NIHCM releases report on U.S. healthcare spending

In its recently released data brief, the National Institute for Healthcare Management Foundation (NIHCM) reports that even though spending on healthcare in the U.S. accounted for almost 18% of GDP in 2010—about 50% higher than in the next closest comparable developed countries—over the past three years, healthcare spending has grown at its slowest pace in 50 years, largely as a result of the recession. Yet, in reality, growth has been slowing every year since 2001, signaling the presence of other influences beyond the economic downturn.

The single largest component of healthcare spending is hospital care, which may be driving inflation in healthcare costs. Mark Dietrich offers a detailed look at the factors affecting the healthcare economy in Chapter 2 of the recently published BVR/AHLA Guide to Healthcare Valuation, 3rd Edition. “The Healthcare Economy” covers the annual projections from the CMS Office of the Actuary for national health expenditures through 2020 for hospital spending, Medicare, physician and clinical services spending, home health and nursing facilities spending, and prescription drug costs. It describes the negative impact of the primary care physician shortage in the next several decades on practice value; lays out healthcare indicators, trends in physician supply and demand, and trends in health insurance coverage; and ties in the concentration of market share and the state of managed care, including regional and firm size differences.

HIPAA: Financial executives & valuation analysts beware

The 9th Circuit Court of Appeals’ affirmation of a Health Insurance Portability and Accountability Act (HIPAA) violation in the recent United States v. Zhou case serves as a warning that ignorance of that law is no excuse. After being fired from UCLA, former research assistant Zhou accessed numerous patient records containing protected health information (PHI) with no legitimate purpose. His defense was that he was unaware of the HIPAA prohibition against such access. The court observed:

Under Zhou’s interpretation of the statute, a defendant is guilty only if he knew that obtaining the personal healthcare information was illegal. We reject Zhou’s argument because it contradicts the plain language of HIPAA. The statute’s misdemeanor criminal penalty applies to an individual who “knowingly” and in violation of this part … obtains individually identifiable health information relating to an individual.

The court said that “knowingly” applied only to obtaining the PHI, not to the fact that it was illegal. Thus, ignorance of the law was no excuse.

This case has broad implications for many professionals, including financial executives and valuation analysts who receive PHI during business engagements and/or due diligence proceedings. A HIPAA covered entity (such as a physician practice or hospital) shouldn’t provide PHI to business associates unless: 1) there is a need to do so; and 2) a business associates agreement (BAA) is obtained first. Regardless, a covered entity’s failure to obtain a BAA does not protect a business associate from liability for failing to protect the PHI.  

Receipt of PHI most frequently arises when valuing or analyzing accounts receivable where clients (covered entities) may inadvertently or unwisely provide reports that include patient names and other identifying information. Other examples may include seemingly innocuous financial records such as a general ledger. For PHI specifics, click here.

Executives and analysts should consider whether they want to take possession of PHI even if a BAA is in place. A substantive question exists, or should exist, as to whether a business engagement requires access to PHI in the first place. If there is no need to access PHI, a BAA conceivably provides no protection to either the covered entity disclosing it or the business associate who receives it. In addition, analysts should specify that no PHI be provided in response to a data request, and they should consider including an indemnification clause in their engagement letters against the unintentional or unauthorized receipt of PHI from a client. Finally, analysts who find themselves in possession of PHI have the same obligations and exposures as the provider of the PHI to safeguard it from disclosure to unauthorized individuals.

For more information on Business Associates, click here.

For a sample BAA from the Department of Health and Human Services click here.

AMA releases report card on national health insurers

The American Medical Association’s recently released National Health Insurer Report Card is a critical tool in evaluating the payor mix of medical practices—specifically for practice managers, hospitals that employ physicians, and appraisers or accountants preparing financial statements who need to establish an allowance for uncollectible accounts. The report evaluates health insurers on several metrics, including the timeliness of claim submission acknowledgement and the percentage of claims paid within 15-day time periods.

The AMA reports that for the “second year in a row, UnitedHealthcare came out on top of seven large commercial health insurers with an accuracy rating of 98.3%.” The AMA also found that Anthem Blue Cross/Blue Shield made the biggest improvement, jumping from an accuracy rating of 61.0% last year to 88.6% this year. However, the insurer also scored a significantly negative finding with an increase in claims denial.