strata Decision Technology. Does not include supplemental payments from Medicaid." width="1558" height="616" id="figure5"><p>Taken together, these data highlight the challenges that hospitals and health systems face in providing essential services that communities need. This is particularly true for hospitals in rural areas, where the financial challenges can be even more severe.</p><h2><span>2. Hospital Administrative Expenses</span></h2><p><span><em><strong><img src="/sites/default/files/inline-images/Figure-6-Premiums-grew-twice-as-fast-as-hospital-prices-in-2023.png" data-entity-uuid="d158d191-431b-4548-aebc-57269df046dc" data-entity-type="file" alt="Figure 6. Premiums grew twice as fast as hospital prices in 2023. Health Insurance Premiums: 6.7%; Hospital Prices: 2.6%. Note: Health insurance premiums represent premiums for a family of four, from KFF Employer Health Benefits Survey, 2023. Hospital Prices: BLS, annual average Producer Price index for hospitals." width="607" height="790" id="figure6" class="align-right">Some commercial health insurer practices increase hospital costs and delay care to patients</strong></em></span></p><p>Hospitals have seen significant growth in administrative costs due to inappropriate practices by certain commercial health insurers, including Medicare Advantage (MA) and Medicaid managed care plans. In addition to increasing premiums, which grew twice as fast as hospital prices in 2023, commercial health insurers have overburdened hospitals with time-consuming and labor-intensive practices like automatic claims denials and onerous prior authorization requirements (see <a href="#figure6">Figure 6</a>).<a href="#fn11"><sup>11</sup></a></p><p>A 2021 study by McKinsey estimated that hospitals spent $10 billion annually on dealing with insurer prior authorizations.<a href="#fn12"><sup>12</sup></a> Additionally, a 2023 study by Premier found that hospitals are spending just under $20 billion annually in appealing denials — more than half which was wasted on claims that should have been paid out at the time of submission.<a href="#fn13"><sup>13</sup></a> Denials issued by commercial MA plans rose sharply by 55.7% in 2023.<a href="#fn14"><sup>14</sup></a> Notably, many of these denials were ultimately overturned, consistent with a study by the Department of Health and Human Services’ (HHS) Office of Inspector General (OIG) that found 75% of care denials were subsequently overturned.<a href="#fn15"><sup>15</sup></a> These denials are particularly concerning because they often occur for medically necessary care, which can result in direct patient harm. In fact, a recent HHS OIG report found that nearly one in five MA denials met Medicare coverage rules, which meant that had they been paid via Medicare fee-for-service, they would have been paid without denial.<a href="#fn16"><sup>16</sup></a> Even when denials are ultimately overturned, hospitals are not paid for the costs incurred to navigate that burdensome and resource-intensive process. Making matters worse, MA plans paid hospitals less than 90% of Medicare rates despite costing taxpayers more than traditional Medicare in 2023.<a href="#fn17"><sup>17</sup></a><sup>,</sup><a href="#fn18"><sup>18</sup></a> Although partly a function of lower rates, the worsening administrative overload is simply costing hospitals more and more.</p><p>Though these issues are often felt most acutely with MA and Medicaid managed care plans, it also is true for other commercial payers, where claims denials increased by 20.2% in 2023. Moreover, the time taken by commercial payers to process and pay hospital claims from the date of submission increased by 19.7% in 2023, according to data from the Vitality Index. For hospitals and health systems, these practices result in billions of dollars in lost revenue each year, which require hospitals to divert dollars away from patient care to instead focus on seeking payment from commercial insurers.<a href="#fn19"><sup>19</sup></a> Without further intervention, these trends are expected to continue and worsen. National expenditures on the administrative costs of private health insurance spending alone are projected to account for 7% of total health care spending between 2022 and 2031 and are projected to grow faster than expenditures for hospital care.<a href="#fn20"><sup>20</sup></a></p><h3><span>Other expenses</span></h3><p>Hospitals also are spending more on things that are not direct patient care services but are still critical to delivering care and maintaining operations. For example, the costs associated with implementing, maintaining and upgrading information management systems and overall technology infrastructure, while critical to improving efficiency and quality of care, typically represent significant investments.</p><p>Additionally, given the confidential nature of patient data in these systems, hospitals have increasingly become targets for cyberattacks. As a result, the costs of defending against these attacks and protecting patient data has grown steadily.<a href="#fn21"><sup>21</sup></a> Health care data breaches are by far the costliest of any other sector.<a href="#fn22"><sup>22</sup></a> As cyberattacks and data breaches in health care have grown and regulators are requiring more robust protections, hospitals and health systems are finding themselves increasingly trying to invest in cybersecurity.<a href="#fn23"><sup>23</sup></a> Protecting against cyberattacks and other vulnerabilities is important to patient care, but is increasingly costly. In 2022, hospitals spent nearly $30 billion on property and medical liability insurance, according to data from Lightcast.</p><h2><span>3. Hospital Drug Expenses</span></h2><p>An area of persistent cost pressure for hospitals and health systems has been the rapid and sustained growth in drug expenses. Hospitals spent $115 billion on drug expenses in 2023 alone. One of the factors fueling this growth is drug company decisions to impose large price increases on existing drugs. However, 2023 also saw a continuation of a long-standing trend of drug companies introducing new drugs at record prices. In 2023, the median annual list price for a new drug was $300,000, an increase of 35% from the prior year (see <a href="#figure7">Figure 7</a>).<a href="#fn24"><sup>24</sup></a> A recent report by the HHS Assistant Secretary for Planning and Evaluation (ASPE) found that between 2022 and 2023, prices for nearly 2,000 drugs increased faster than the rate of general inflation, with an average price hike of 15.2%.<a href="#fn25"><sup>25</sup></a></p><img src="/sites/default/files/inline-images/Figure-7-Annual-List-Prices-of-Novel-Drugs-Launched-in-2023.png" data-entity-uuid="b88a70d2-300e-48d9-90f9-e3fbe3b80e83" data-entity-type="file" alt="Figure 7. Annual List Prices of Novel Drugs Launched in 2023*. Elevidys: $3,200,000; Roctavian: $2,900,000; Veopoz: $1,799,980; Altuviiio: $970,000; Pombiliti: $650,000; Talvey: $360,000; Orserdu: $280,526; Adzynma: $245,000; Zynyz: $170,880; Filspari: $129,965; Velsipity: $74,000; Leqembi: $26,000. Median price of new drug: $300,000. Median household: $74,580. Average price of a new car: $48,759. Source: Annual list prices of novel drugs launched in 2023 are from a Reuters survey of new drug costs. Median household income is from 2022 Census Bureau data. Average price of new care is from Kelly Blue Book new-vehicle transaction price in December 2023." width="1563" height="771" id="figure7"><p><img src="/sites/default/files/inline-images/Figure-8-Increase-in-drug-shortages-and-drug-prices-2022-2023.png" data-entity-uuid="e6973989-b4db-4b1f-a2ac-dd8b512598d6" data-entity-type="file" alt="Figure 8. Increase in drug shortages and drug prices, 2022–2023. 2022: Drug Shortages 8.0%; Drug Prices 11.5%. 2023: Drug Shortages: 13.0%; Drug Prices 15.2%. Note: Drug shortage data from Utah Drug Information System; Drug price data from ASPE." width="607" height="691" id="figure8" class="align-right">While high drug prices alone pose significant challenges for hospitals and health systems, it is compounded by the fact that many of these same drugs are in shortage. In fact, 2023 saw the most drug shortages in over a decade; there were an average of 301 drugs in shortage per quarter, an increase of 13.0% from the previous year (see <a href="#figure8">Figure 8</a>). These shortages added as much as 20% to hospital drug budgets, according to data from the American Society of Health System Pharmacists (ASHP). These shortages can occur for many reasons, including fractured global supply chains lack of available raw materials, and decisions by drug companies that lack incentives to produce low-margin generic medications.<a href="#fn26"><sup>26</sup></a> An ASHP survey found that more than 99% of hospital and health system pharmacists experienced drug shortages in 2023, with 85% of respondents describing the severity of drug shortages as critically or moderately impactful.<a href="#fn27"><sup>27</sup></a> While generic drugs comprised the majority of medications in shortage, estimated to make up as much as 83% of shortages, many of these drugs also were used to treat cancer and autoimmune diseases.<a href="#fn28"><sup>28</sup></a></p><p>Hospital pharmacy staff have limited options for navigating drug shortages. They can purchase the drug by going outside their traditional suppliers and group purchasing agreements, access alternate concentrations or package sizes of the drugs than what is needed or purchase a substitute drug with the same clinical indication. However, all three of these options mean hospitals pay higher prices to acquire the drugs. An ASPE report found up to a 16.6% increase in the prices of drugs in shortage; in many cases, the increase in the price of substitute drugs were at least three times higher than the price increase of the drug in shortage.<a href="#fn29"><sup>29</sup></a> The costs incurred as a result of drug shortages are compounded by staff overtime needed to find, procure and administer alternative drugs, to manage the added challenges of multiple medication dispensing automation systems and changing electronic health records (EHRs), and to undergo training to ensure medication safety using alternative therapies.<a href="#fn30"><sup>30</sup></a></p><h2><span>4. Hospital Supply Costs</span></h2><div class="row"><div class="col-md-5"><p>Having adequate and up-to-date medical supplies, devices and equipment are necessary for hospitals to deliver high quality care to patients. These can include artificial joints used to treat patients with conditions such as arthritis, robotic surgery machines used to perform laparoscopic surgical procedures, and complex imaging machinery used for clinical diagnostics. Most of these items are expensive to acquire and maintain and rely on increasingly volatile global supply chains. Comprising approximately 10.5% of the average hospital’s budget, medical supply expenses collectively accounted for $146.9 billion in 2023, an increase of $6.6 billion over 2022, according to data from Strata Decision Technology. As technology and science are constantly evolving, hospitals routinely need to purchase new supplies, devices and equipment that meet clinical care standards and ensure high quality care.</p><p>The upfront costs for critical equipment and device upgrades come at a significant cost (<a href="#table1">Table 1</a>). For example, the advanced technology of cardiac magnetic resonance imaging (cMRI) machines, which have allowed doctors to develop a deeper understanding of cardiac pathologies and has led to improved diagnostics, costs hospitals on average $3.2 million. For some hospitals that have high demand for cardiac services, they may need to purchase multiple cMRI machines. The additional costs for ongoing maintenance, upgrades and staff training also add to the total costs hospitals must incur to deliver their patients with the high quality care.</p></div><div class="col-md-7"> table, th, td { border: 1px solid; } th { background-color: #69b3e733; } } <table id="table1"><tbody><tr><td><h3>Table 1. Medical Device and Equipment Market Prices</h3></td></tr><tr><td><em>Cutting-edge innovation and technologies provide hospitals with the means to enhance patient outcome in their continuous commitment to delivering top-tier patient care. The featured equipment is intricately connected to advancements in diagnostics, heightened success rates in cardiovascular surgery, and more effective joint replacement procedures.</em></td></tr></tbody></table><table><thead><tr><th>Medical Devices and Equipment</th><th>Average List Price</th></tr></thead><tbody><tr><td colspan="2"><strong>Point of Care ultrasound devices</strong></td></tr><tr><td>Pocket-sized handheld or tablet-based</td><td>$8,143</td></tr><tr><td>Compact ultrasound systems*</td><td>$73,797</td></tr><tr><td colspan="2"><strong>Cardiovascular diagnostic and surgical equipment</strong></td></tr><tr><td>Cardiac magnetic resonance imaging (cMRI) machine</td><td>$3,230,728</td></tr><tr><td>Cardiopulmonary bypass system</td><td>$325,442</td></tr><tr><td colspan="2"><strong>Joint implant proprietary software and equipment</strong></td></tr><tr><td>Image based planning software</td><td>$222,132</td></tr><tr><td>Navigation software system (guide surgeons in real-time)</td><td>$135,365</td></tr><tr><td colspan="2"><p>*Larger than handheld devices, but still portable. May have more advanced features.</p><p><span><strong>Note:</strong></span> Market prices of medical devices and equipment are courtesy of ECRI, an independent not-for-profit corporation that provides a wide range of services dealing with health care technology.</p></td></tr></tbody></table></div></div><h2><span>5. Hospital Labor Costs</span></h2><p>Hospitals’ labor costs increased by more than $42.5 billion between 2021 and 2023 to a total of $839 billion, accounting for nearly 60% of the average hospital’s expenses. Hospitals continue to turn to expensive contract labor to fill gaps and maintain access to care, spending approximately $51.1 billion on contracted staff in 2023.</p><p><img src="/sites/default/files/inline-images/Figure-9-Growth-in-Total-Hospital-Employee-Compensation-Far-Outpaces-Inflation.png" data-entity-uuid="5fa4709d-12e9-47f3-af06-07ac3b0937b6" data-entity-type="file" alt="Figure 9. Growth in Total Hospital Employee Compensation Far Outpaces Inflation. 2014 to 2023: Inflation 28.7%; Hospital Employee Compensation 45.0%. Note: BLS Annual average Employee Cost Index, 2014 to 2023 for hospitals and CPI-U, 2014 to 2023." width="522" height="592" id="figure9" class="align-right">Though expenditures on contract labor have moderated since pandemic highs, the spending remains elevated and has added to the financial challenges hospitals and health systems face. This is especially true for smaller, rural hospitals where the local workforce pool is smaller and it can be more difficult to recruit staff. Hospitals’ labor costs also can be very sensitive to sudden fluctuations in the demand and supply of labor. Growth in wages and benefits of hospital employees has vastly surpassed economy-wide inflation over the last decade (see <a href="#figure9">Figure 9</a>).</p><p>Yet, critical labor shortages persist, especially in the face of growing burnout among clinicians. Employee burnout hastened by the pandemic and further exacerbated by commercial insurer administrative burden and increase in violence against hospital employees, led to an unprecedented exodus of health care professionals in recent years.<a href="#fn31"><sup>31</sup></a> Resignations per month among health care workers grew 50% between 2020 and 2023, according to data from McKinsey.<a href="#fn32"><sup>32</sup></a> Additionally, hospitals have been forced to contend with record high turnover rates — fueling additional expenses for hospitals looking to recruit new workers.<a href="#fn33"><sup>33</sup></a></p><p>Consequently, hospitals and health systems have invested more to attract and retain talent. Data from Lightcast indicates that advertised wage rates across all hospital jobs jumped by 10.1% during 2023. With a growing gap between supply and demand for health care workers over the next decade, labor costs will likely continue to be an issue for hospitals.</p><h2><span>A Look Ahead to the Rest of 2024</span></h2><p>Though 2024 is the first full year out of the most recent public health emergency period, hospitals and health systems continue to face many challenges. Credit ratings agencies have painted a bleak picture for the hospital sector in 2024.<a href="#fn34"><sup>34</sup></a> According to the S&P, negative outlooks for not-for-profit hospitals are proportionally at their highest in over a decade, affecting 24% of the sector.<a href="#fn35"><sup>35</sup></a> Similarly, Fitch reported a credit downgrade-to-upgrade ratio of 3:1 — alarmingly close to the ratio seen during the 2008 financial crisis — calling it a “make or break” year and highlighting the sector’s struggles, particularly among smaller hospitals with annual revenues under $500 million.<a href="#fn36"><sup>36</sup></a> While it is expected that hospitals and health systems will continue to face cost increases for labor, drugs, and medical supplies, there are additional headwinds to consider which include:</p><ul><li>Coverage losses due to Medicaid redeterminations: More than 19 million Medicaid enrollees have been disenrolled through 2023.<a href="#fn37"><sup>37</sup></a> Though partially offset by record Marketplace enrollment and possible enrollment in employer-sponsored coverage, this has still resulted in a steady increase in uncompensated care costs throughout 2023 and will likely continue into 2024 – particularly for states that have not expanded Medicaid.<a href="#fn38"><sup>38</sup></a></li><li>Potential legislative actions to cut hospital Medicare payments for patient care: Congress is considering several bills that would impose additional payment reductions to services provided in hospital outpatient departments. These proposals, referred to as “siteneutral” payment cuts, would exacerbate financial challenges for hospitals and threaten patients’ access to quality care.</li><li>Cybersecurity risks impact providers and patient care: The cyberattack on Change Healthcare in February 2024 has underscored the extensive repercussions such incidents can have on patient care and hospital operations. The disruptions stemming from that cyberattack have significantly hindered revenue cycle management, pharmacy services, select health care technologies, clinical authorizations, and more across multiple health systems, serving as an example of how an attack can reverberate across the entire health care sector when a business that provides numerous mission-critical services is compromised.<a href="#fn39"><sup>39</sup></a></li><li>Ongoing and escalating hospital violence: There has been a significant uptick in violence against health care workers in recent years.<a href="#fn40"><sup>40</sup></a> To address this issue, hospitals are making significant investments in violence prevention and preparedness efforts to support their employees.</li></ul><h2><span>Conclusion</span></h2><p>America’s hospitals and health systems are dedicated to providing high-quality 24/7 care to all patients in every community across the country. While the commitment to caring and advancing health never wavers, hospitals continue to face significant challenges making it difficult to ensure the care is always there.</p><p>The AHA continues to urge Congress and the Administration to support policies to make sure hospitals and health systems have the resources they need to continue providing 24/7 care to all patients and communities. These include:</p><ul><li>Rejecting Medicare and Medicaid cuts to hospital care, including harmful site-neutral proposals and forthcoming reductions to Medicaid Disproportionate Share hospitals.</li><li>Supporting and strengthening the health care workforce.</li><li>Protecting the 340B Drug Pricing Program from any harmful changes and reining in the increasing costs of drugs.</li><li>Taking actions to hold commercial insurers accountable for practices that delay, deny and disrupt care.</li><li>Bolstering support to enhance cybersecurity of hospitals and the entire health care system.</li></ul><hr><h2>End Notes</h2><ol><li id="fn1"><a href="www.kaufmanhall.com/news/2022-worst-financial-year-hospitals-and-health-systems-start-pandemic" target="_blank">www.kaufmanhall.com/news/2022-worst-financial-year-hospitals-and-health-systems-start-pandemic</a></li><li id="fn2"><a href="https://www.syntellis.com/sites/default/files/2023-11/aha_q2_2023_v2.pdf" target="_blank">www.syntellis.com/sites/default/files/2023-11/aha_q2_2023_v2.pdf</a></li><li id="fn3"><a href="https://fortune.com/well/2024/01/11/rural-hospitals-are-caught-in-an-aging-infrastructure-conundrum/" target="_blank">fortune.com/well/2024/01/11/rural-hospitals-are-caught-in-an-aging-infrastructure-conundrum/</a></li><li id="fn4"><a href="/guidesreports/2023-04-19-essential-role-financial-reserves-not-profit-healthcare" target="_blank">www.aha.org/guidesreports/2023-04-19-essential-role-financial-reserves-not-profit-healthcare</a></li><li id="fn5"><a href="https://www.modernhealthcare.com/finance/hospital-2023-credit-rating-downgrade-fitch-ratings-sp-global-moodys" target="_blank">www.modernhealthcare.com/finance/hospital-2023-credit-rating-downgrade-fitch-ratings-sp-global-moodys</a></li><li id="fn6"><a href="/cybersecurity/change-healthcare-cyberattack-updates" target="_blank">www.aha.org/cybersecurity/change-healthcare-cyberattack-updates</a></li><li id="fn7"><a href="/news/blog/2023-09-20-unwise-dsh-cuts-combined-rise-uncompensated-care-due-medicaid-redeterminations-coverage-losses-further" target="_blank">www.aha.org/news/blog/2023-09-20-unwise-dsh-cuts-combined-rise-uncompensated-care-due-medicaid-redeterminations-coverage-losses-further</a></li><li id="fn8">AHA analysis of 2022 Annual Survey data.</li><li id="fn9"><a href="https://www.trillianthealth.com/insights/the-compass/the-total-available-market-of-commercially-insured-patients-is-shrinking" target="_blank">www.trillianthealth.com/insights/the-compass/the-total-available-market-of-commercially-insured-patients-is-shrinking</a></li><li id="fn10"><a href="/news/headline/2024-01-10-aha-infographic-medicare-underpayments-hospitals-nearly-100-billion-2022#:~:text=AHA%20infographic%3A%20Medicare%20underpayments%20to%20hospitals%20nearly%20%24100%20billion%20in%202022,-Jan%2010%2C%202024&text=Medicare%20paid%20hospitals%20a%20record,negative%20Medicare%20margins%20that%20year." target="_blank">www.aha.org/news/headline/2024-01-10-aha-infographic-medicare-underpayments-hospitals-nearly-100-billion-2022#:~:text=AHA%20infographic% 3A%20Medicare%20underpayments%20to%20hospitals%20nearly%20%24100%20billion%20in%202022,-Jan%2010%2C%202024&text=Medicare%20 paid%20hospitals%20a%20record,negative%20Medicare%20margins%20that%20year.</a></li><li id="fn11"><a href="https://www.wsj.com/health/healthcare/health-insurance-cost-increase-5b35ead7" target="_blank">www.wsj.com/health/healthcare/health-insurance-cost-increase-5b35ead7</a></li><li id="fn12"><a href="https://www.mckinsey.com/~/media/mckinsey/industries/healthcare%20systems%20and%20services/our%20insights/administrative%20simplification%20how%20to%20save%20a%20quarter%20trillion%20dollars%20in%20us%20healthcare/administrative-simplification-how-to-save-a-quarter-trillion-dollars-in-us-healthcare.pdf?shouldIndex=false" target="_blank">www.mckinsey.com/~/media/mckinsey/industries/healthcare%20systems%20and%20services/our%20insights/administrative%20simplification%20 how%20to%20save%20a%20quarter%20trillion%20dollars%20in%20us%20healthcare/administrative-simplification-how-to-save-a-quarter-trillion-dollars- in-us-healthcare.pdf?shouldIndex=false</a></li><li id="fn13"><a href="https://premierinc.com/newsroom/blog/trend-alert-private-payers-retain-profits-by-refusing-or-delaying-legitimate-medical-claims" target="_blank">premierinc.com/newsroom/blog/trend-alert-private-payers-retain-profits-by-refusing-or-delaying-legitimate-medical-claims</a></li><li id="fn14"><a href="https://www.syntellis.com/sites/default/files/2023-11/aha_q2_2023_v2.pdf">www.syntellis.com/sites/default/files/2023-11/aha_q2_2023_v2.pdf</a></li><li id="fn15"><a href="https://oig.hhs.gov/oei/reports/OEI-09-19-00350.pdf" target="_blank">oig.hhs.gov/oei/reports/OEI-09-19-00350.pdf</a></li><li id="fn16"><a href="https://oig.hhs.gov/oei/reports/OEI-09-18-00260.pdf" target="_blank">oig.hhs.gov/oei/reports/OEI-09-18-00260.pdf</a></li><li id="fn17"><a href="https://www.ensemblehp.com/blog/the-real-cost-of-medicare-advantage-plan-success/" target="_blank">www.ensemblehp.com/blog/the-real-cost-of-medicare-advantage-plan-success/</a></li><li id="fn18"><a href="https://www.medpac.gov/wp-content/uploads/import_data/scrape_files/docs/default-source/reports/mar21_medpac_report_to_the_congress_sec.pdf#page=401" target="_blank">www.medpac.gov/wp-content/uploads/import_data/scrape_files/docs/default-source/reports/mar21_medpac_report_to_the_congress_sec.pdf#page=401</a></li><li id="fn19"><a href="https://www.ama-assn.org/practice-management/prior-authorization/health-systems-plagued-payer-takeback-schemes-110000#:~:- text=authorization’s financial impact-,Prior authorization’s financial impact,an increase of 67%.”" target="_blank">www.ama-assn.org/practice-management/prior-authorization/health-systems-plagued-payer-takeback-schemes-110000#:~:- text=authorization’s%20 financial%20impact-,Prior%20authorization’s%20financial%20impact,an%20increase%20of%2067%25.%E2%80%9D</a></li><li id="fn20">AHA analysis of NHE projections of 2022-2031 expenditures.</li><li id="fn21"><a href="https://www.healthcaredive.com/news/healthcare-ransomware-costs-comparitech-77-billion/698044/" target="_blank">www.healthcaredive.com/news/healthcare-ransomware-costs-comparitech-77-billion/698044/</a></li><li id="fn22"><a href="https://intraprisehealth.com/the-cost-of-cyberattacks-in-healthcare/" target="_blank">intraprisehealth.com/the-cost-of-cyberattacks-in-healthcare/</a></li><li id="fn23"><a href="https://www.healthcareitnews.com/news/cisos-face-budgetary-pressures-burnout-during-global-recession" target="_blank">www.healthcareitnews.com/news/cisos-face-budgetary-pressures-burnout-during-global-recession</a></li><li id="fn24"><a href="https://www.reuters.com/business/healthcare-pharmaceuticals/prices-new-us-drugs-rose-35-2023-more-than-previous-year-2024-02- 23/?utm_source=facebook&utm_medium=news_tab" target="_blank">www.reuters.com/business/healthcare-pharmaceuticals/prices-new-us-drugs-rose-35-2023-more-than-previous-year-2024-02- 23/?utm_source=facebook& utm_medium=news_tab</a></li><li id="fn25"><a href="https://aspe.hhs.gov/reports/changes-list-prices-prescription-drugs" target="_blank">aspe.hhs.gov/reports/changes-list-prices-prescription-drugs</a></li><li id="fn26"><a href="https://www.fda.gov/media/131130/download?attachment" target="_blank">www.fda.gov/media/131130/download?attachment</a></li><li id="fn27"><a href="https://news.ashp.org/-/media/assets/drug-shortages/docs/ASHP-2023-Drug-Shortages-Survey-Report.pdf" target="_blank">news.ashp.org/-/media/assets/drug-shortages/docs/ASHP-2023-Drug-Shortages-Survey-Report.pdf</a></li><li id="fn28"><a href="https://www.iqvia.com/insights/the-iqvia-institute/reports-and-publications/reports/drug-shortages-in-the-us-2023?utm_campaign=2023_ Drug_Shortages_Report_INSTITUTE_IS&utm_medium=email&utm_source=Eloqua" target="_blank">www.iqvia.com/insights/the-iqvia-institute/reports-and-publications/reports/drug-shortages-in-the-us-2023?utm_campaign=2023_ Drug_Shortages_Report_ INSTITUTE_IS&utm_medium=email&utm_source=Eloqua</a></li><li id="fn29"><a href="https://aspe.hhs.gov/reports/drug-shortages-impacts-consumer-costs" target="_blank">aspe.hhs.gov/reports/drug-shortages-impacts-consumer-costs</a></li><li id="fn30"><a href="https://link.springer.com/article/10.1007/s13181-023-00950-6#:~:text=Shortages%20compromise%20or%20delay%20medical,morbidity%20%5B1%2C%202%5D." target="_blank">link.springer.com/article/10.1007/s13181-023-00950-6#:~:text=Shortages%20compromise%20or%20delay%20medical,morbidity%20%5B1%2C%202%5D.</a></li><li id="fn31"><a href="/system/files/media/file/2023/06/fact-sheet-examining-the-real-factors-driving-physician-practice-acquisition.pdf" target="_blank">www.aha.org/system/files/media/file/2023/06/fact-sheet-examining-the-real-factors-driving-physician-practice-acquisition.pdf</a></li><li id="fn32"><a href="https://www.mckinsey.com/industries/healthcare/our-insights/how-health-systems-and-educators-can-work-to-close-the-talent-gap" target="_blank">www.mckinsey.com/industries/healthcare/our-insights/how-health-systems-and-educators-can-work-to-close-the-talent-gap</a></li><li id="fn33"><a href="https://www.healthcarefinancenews.com/news/rn-turnover-healthcare-rise" target="_blank">www.healthcarefinancenews.com/news/rn-turnover-healthcare-rise</a></li><li id="fn34"><a href="https://on24static.akamaized.net/event/44/67/84/2/rt/1/documents/resourceList1709062595167/ushealthcaresectorcreditbeat227241709062595167.pdf" target="_blank">on24static.akamaized.net/event/44/67/84/2/rt/1/documents/resourceList1709062595167/ushealthcaresectorcreditbeat227241709062595167.pdf</a></li><li id="fn35"><a href="https://www.spglobal.com/ratings/en/research/articles/231206-historical-peak-of-negative-outlooks-signals-challenges-remain-for-u-s-not- for-profit-acute-health-care-provi-12927513" target="_blank">www.spglobal.com/ratings/en/research/articles/231206-historical-peak-of-negative-outlooks-signals-challenges-remain-for-u-s-not- for-profit-acutehealth- care-provi-12927513</a></li><li id="fn36"><a href="https://www.fitchratings.com/research/us-public-finance/us-not-for-profit-hospitals-health-systems-outlook-2024-05-12-2023" target="_blank">www.fitchratings.com/research/us-public-finance/us-not-for-profit-hospitals-health-systems-outlook-2024-05-12-2023</a></li><li id="fn37"><a href="https://www.kff.org/report-section/medicaid-enrollment-and-unwinding-tracker-overview/" target="_blank">ww.kff.org/report-section/medicaid-enrollment-and-unwinding-tracker-overview/</a></li><li id="fn38"><a href="/news/blog/2023-09-20-unwise-dsh-cuts-combined-rise-uncompensated-care-due-medicaid-redeterminations-coverage-losses-further" target="_blank">www.aha.org/news/blog/2023-09-20-unwise-dsh-cuts-combined-rise-uncompensated-care-due-medicaid-redeterminations-coverage-losses-further</a></li><li id="fn39"><a href="/2024-02-24-update-unitedhealth-groups-change-healthcares-continued-cyberattack-impacting-health-care-providers" target="_blank">www.aha.org/2024-02-24-update-unitedhealth-groups-change-healthcares-continued-cyberattack-impacting-health-care-providers</a></li><li id="fn40"><a href="https://apnews.com/article/hospitals-workplace-violence-shootings-aa6918569ff8f76ff8a15b9813e31686" target="_blank">apnews.com/article/hospitals-workplace-violence-shootings-aa6918569ff8f76ff8a15b9813e31686</a></li></ol></div><div class="col-md-4"><p><a href="/system/files/media/file/2024/05/Americas-Hospitals-and-Health-Systems-Continue-to-Face-Escalating-Operational-Costs-and-Economic-Pressures.pdf" target="_blank" title="Click here to download Costs of Caring 2024: America’s Hospitals and Health Systems Continue to Face Escalating Operational Costs and Economic Pressures as They Care for Patients and Communities report PDF."><img src="/sites/default/files/inline-images/Page-1-Americas-Hospitals-and-Health-Systems-Continue-to-Face-Escalating-Operational-Costs-and-Economic-Pressures.png" data-entity-uuid="4315111b-85e5-46dd-9949-8bb4ee5e6246" data-entity-type="file" alt="Costs of Caring 2024: America’s Hospitals and Health Systems Continue to Face Escalating Operational Costs and Economic Pressures as They Care for Patients and Communities page 1." width="695" height="900"></a></p><div class="external-link spacer"><a class="btn btn-wide btn-primary" href="/guidesreports/2024-09-10-skyrocketing-hospital-administrative-costs-burdensome-commercial-insurer-policies-are-impacting" target="_blank">View the Skyrocketing Hospital Administrative Costs, Burdensome Commercial Insurer Policies Are Impacting Patient Care Report</a></div><div class="external-link spacer"><a class="btn btn-wide btn-primary" href="/guidesreports/2024-05-01-2023-costs-caring" target="_blank">View the 2023 Costs of Caring Report</a></div><div class="external-link spacer"><a class="btn btn-wide btn-primary" href="/guidesreports/2023-04-20-2022-costs-caring" target="_blank">View the 2022 Costs of Caring Report</a></div><div class="external-link spacer"><a class="btn btn-wide btn-primary" href="/guidesreports/2021-10-25-2021-cost-caring" target="_blank">View the 2021 Costs of Caring Report</a></div></div></div></div> Mon, 28 Apr 2025 15:04:37 -0500 Cost Management /news/headline/2025-02-10-nih-issues-indirect-cost-rate-cuts-grants <p>The National Institutes of Health Feb. 7 issued supplemental <a href="https://grants.nih.gov/grants/guide/notice-files/NOT-OD-25-068.html">guidance</a> on updating negotiated indirect cost rates for new and existing NIH grants. The NIH will apply a straight 15% indirect cost rate across all new and existing grant awards. The rate will be applied to all current grants for “go forward expenses” from Feb. 10 onward and for all new grants issued. <br><br>Twenty-two state attorneys general also sued the administration Feb. 10 following the move, asking a federal judge to block it.</p> Mon, 10 Feb 2025 15:28:00 -0600 Cost Management /news/headline/2024-12-13-research-finds-drug-prices-increased-without-adding-new-clinical-benefits <p>The net prices of five drugs included in a <a href="https://icer.org/wp-content/uploads/2024/12/UPI_2024_Report_121224.pdf" title="5 drug study">new study</a> from the Institute for Clinical and Economic Review increased without clinical justification in 2023. These increases led to $815 million incremental added costs for U.S. payers.</p> Fri, 13 Dec 2024 14:26:22 -0600 Cost Management /news/headline/2024-10-22-new-report-highlights-gaps-nashps-hospital-cost-tool <p>The National Academy for State Health Policy’s Hospital Cost Tool “misses the mark in many ways, and its use by payers, purchasers and policymakers could have dire consequences for hospitals’ financial well-being, and, ultimately, patients’ access to care,” according to a <a href="/system/files/media/file/2024/10/Assessing-the-Gaps-A-Review-of-NASHPs-Hospital-Cost-Tool.pdf">report</a> prepared for the AHA by Faegre Drinker Consulting. The tool attempts to use hospital Medicare cost reports to calculate a “break-even” point for state government and commercial insurers to negotiate commercial rates with hospitals. “To the extent payers and policymakers are increasingly leveraging the NASHP HCT and other tools like it to develop their own mechanisms for rate setting, it is important for policymakers to understand the limitations and shortcomings of these tools and be cautious when interpreting their results.” This builds on other <a href="/system/files/media/file/2024/09/The-Path-to-Accurate-Cost-Accounting-A-Rigorous-but-Critical-Journey.pdf">evidence</a> on the limits of cost reports for this purpose.</p> Tue, 22 Oct 2024 15:23:07 -0500 Cost Management /news/perspective/2024-09-20-increasing-administrative-costs-burdensome-commercial-insurer-practices-create-patient-care <p>There will always be administrative costs associated with operating a hospital. But the lion’s share of a hospital’s resources should be devoted to doing what hospitals do best: provide safe, accessible and exceptional patient care to anyone who needs it.</p><p>That may seem self-evident, but as documented in a <a href="/guidesreports/2024-09-10-skyrocketing-hospital-administrative-costs-burdensome-commercial-insurer-policies-are-impacting">new AHA report</a> released this month, that mission is coming under increasing strain because of skyrocketing administrative costs and burdensome commercial insurer practices that often delay and deny patient care.</p><p>For example, many commercial insurers now demand prior authorization for a growing array of services and the use of step therapy or “fail-first policies” that delay patients from getting the most appropriate care. Between 2022 and 2023, care denials increased an average of 20.2% for commercial claims and 55.7% for Medicare Advantage claims, according to the report.</p><p>These burdensome commercial insurer practices force hospitals and health systems to dedicate precious staff and clinical resources to appeal and overturn inappropriate denials — which alone can cost billions every year. In fact, recent data from Strata Decision Technology show that administrative costs now account for <strong>more than 40% of total expenses hospitals incur in delivering care to patients.</strong></p><p>Speaking for many in the field, one health system noted in our report that “the growing number of prior authorization requirements, claim audits, denials, level of care downgrades and payer policies is staggering . . . affecting our health system’s ability to reinvest in its infrastructure, service lines, and physician retention and recruitment.”</p><p>The goal of hospitals and care teams is to care for patients and bring them back to health, without being hobbled with excessive regulatory and insurer requirements that stand in the way of their critical work.</p><p>The AHA is leading the fight to push back against onerous and often inappropriate insurance tactics that burden already overwhelmed health care professionals and decrease patient access to care.</p><p>We have made commercial insurer accountability a top priority, working with Congress and the federal agencies to increase oversight of Medicare Advantage plans and crack down on abuses that undermine their effectiveness for patients. And we are making some progress. For example, earlier this year we worked closely with the Centers for Medicare & Medicaid Services to shape a final regulation requiring MA, Medicaid, Children's Health Insurance Program and federally facilitated Marketplace plans to streamline their prior authorization processes to improve timely access to care for patients and alleviate provider administrative burden.</p><p>At the same time, the Coalition to Strengthen America’s Healthcare, of which the AHA is a founding member, has launched a multiplatform media blitz in September, including debuting a new ad called <a href="https://www.youtube.com/watch?v=s504f02MW3I" target="_blank" title="Youtube: Every Second Counts">“Every Second Counts.”</a></p><p>The ad, which is running on national cable including Fox, CNN and MSNBC, draws the distinction between hospitals and health systems providing 24/7 care to patients and corporate health insurers that often delay needed care while increasing their profits.</p><p>We will continue speak out that clinicians and care teams in consultation with their patients should be the ones making critical care decisions … not insurers, regulators and bureaucrats.</p><p>Caregivers will never be deterred from their mission of providing quality and safe patient care. We will continue to collaborate with partners — both in and out of government — to address and remove any impediments to a hospital’s ability to do what they do best: treat patients, save lives and advance health for all.</p> Fri, 20 Sep 2024 08:08:52 -0500 Cost Management /guidesreports/2024-09-10-skyrocketing-hospital-administrative-costs-burdensome-commercial-insurer-policies-are-impacting <div class="container"><div class="row"><div class="col-md-8"><p>While the impact of cost increases for drugs, supplies, and labor on health care providers has been well-documented, the costs associated with excessive regulatory and insurer requirements has been less studied, but is equally challenging. In addition to navigating the complex <a href="/news/blog/2024-04-17-unequal-transparency-how-hospitals-report-more-data-any-other-entity-health-care-sector">web of federal and state regulatory requirements</a>, hospitals face increasingly burdensome insurer policies. These include securing prior authorization for a growing array of services as well as use of step therapy or fail-first policies that delay patients getting the most appropriate care, <a href="/white-papers/2022-07-28-commercial-health-plans-policies-compromise-patient-safety-and-raise-costs">to name just a few</a>. Many hospitals and health systems are forced to dedicate staff and clinical resources to appeal and overturn inappropriate denials, which alone can cost billions of dollars every year. Recent data from Strata Decision Technology show that administrative costs now account for <span><strong>more than 40% of total expenses hospitals incur in delivering care to patients.</strong></span></p></div><div class="col-md-4"><div class="external-link spacer"><a class="btn btn-wide btn-primary" href="/system/files/media/file/2024/09/Skyrocketing-Hospital-Administrative-Costs-Burdensome-Commercial-Insurer-Policies-Are-Impacting-Patient-Care.pdf" target="_blank" title="Click here to download the Skyrocketing Hospital Administrative Costs, Burdensome Commercial Insurer Policies Are Impacting Patient Care report PDF.">Download the Report PDF</a></div></div></div><div class="row"><div class="col-md-8"><p><img src="/sites/default/files/inline-images/Figure-1-Increases-in-Care-Denials-for-Medicare-Advantage-and-Commercial-Claims.PNG" data-entity-uuid="96fe6d8e-c721-44c7-a305-c279608095b2" data-entity-type="file" alt="Figure 1. Increases in Care Denials for Medicare Advantage and Commercial Claims. Medicare Advantage: 55.7%. Commercial Claims: 20.2%." width="537" height="372" class="align-right">Between 2022 and 2023, care denials increased an average of 20.2% and 55.7% for commercial and Medicare Advantage (MA) claims, respectively (Figure 1).</p><p>One factor driving this growth is the increased use of <a href="https://www.nytimes.com/2024/04/07/us/health-insurance-medical-bills-takeaways.html" target="_blank">machine learning algorithms</a> and other artificial intelligence tools. Poor applications of these technologies can result in automatic denials of care without consideration of a patient’s individual clinical circumstances or review from a clinician or plan medical director as required. Although the 2024 MA final rule offers some guidance regarding payment denials and prompt pay, the issue remains a significant concern. In these situations, hospital staff must expend valuable time and resources to overturn inappropriate denials, adding unnecessary cost and burden to the health care system, and creating uncertainty for patients about whether their insurance will pay for their care. <span><strong>In fact, according to a 2018 Department of Health and Human Services (HHS) Office of Inspector General report on MA denials, it estimated that 75% of care denials are eventually overturned.</strong></span></p><div><div><h2>Perspective from the Field</h2></div><p>One health care delivery system reported that denial rates for MA claims have ranged from 10.5% to 15.5%. At the same time, as much as 56% of those denied claims have been overturned on appeal. This has created cash flow challenges for their system where unpaid claims outstanding for more than 90 days has ranged from 27.1% to as much as 46.7%. They also noted that “The growing number of prior authorization requirements, claim audits, denials, level of care downgrades and payer policies is staggering. These expansive tactics are affecting our health system’s ability to reinvest in its infrastructure, service lines, and physician retention and recruitment.”</p></div><p><span><strong><img src="/sites/default/files/inline-images/AHA-Survey-Change-Healthcare-Cyberattack-Having-Significant-Disruptions-on-Patient-Care-Hospitals-Finances.PNG" data-entity-uuid="7f57b1d8-497b-4398-969c-eb55498b03aa" data-entity-type="file" alt="AHA Survey: Change Healthcare Cyberattack Having Significant Disruptions on Patient Care, Hospitals' Finances page 1." width="664" height="853" class="align-right">A study by McKinsey found that hospitals and health systems are conservatively spending an estimated $40 billion annually on costs associated with billing and collections.</strong></span> Even when denials are successfully overturned, commercial insurers impose other roadblocks to timely payment of claims.</p><p>The time taken by commercial payers simply to process and pay hospital claims from the date of submission increased by 19.7% in 2023, according to data from the <a href="https://hyvehealthcare.com/solutions/vitality-payer-scorecard/" target="_blank">Vitality Payer Scorecard</a>. Additionally, commercial insurers use post-payment claims audits to cut reimbursement to hospitals or otherwise unilaterally recoup payments after-the-fact. These unfair business practices create cash flow challenges for hospitals that threaten the viability of many community providers. <span><strong>An AHA survey found that 50% of hospitals and health systems reported having more than $100 million in accounts receivable for claims that were older than six months in 2022.</strong></span></p><p>These cash flow challenges also are exacerbated when cyberattacks cripple the claims processing and payment systems that hospitals and insurance companies rely on as evidenced by the recent Change Healthcare attack. The risk of such cybersecurity threats also adds to the administrative costs hospitals incur to operate, maintain and update the complex technologies that are required for hospital billing and collections.</p><h2>Conclusion</h2><p>Hospitals and health systems already face many pressures that make their ability to care for communities more challenging. We shouldn’t allow insurers or others to add to that with costly administrative practices that burden already overwhelmed health care professionals and decrease patient access to care. For more on the financial challenges facing hospitals and health systems, see <a href="/costsofcaring">AHA’s Cost of Caring Report</a>.</p></div><div class="col-md-4"><p><a href="/system/files/media/file/2024/09/Skyrocketing-Hospital-Administrative-Costs-Burdensome-Commercial-Insurer-Policies-Are-Impacting-Patient-Care.pdf" target="_blank" title="Click here to download the Skyrocketing Hospital Administrative Costs, Burdensome Commercial Insurer Policies Are Impacting Patient Care report PDF."><img src="/sites/default/files/inline-images/Page-1-Skyrocketing-Hospital-Administrative-Costs-Burdensome-Commercial-Insurer-Policies-Are-Impacting-Patient-Care.png" data-entity-uuid="6f06e568-5e55-4a99-ab72-e70423a266fc" data-entity-type="file" alt="Skyrocketing Hospital Administrative Costs, Burdensome Commercial Insurer Policies Are Impacting Patient Care report page 1." width="695" height="900"></a></p></div></div></div> Tue, 10 Sep 2024 09:26:57 -0500 Cost Management /testimony/2024-07-11-aha-senate-statement-record-health-care-transparency-lowering-costs-and-empowering-patients <p class="text-align-center"><strong>Statement</strong><br><strong>of the</strong><br><strong>���������� Association</strong><br><strong>for the</strong><br><strong>Special Committee on Aging</strong><br><strong>of the</strong><br><strong>United States Senate</strong><br><strong>“Health Care Transparency: Lowering Costs and Empowering Patients”</strong><br><br><strong>July 11, 2024</strong></p><p>On behalf of our nearly 5,000 member hospitals, health systems and other health care organizations, our clinician partners — including more than 270,000 affiliated physicians, 2 million nurses and other caregivers — and the 43,000 health care leaders who belong to our professional membership groups, the ���������� Association (AHA) writes to share the hospital field’s comments on health care costs and transparency.</p><h2>OVERVIEW OF NATIONAL HEALTH SPENDING</h2><p>America’s hospitals and health systems — physicians, nurses and other caregivers — understand and share concerns regarding the high cost of health care and are working hard to make care more affordable by transforming the way health care is delivered in our communities. Real change will require an effort by everyone involved, including providers, the government, employers and individuals, device makers, drug manufacturers, insurers and other stakeholders.</p><p>The AHA’s most recent “<a href="/system/files/media/file/2024/05/Americas-Hospitals-and-Health-Systems-Continue-to-Face-Escalating-Operational-Costs-and-Economic-Pressures.pdf" target="_blank" title="Cost of Caring Report">Cost of Caring</a>” report provides greater details on the challenges hospitals face with respect to treating patients with higher acuities while dealing with financial instability. The issues include workforce shortages and increasing supply chain costs, coupled with inadequate reimbursement from government payers and increased administrative burden related to commercial insurance efforts to reduce compensation. Taken together, these factors create an environment of financial uncertainty in which many hospitals and health systems are operating with little to no margin.</p><p>For this statement, we highlight two of the cost drivers incurred by hospitals and health systems: commercial insurer operating methods and prescription drug costs.</p><h3>Commercial Insurer Practices</h3><p>To truly reduce health care costs, we urge Congress to address practices by certain commercial health insurers. For example, additional oversight is needed to ensure that Medicare Advantage (MA) plans can no longer engage in tactics that restrict and delay access to care while adding burden and cost to the health care system.</p><p>While MA plans were designed to help increase efficiency in the Medicare program, data from the Medicare Payment Advisory Commission (MedPAC) found that MA plans will be responsible for $88 billion in excess federal spending this year, due in part to inappropriate upcoding practices, whereby plans report enrollees as having more health conditions and being sicker than they are to receive higher reimbursements. At the same time, health insurance premiums continue to grow — in fact, annual insurance premiums increased nearly twice as much as hospital prices over a 10-year period.<sup>1</sup></p><p>Additionally, inappropriate denials for prior authorization and coverage of medically necessary services remain a pervasive problem among certain MA plans. A 2022 report from the Department of Health and Human Services (HHS) Office of Inspector General found that MA plans are denying at a high rate medically necessary care that met Medicare criteria.<sup>2</sup> The report highlights that 13% of prior authorization denials and 18% of payment denials met Medicare coverage rules and therefore should have been approved. In a program this size — covering more than half of all Medicare beneficiaries — improper denials at this rate are unacceptable. However, because the government pays MA plans a risk-adjusted per-beneficiary capitation rate, there is a perverse incentive to deny services to patients or payments to providers to boost profits.</p><p>These practices delay access to care for seniors and add financial burden and strain on the health care system through inappropriate payment denials and increased staffing and technology costs to comply with plan requirements. They also are a major burden to the health care workforce and contribute to provider burnout. To address these issues, the AHA supports regulatory and legislative solutions that streamline and improve prior authorization processes, including the Improving Seniors’ Timely Access to Care Act (S. 4532), which would codify many of the reforms in the Interoperability and Prior Authorization Final Rule.</p><p>Though issues with denials are often felt most acutely with MA and Medicaid managed care plans, these practices also are followed by other commercial payers, where claims denials increased by 20.2% in 2023. Moreover, the time taken by commercial payers to process and pay hospital claims from the date of submission increased by 19.7% in 2023, according to data from the Vitality Index. For hospitals and health systems, these practices, which require hospitals to divert dollars away from patient care to instead focus on seeking payment from commercial insurers, result in billions of dollars in lost revenue each year.<sup>3</sup> Without further intervention, these trends are expected to continue and worsen. National expenditures on the administrative costs of private health insurance spending alone are projected to account for 7% of total health care spending between 2022 and 2031 and are projected to grow faster than expenditures for hospital care.<sup>4</sup></p><h3>Prescription Drug Prices</h3><p>Congress also should address the high costs of prescription medications, given the regular increases in costs, as this impacts expenses for all providers, including hospitals. For instance, a report from earlier this year noted pharmaceutical companies raised list prices on 775 brand name drugs during the first half of January 2024, with a median increase of 4.5%, though the prices of some drugs rose by 10% or higher.<sup>5</sup> These increases were higher than the rate of inflation, which was 3.4% in December. A report by the HHS Assistant Secretary for Planning & Evaluation (ASPE) found that between 2022 and 2023 drug companies increased drug prices for nearly 2,000 drugs faster than the rate of general inflation, with an average price hike of 15.2%.<sup>6</sup></p><p>Moreover, recent drug shortages also have fueled further expense growth. An ASPE report found up to a 16.6% increase in the prices of drugs in shortage; in many cases, the increase in the price of substitute drugs were at least three times higher than the price increase of the drug in shortage<sup>.7</sup> The costs incurred as a result of drug shortages are compounded by staff overtime needed to find, procure and administer alternative drugs, to manage the added challenges of multiple medication dispensing automation systems and changing electronic health records and to undergo training to ensure medication safety using alternative therapies<sup>.8</sup></p><h2>MEDICAL DEBT</h2><p>Hospitals and health systems are very concerned about patients’ medical debt, which is a consequence of patients not paying some or all their health care bills. While health insurance is intended to be the primary mechanism to protect patients from unexpected and unaffordable health care costs, for too many that coverage is either unavailable or falling short.</p><p>Trends in health insurance coverage that are driving an increase in medical debt include inadequate enrollment in comprehensive health care coverage, growth in high-deductible and skinny health plans that intentionally push more costs onto patients and misleading health plan practices that confuse patients’ understanding of their coverage. These gaps in coverage leave individuals financially vulnerable when seeking medical care. The primary causes of medical debt are:</p><ul><li><strong>There are still too many uninsured Americans</strong>. Affordable, comprehensive health care coverage is the most important protection against medical debt. While the U.S. health care system has achieved higher rates of coverage over the past decade, gaps remain.</li><li><strong>High-deductibles subject many Americans to cost-sharing they cannot afford</strong>. High-deductible plans are designed to increase patients’ financial exposure through high cost-sharing in exchange for lower monthly premiums. Yet many individuals enrolled in high-deductible plans find they cannot manage their portion of health plan expenses. A Federal Reserve report found that 37% of adults would not be able to afford a $400 emergency<sup>,9</sup> an amount $1,000 less than the average general annual deductible for single, employer-sponsored coverage.</li><li><strong>Certain health plans provide inadequate benefits and frequently lead to surprise gaps in coverage</strong>. Short-term, limited-duration health plans and health sharing ministries cover fewer benefits and include few to no consumer protections, such as required coverage of pre-existing conditions and limits on out-of-pocket costs. Patients with these types of plans often find themselves responsible for their entire medical bill without any help from their health plan, including for critical services such as emergency medical and oncology care. These denials can lead to an accumulation of significant medical debt.<sup>10</sup></li><li><strong>Complex health plan benefit design and misleading marketing can expose patients to unexpected costs</strong>. Many health plans have complex benefit designs that are not transparent to patients, such as what is covered pre-deductible, the interaction between point-of-service copays, coinsurance and deductibles and poor communication and education about what the plan covers. For example, a recent National Association of Insurance Commissioners report found significant gaps and inconsistencies with the way that insurers share information about pre-deductible, no cost-sharing preventive services with their members, resulting in a “meaningful barrier to effective understanding and use of preventive service benefits.”<sup>11</sup></li></ul><p>Hospitals are the only part of the health care sector that provide services to patients regardless of their ability to pay. They underscore that commitment by offering financial and other assistance, including helping patients qualify for federal and state health care programs, such as Medicaid. In doing so, patients can receive regular preventive care, not just episodic care for serious injuries or illness. In addition, hospitals absorb billions of dollars of losses for patients who are unable to pay their bills, mainly due to inadequate commercial insurance coverage; in 2020, the latest figure available, hospitals provided more than $42 billion in uncompensated care.<sup>12</sup></p><p>This is why hospitals are staunch supporters of ensuring everyone is enrolled in some form of comprehensive coverage. However, we appreciate that closing the remaining coverage gaps may be a longer-term solution and that more immediate steps can be taken. To that end, the AHA has routinely developed patient billing guidelines to help prevent patients from incurring medical debt. The AHA’s Board of Trustees adopted the most recent <a href="/standardsguidelines/2020-10-15-patient-billing-guidelines" target="_blank">set of guidelines</a> in 2020, which reaffirm the hospital field’s commitment to:</p><ul><li>Treating all people equitably, with dignity, respect and compassion.</li><li>Serving the emergency health care needs of all, regardless of a patient’s ability to pay.</li><li>Assisting patients who cannot pay for part or all the care they receive.</li></ul><p>Notably, several of the guidelines directly address medical debt, including encouraging hospitals to forego adverse credit reporting of medical debt. So far, nearly 2,800 hospitals and health systems have affirmed their commitment to the guidelines, and the AHA revisits them regularly for updating.</p><h2>PRICE TRANSPARENCY REQUIREMENTS</h2><p>We appreciate Congress’ ongoing interest in hospital price transparency to provide consumers with the price information they need specific to their course of treatment.</p><p>Hospitals and health systems have invested considerable time and resources to comply with the Hospital Price Transparency Rule, which requires online access to both a machine-readable file and a list of shoppable services. Recent data from Turquoise Health shows that 93.4% of hospitals have met the requirement to post a machine-readable file.</p><p>We are concerned, however, with recent legislative efforts to no longer recognize price estimator tools as a method to meet the shoppable services requirement. This change would both reduce access to a consumer-friendly research tool and unfairly penalize hospitals that have spent significant capital to comply with the regulation. These facilities would instead need to develop and maintain a shoppable services spreadsheet, which may be difficult for consumers to navigate and will not reflect the different policies that their insurer may apply to determine the final price for a service. Price estimator tools offer consumers an estimate of their out-of-pocket costs based on their insurance benefit design, such as cost-sharing requirements and prior utilization, as well as the patient’s annual deductible. This is an important feature of these tools that is not available from a shoppable services spreadsheet. Eliminating the use of price estimator tools as a method to meet the shoppable services requirement of the Hospital Price Transparency Rule would therefore reduce price transparency for patients. We urge Congress to reject this potential change.</p><p>As Congress seeks to make statutory changes to price transparency standards, it is important for legislators to take into consideration the adjustments to the Hospital Price Transparency Rule made by the Centers for Medicare & Medicaid (CMS) on a regular basis. These include changes related to standardization, new data elements, file accessibility, an accuracy and completeness affirmation, as well as changes to CMS’ monitoring and enforcement processes. Most notably, CMS now requires hospitals to use a standard format to comply with the machine-readable file requirement, which includes new data elements such as negotiated rate contracting type or methodology, an accuracy and completeness affirmation and (as of January 1, 2025) an “estimated allowed amount.” CMS also now requires that hospitals’ price transparency information be more easily found on their websites.</p><p>Regarding compliance and enforcement, hospitals may be required to have an authorized hospital official certify the accuracy and completeness of the hospital’s machine-readable file during the monitoring and enforcement process. CMS also can require hospitals to provide additional documentation at the agency’s request, including contracting documentation needed to validate the hospital’s negotiated rates and verification of the hospital’s licensing status.</p><p>In addition, CMS increased its efforts to publicize hospital-specific information on all compliance assessment and enforcement activity, which it now updates regularly on a public website. This includes details related to CMS’ assessment of hospital compliance, any compliance actions taken against a specific hospital, the status of the compliance action(s) and the outcome of the action(s). A list of the civil monetary compliance notices and fines issued to date is available on the CMS website.<sup>13 </sup>The fines vary in scope, from $55,000 to nearly $1 million, for those hospitals that have been deemed out of compliance with the Hospital Price Transparency Rule. CMS clearly has the authority and willingness to enforce compliance with the rule and assess significant fines, regardless of statutory activity.</p><h2>CONCLUSION</h2><p>Thank you for your consideration of the AHA’s comments on issues related to health care expenditures. We look forward to continuing to work with you to address these important topics on behalf of our patients and communities.</p><p>__________</p><p><sup>1 </sup><a class="ck-anchor" id="https://www.medpac.gov/wp-content/uploads/2023/10/MedPAC-MA-status-report-Jan-2024.pdf" href="https://www.medpac.gov/wp-content/uploads/2023/10/MedPAC-MA-status-report-Jan-2024.pdf">https://www.medpac.gov/wp-content/uploads/2023/10/MedPAC-MA-status-report-Jan-2024.pdf</a> <br><sup>2 </sup><a class="ck-anchor" id="https://oig.hhs.gov/oei/reports/OEI-09-18-00260.pdf" href="https://oig.hhs.gov/oei/reports/OEI-09-18-00260.pdf">https://oig.hhs.gov/oei/reports/OEI-09-18-00260.pdf</a><br><sup>3 </sup><a class="ck-anchor" id="https://www.ama-assn.org/practice-management/prior-authorization/health-systems-plagued-payer-takeback-schemes-110000#:~:-%20text=authorization%E2%80%99s%20financial%20impact-,Prior%20authorization%E2%80%99s%20financial%20impact,an%20increase%20of%2067%.%E2%80%9D" href="https://www.ama-assn.org/practice-management/prior-authorization/health-systems-plagued-payer-takeback-schemes-110000#:~:-%20text=authorization%E2%80%99s%20financial%20impact-,Prior%20authorization%E2%80%99s%20financial%20impact,an%20increase%20of%2067%.%E2%80%9D">https://www.ama-assn.org/practice-management/prior-authorization/health-systems-plagued-payer-takeback-schemes-110000#:~:-%20text=authorization%E2%80%99s%20financial%20impact-,Prior%20authorization%E2%80%99s%20financial%20impact,an%20increase%20of%2067%.%E2%80%9D</a> <br><sup>4 </sup>AHA analysis of NHE projections of 2022-2031 expenditures.<br><sup>5 </sup><a class="ck-anchor" id="https://www.wsj.com/health/pharma/drugmakers-raise-prices-of-ozempic-mounjaro-and-hundreds-of-other-drugs-bdac7051" href="https://www.wsj.com/health/pharma/drugmakers-raise-prices-of-ozempic-mounjaro-and-hundreds-of-other-drugs-bdac7051">https://www.wsj.com/health/pharma/drugmakers-raise-prices-of-ozempic-mounjaro-and-hundreds-of-other-drugs-bdac7051</a> <br><sup>6 </sup><a class="ck-anchor" id="https://aspe.hhs.gov/reports/changes-list-prices-prescription-drugs" href="https://aspe.hhs.gov/reports/changes-list-prices-prescription-drugs">https://aspe.hhs.gov/reports/changes-list-prices-prescription-drugs</a> <br><sup>7</sup> <a class="ck-anchor" id="https://aspe.hhs.gov/reports/drug-shortages-impacts-consumer-costs" href="https://aspe.hhs.gov/reports/drug-shortages-impacts-consumer-costs">https://aspe.hhs.gov/reports/drug-shortages-impacts-consumer-costs</a> <br><sup>8</sup> <a class="ck-anchor" id="https://link.springer.com/article/10.1007/s13181-023-00950-6#:~:text=Shortages%20compromise%20or%20delay%20medical,morbidity%20%5B1%2C%202%5D." href="https://link.springer.com/article/10.1007/s13181-023-00950-6#:~:text=Shortages%20compromise%20or%20delay%20medical,morbidity%20%5B1%2C%202%5D.">https://link.springer.com/article/10.1007/s13181-023-00950-6#:~:text=Shortages%20compromise%20or%20delay%20medical,morbidity%20%5B1%2C%202%5D.</a> <br><sup>9 </sup><a class="ck-anchor" id="https://www.federalreserve.gov/publications/2023-economic-well-being-of-us-households-in-2022-expenses.htm" href="https://www.federalreserve.gov/publications/2023-economic-well-being-of-us-households-in-2022-expenses.htm">https://www.federalreserve.gov/publications/2023-economic-well-being-of-us-households-in-2022-expenses.htm</a> <br><sup>10 </sup><a class="ck-anchor" id="https://kffhealthnews.org/news/sham-sharing-ministries-test-faith-of-patients-and-insurance-regulators/" href="https://kffhealthnews.org/news/sham-sharing-ministries-test-faith-of-patients-and-insurance-regulators/">https://kffhealthnews.org/news/sham-sharing-ministries-test-faith-of-patients-and-insurance-regulators/</a> <br><sup>11</sup> <a class="ck-anchor" id="https://healthyfuturega.org/ghf_resource/preventive-services-coverage-and-cost-sharing-protections-are-inconsistently-and-inequitably-implemented" href="https://healthyfuturega.org/ghf_resource/preventive-services-coverage-and-cost-sharing-protections-are-inconsistently-and-inequitably-implemented">https://healthyfuturega.org/ghf_resource/preventive-services-coverage-and-cost-sharing-protections-are-inconsistently-and-inequitably-implemented</a> <br><sup>12 </sup><a class="ck-anchor" id="/system/files/media/file/2020/01/2020-Uncompensated-Care-Fact-Sheet.pdf" href="/system/files/media/file/2020/01/2020-Uncompensated-Care-Fact-Sheet.pdf">/system/files/media/file/2020/01/2020-Uncompensated-Care-Fact-Sheet.pdf</a><br><sup>13</sup> <a class="ck-anchor" id="https://www.cms.gov/priorities/key-initiatives/hospital-price-transparency/enforcement-actions" href="https://www.cms.gov/priorities/key-initiatives/hospital-price-transparency/enforcement-actions">https://www.cms.gov/priorities/key-initiatives/hospital-price-transparency/enforcement-actions</a> </p> Thu, 11 Jul 2024 13:11:00 -0500 Cost Management /news/blog/2024-06-24-setting-record-straight-latest-arnold-ventures-funded-study-draws-many-faulty-conclusions-including <p>Last week, several academics released a <a href="https://sponsors.aha.org/rs/710-ZLL-651/images/StRS-0624-Upcoming_Paper.pdf?version=0">working paper</a> saying hospital prices lead to employment losses outside the health sector, among other faulty conclusions. The study uses extremely limited and disparate data and, unsurprisingly, was funded by Arnold Ventures, offering yet another example of that group’s willingness to back even the sloppiest work as long as it paints hospitals in the most negative light. The flaws in this study are best illustrated by the authors’ assertion that hospital price increases lead to increases in suicide. That preposterous claim undermines their entire analysis.</p><p>The authors’ approach to their economic arguments is, in a word, odd. First, they start with the hypothesis that rising hospital prices lead to job loss. They then link job losses generally to increased risk of suicide. And yet, during the study period, employment <em>increased</em> – <a href="https://www.bls.gov/charts/employment-situation/civilian-unemployment-rate.htm">both overall</a> and <a href="https://www.healthsystemtracker.org/chart-collection/what-are-the-recent-trends-health-sector-employment/#Cumulative%20%%20change%20in%20health%20sector%20and%20non-health%20sector%20employment,%20January%201990%20-%20February%202024">even more so in the health sector</a>. However, the authors explicitly chose to exclude health sector jobs, including the 6.4 million employees who work in hospitals. They also say nothing about how spending on hospital care supports millions of <em>other</em> jobs in the economy, including food services, child care, housing, and retail needs of these millions of workers and their families.</p><p>Worst of all, however, is their effort to link suicide rates with hospital pricing. Quite frankly, it is unconscionable given the lengths hospitals go to every day to save people who have attempted or are at risk of taking their own life.</p><p>Hospitals and health systems know as much as anyone about the scourge of suicide in this country. Across the country, people in acute psychiatric distress (including children) are getting stuck in hospital emergency departments because there isn’t the space or the workforce available to care for them earlier or in the appropriate alternative setting. The emotional and physical toll of caring for these patients is incredibly hard on hospitals’ teams.</p><p>To be clear: Hospital prices do not cause suicide. No single thing does. Indeed, the hospital is – or should be – a place of last resort for individuals in need of ongoing psychiatric care. And hospitals are the only part of the health care system that are open 24 hours a day, 7 days a week to be there when needed, regardless of whether someone has insurance or the ability to pay.</p><p>We wish we did not have to make such an obvious point, but the weakness of this research compels us to. Perhaps Arnold Ventures should have directed this funding to research on how to reduce suicide rather than a shoddy attack on those who treat behavioral health problems every day.</p> Mon, 24 Jun 2024 17:42:33 -0500 Cost Management /news/perspective/2024-05-10-hospitals-face-financial-pressures-costs-caring-continue-surge <p>Hospitals hold an extraordinary place in our society by offering comfort and caring to all who walk through their doors, regardless of ability to pay.</p><p>While the commitment to serve, treat and heal never wavers, hospitals continue to face cost pressures that have increased throughout the past few years.</p><p>The AHA’s new <a href="/costsofcaring" target="_blank" title="Costs of Caring report">Costs of Caring report</a> highlights how hospitals and health systems continue to experience significant financial pressures that challenge their ability to provide 24/7 care for patients and communities. Simply put, the costs of providing care often outstrip levels of reimbursement … by a lot.</p><p>During the pandemic and in the years following, baseline costs have escalated dramatically in a number of essential areas, including workforce, drug and medication expenses, and administrative costs, to name but a few. These factors are creating headwinds and obstacles that threaten access to care for millions of Americans.</p><p>A closer look at the data reveals:</p><ul><li>Hospitals’ labor costs, which on average account for 60% of a hospital’s budget, increased by more than $42.5 billion between 2021 and 2023.</li><li>Economy-wide inflation grew by 12.4% during that period, more than double the 5.2% growth in Medicare reimbursement for hospital inpatient care. This makes it harder for hospitals to maintain access to care and invest in cutting-edge treatment and technology.</li><li>Significant underpayment by all payers was the norm for several essential and complex health care services. For example, payments for inpatient behavioral health services were on average 34% below costs, and in the outpatient setting, payments for burn and wound services were on average 43% below costs.</li><li>Certain commercial health insurer practices like prior authorization and denials have only added to mounting administrative burden, while health insurance premiums grew twice as fast as hospital prices in 2023.</li></ul><p>And if that wasn’t enough, these issues were exacerbated by the recent Change Healthcare cyberattack, forcing many hospitals and health systems to use diminishing cash reserves to maintain operations.</p><p>While some hospital and health system finances have experienced modest stabilization from historic lows in 2022, we are still far from where we need to be to meet the demand for care, invest in new and promising technologies and interventions, and stand ready for the next health care crisis.</p><p>That’s why we are continuing to call on Congress and the Administration to take action to strengthen hospitals and health systems and bolster access to care for all patients and communities. Among other priorities, we are advocating for rejecting funding cuts and extending key policies to ensure patients’ access to care; supporting and strengthening the health care workforce; holding commercial insurers accountable for practices that delay, deny and disrupt care; and bolstering support to enhance cybersecurity of hospitals and the entire health care sector.</p><p>No matter how big the challenges look — no matter how thick the fog is over the current political and policy landscape — we will answer the call to advance health in America.</p> Fri, 10 May 2024 10:23:52 -0500 Cost Management /testimony/2024-05-08-aha-statement-senate-budget-committee-alleviating-administrative-burden-health-care <p class="text-align-center"><strong>Statement</strong><br><strong>of the</strong><br><strong>���������� Association</strong><br><strong>for the</strong><br><strong>Committee on the Budget</strong><br><strong>of the</strong><br><strong>U.S. Senate</strong></p><p class="text-align-center"><strong>Reducing Paperwork, Cutting Costs: Alleviating Administrative Burdens in Health Care</strong></p><p class="text-align-center"><strong>May 8, 2024</strong></p><p>On behalf of our nearly 5,000 member hospitals, health systems and other health care organizations, our clinician partners — including more than 270,000 affiliated physicians, 2 million nurses and other caregivers — and the 43,000 health care leaders who belong to our professional membership groups, the ���������� Association (AHA) appreciates the opportunity to provide comments on ways to reduce administrative burden and costs in the health care system.</p><h2>PRIOR AUTHORIZATION</h2><p>Inappropriate denials for prior authorization and coverage of medically necessary services are a pervasive problem among certain plans in the Medicare Advantage (MA) program. This results in delays in care, wasteful and potentially dangerous utilization of fail-first requirements for imaging and therapies, and other direct patient harms. These practices also add financial burden and strain to the health care system through inappropriate payment denials and increased staffing and technology costs to comply with plan requirements. Additionally, plan prior authorization requirements are a major burden to the health care workforce and contribute to provider burnout. In fact, Surgeon General Vivek Murthy, M.D., issued a recent <a href="https://www.hhs.gov/sites/default/files/health-worker-wellbeing-advisory.pdf">advisory</a> that notes that burdensome documentation requirements, including the volume of and requirements for prior authorization, are drivers of health care worker burnout.</p><p>Many of the harms associated with inappropriate care delays and denials are evidenced by the <a href="https://oig.hhs.gov/oei/reports/OEI-09-18-00260.pdf">striking report</a> issued in April 2022 by the Department of Health and Human Services Office of Inspector General (HHS OIG). MA plans are denying medically necessary, covered services that met Medicare criteria at an alarming rate. The report found that 13% of prior authorization denials and 18% of payment denials actually met Medicare coverage rules and therefore were inappropriate. In a program the size of MA, improper denials at this rate are unacceptable.</p><p>Streamlining the prior authorization process is vital to MA reform. Plans vary widely on accepted methods of prior authorization requests and supporting documentation submission. The most common methods of prior authorization requests are fax machines and call centers. Additionally, plans that offer electronic submission methods most commonly use proprietary plan portals, which require significant time spent logging into a system, extracting data and completing idiosyncratic plan requirements. For each plan, providers and their staff must ensure they are following the correct rules and processes, which vary substantially between plans and by service, and are often unilaterally changed in the middle of a contact year.</p><p>This heavily burdensome process contributes to patient uncertainty regarding their care plan and creates harmful delays in care. According to a 2022 American Medical Association <a href="https://www.ama-assn.org/system/files/prior-authorization-survey.pdf">survey</a>, 94% of physicians reported care delays associated with prior authorizations, while 80% indicated that prior authorization hassles led to patient abandonment of treatment.</p><p>We greatly appreciate the new regulations issued by the Centers for Medicare & Medicaid Services, which will significantly reduce the burden associated with the prior authorization process. However, greater oversight of MA plans is needed to ensure appropriate access to care. The AHA specifically urges Congress to:</p><p><strong>Establish Controls for MA Plan Usage of Prior Authorization.</strong> The AHA supports The Improving Seniors’ Timely Access to Care Act, which would codify many of the reforms in the Interoperability and Prior Authorization Final Rule to streamline prior authorization requirements under MA plans by making them simpler and more uniform and eliminating the wide variation in prior authorization methods that frustrate both patients and providers. Additionally, we recommend that MA plans be required to deliver prior authorization responses within 72 hours for standard, non-urgent services and 24 hours for urgent services.</p><p><strong>Conduct More Frequent and Targeted Plan Audits.</strong> We urge additional CMS audits be conducted and targeted to specific service types of MA plans that have a history of inappropriate denials or delayed prior authorization response timeframes.</p><p><strong>Establish Provider Complaint Process.</strong> Health care providers, including hospitals and health systems, act on behalf of their patients when working with insurers to obtain approval and coverage for medically necessary care. We encourage Congress to establish a process for health care providers to submit complaints to CMS for suspected violation of federal rules by MA plans.</p><p><strong>Enforce Penalties for Non-Compliance.</strong> Congress should ensure that CMS exercise its authority to enforce penalties for MA plans that fail to comply with federal rules, including the provisions regarding plan reporting and adherence to medical necessity criteria that are not more restrictive than Traditional Medicare. In the recent contract year 2024 Medicare Advantage Rule, CMS noted that a number of the established regulations were already requirements under the health plan terms of participation in the MA program. Given MAOs historic lack of adherence to these rules, Congress should establish stronger programs to hold plans accountable for non-adherence. Additional requirements are insufficient without enforcement action and penalties to support compliance.</p><p><strong>Provide Clarity on the Role of States in MA Oversight.</strong> One of the challenges in regulating MA plans is the split responsibility of insurance oversight between the federal and state governments. To ensure that CMS and states exercise their authorities as needed, we encourage Congress to delineate and strengthen the specific oversight and enforcement responsibilities of state and federal authorities.</p><h2>PROMPT PAYMENT</h2><p>In addition to challenges with inappropriate denials of care, hospitals and health systems are increasingly reporting significant financial impacts from insurers’ failure to pay promptly. An AHA <a href="/infographics/2022-11-01-survey-commercial-health-insurance-practices-delay-care-increase-costs-infographic">member survey</a> found that 50% of hospitals and health systems reported having more than $100 million in unpaid claims that were more than six months old. Among the 772 hospitals surveyed, these delays amounted to more than $6.4 billion in delayed or denied claims that are more than six months old.</p><p>These delays add unnecessary cost and burden to the health care system, as combatting inappropriate delays and denials cost valuable time and resources, including resources needed to comply with insurer requests for additional documentation, physician peer-to-peer consultations and onerous appeal processes — and these processes may still be subject to other types of insurer audits or post-pay reviews that recoup payment to start the process all over again.</p><p>To address these concerns, the AHA urges Congress to add statutory prompt payment requirements for MA plans when services are furnished by in-network providers to enrollees of the MA plans and to subject the MA plans to interest penalties on the amounts owed if they fail to make timely payments.</p><h2>GOLD CARDING</h2><h2><u></u></h2><p>Gold carding programs substantially reduce administrative burdens and costs by streamlining access to care for Medicare beneficiaries. These programs help eliminate unnecessary delays in care by enabling providers who have demonstrated consistent adherence to evidence-based guidelines to be granted exemptions for prior authorization requirements.</p><p>The AHA supports the GOLD Card Act of 2023 (H.R. 4968), which would exempt providers from requiring prior authorization for a MA plan year if the provider had at least 90% of prior authorization requests approved the preceding year.</p><h2>CLAIMS ATTACHMENTS STANDARDIZATION</h2><p><u></u></p><p>Health care providers are currently forced to use burdensome manual processes including mail, fax and online portals when they respond to documentation requests from health plans. The lack of standardization in the claims attachment process has created a significant source of administrative complexity and burden for hospitals and other providers. Standardization of the transmission of clinical data to support claims would greatly reduce the burden created by these inefficient manual processes and eliminate unnecessary claims processing delays.</p><p>The AHA supports CMS’s proposed rule to standardize claims attachments under HIPAA. Requiring the use of a standard would improve the timeliness of patient billing and provider cash flow by reducing processing times between when a claim is submitted and when a health insurer issues payment. This would increase efficiency and help alleviate some of the financial strain facing many hospitals and health systems due to delays in payment. If CMS does not finalize a claims attachment standard rule, we urge Congress to explore ways to leverage its authority to address this issue.</p><h2>CONCLUSION</h2><p>Thank you again for your interest in increasing access to care while reducing unnecessary burdens and costs in the health care system. We look forward to working with you to support and advance these important issues.</p> Wed, 08 May 2024 09:57:42 -0500 Cost Management