Top 10 Issues Rural Hospitals will face in 2013

1. Top 10 Issues Rural Hospitals will face in 2013 Jimmy Lewis HomeTown Health CEO www.hometownhealthonline.com

2. 1) Major statewide budget shortfalls and the subsequent realignment of how services are paid for • DCH will become extremely aggressive to collections, recoupments, and ERP’s will become very limited due to state cash shortfall • Cash will be shorter for rural hospitals than ever before forcing new cash recovery methods that are technology based. When A/R drops to 45 days or less, there is no cushion to deal with cyclical shortages thus new methods of cash flow improvement must be adopted including data mining and new means of denial management

3. 2) Physician Shortages and skill shortages in nursing and revenue cycle and migration away from rural hospitals to larger hospital and urban communities resulting in • Increased adoption of hospitalists • Increased employment of physicians • Increased use of PA’s and other nursing assistants • Absolute demand for onsite remote on-line education for all areas of Business Office and Revenue Cycle Management to increase retention. Will result in higher pay scales to retain.

4. 3) Technology usage will run rampant with • EHR’s going live universally • Health Information Exchanges requiring complete integration of all EHR’s • Data mining capability will expand to reduce A/R and denials • New technology will be a “standard of care” where absent the standard of care the hospital has many new liability issues. Technology adoption then becomes a liability for failure to adopt and also the loss of revenue

5. 4) Continued affiliations of small hospitals to large hospitals – mostly soft affiliation with no equity exchanges • Larger hospitals want referrals but no purchase of debt • Larger hospitals have no experience in managing smaller hospitals resulting in financial disturbances for both sides of the affiliation. Simply stated “they ain’t what they are cracked up to be”

6. 5) Consequential effects of Obamacare as it seeks to cut $716 billion from Medicare • Medicare can become the nightmare payer with the cuts to all providers – physicians will start to limit their Medicare exposure as is the case with Medicaid. • Health Insurance Exchanges • These will lead to the loss of commercial cross subsidization as self pay patients who will be newly eligiblesmove to new rate (a blend of Medicare/Medicaid rates )which then become the new norm for commercial rates which in many cases will represent a 30%-50% drop in payments for the commercial part of the payer mix • “Fraud” reduction and redundant care reduction • Readmission reduction • Value Based purchasing • Recoupments stemming for technologically auditing of line items expenses through RACs MACs and many other incentivized recovery systems • ICD10 – 17000 codes in ICD9 to 141,000 codes in ICD10 • Absolute adoption October 1 2010 • Penalties – Penalties - Penalties

7. 6) Commercial payers will drive hospital business to ambulatory surgery centers along with Outpatient imaging • This has had a major increase in 2012 and will soar in 2013 • This is called an “Image Shopper” in many communities • From one hospital as an example….calling patients, after a pre-cert. approval has been given for a MRI exam, stating and recommending, there would be no co-pay, and/or deductible, if the patient would select another provider, one in question, is the open MRI, free standing independent entity for their procedure.  This approach is undermining the integrity of the hospital…….. since there is a quality difference in the equipment, .5 magnet vs 1.5 one, and also, with no reference to the caliber of the radiologist reading the film.  Also, if the hospital waves the co-pay or deductible, it could undermined the "favor-nation" clause in some contracts, that all discounts have to be shared.

8. 7) Subsidies of all categories will fall • DSH and UPL will fall with Obamacare cuts ($500 million cuts 2014 – Georgia to be hard hit) and without full reimbursement replacement for the newly eligible • Local subsidies from local counties will continue to fall as state budget reductions are reflected in local budget cuts

9. 8) Telemedicine and tele-monitoring use will soar as driven by physician shortages and reduced cost of care • Telemedicine as it has been known will change dramatically to involve /include a tremendous expansion of new devices (cell phones, ipads, digitized transponders) and software that allows tele-monitoring • Competition from commercial payers like United and contractual steerage otherwise will soar without the local rural hospital being included as it becomes a new “ patient centered medical home” • Telemedicine will be driven by commercial payers and CMO’s seeking patient monitoring to prevent admission into the system and will apply to chronic disease states among enrolled patients • These many sources of telemedicine will have at least the effect on rural hospitals as that of ambulatory surgery patient redirection

10. 9) Financing – Bank and Bond Financing will become very difficult to maintain as FDIC and other regulatory sources continue to crack down on banks and the quality of their loan portfolios. • Loan and bond covenant management will become a very intense issue for the Hospital Board and C-suite officers

11. 10) Hospital Board confusion • As laymen not accustomed to handling matters of this complexity, hospital governance will become very volatile • County Commissions will wake up to the liability and will force their participation of Hospital authorities

12. www.hometownhealthonline.com HomeTown Health has solutions to help you through 2013 • Business Partners & Solutions www.hthu.net • Online accredited continuing education Jimmy Lewis, HomeTown Health CEO theleadershipgrp@mindspring.com