In late December, Atlantic Health System’s Morristown Medical Center broke ground on a two-story expansion of its Gagnon Cardiovascular Institute. The expansion, which is expected to be open in 2019, will add 72 private patient rooms and additional space for advanced cardiac imaging technology.
Cardiovascular diseases drive more than $500 billion in costs per year, according to the American Heart Association, and will extend to more than $1 trillion by 2035.
“Morristown Medical Center is nationally recognized for exceptional heart care, and we’ve seen an increase in patients at the Gagnon Cardiovascular Institute since its opening in 2009,” according to Dr. Linda D. Gillam, the health system’s chair of cardiovascular medicine. “Generally, some cardiovascular procedures receive a higher reimbursement than other services due to the complexity of the procedure and resources required to perform them.”
But revenue isn’t the whole picture, she adds.
“We see opportunities to advance care options for our patients by optimizing their health through prevention, early identification of disease, proactive management and if needed, expert intervention,” Gillam said. “Atlantic Health System also leads and participates in national clinical trials to bring the most innovative care to our patients. This requires a significant investment in resources to support these new care options, while still remaining nimble enough to best serve our communities.”
Specific treatments for cardiovascular conditions like a heart attack will vary. Depending on the circumstances, they can easily run from $15,000 to $20,000, “or hundreds of thousands of dollars if bypass surgery is needed,” according to Paul Chiafullo, president of Manasquan-headquartered O'Conco Healthcare Consultants.
“While an individual is hospitalized, there’s a lot of coordination required between his or her physicians and the hospital staff,” noted Chiafullo. Better coordination can lead to a better health outcome, and may also reduce costs. Follow-up care is also critical.
“A lot of medical costs are driven by post-discharge readmissions,” he explained. “Say the person gets certain medications while they’re in the hospital, then they stop taking the drugs or they’re not properly followed up. Close to 30 percent of patients are readmitted within the next 90 days. In response, some hospitals periodically call patients after a discharge, or they get test results to be sure the patient is taking their medication when they get back home.”
Many hospitals also are trying to cut costs by educating people about healthy lifestyles and other positive actions — like seeing their primary care physician on a regular basis for checkups — in a bid to reduce the chance of a heart attack or other cardiovascular event.
Even as an aging population drives up the volume of cardiovascular procedures, Medicare reimbursement for treatment done in physician offices is comparable or even higher than hospital reimbursement for the same procedures, according to Michael Lewis, a Toms River-based shareholder and director of health care consulting for the CPA firm Cowan, Gunteski & Co. PA
“As a result, many physicians have elected to perform cardiovascular procedures in their offices,” he reported, noting that in the “current reimbursement environment, cardiovascular procedures offer a lower return on investment to hospitals.
New Jersey hospitals are dealing with “razor-thin profit margins or, in some cases, operating in the red,” he added. “Increasing costs for technology and compliance with federal and state regulations have driven costs up, while reimbursement has flatlined or even dropped.”
Another challenge unique to New Jersey “is the dominance of one insurance carrier, Horizon Blue Cross and Blue Shield,” according to Lewis.
“Hospitals and other health care providers have limited negotiating power since it is essential that they are part of the Horizon network,” he said.
Lewis’ prescription to clients: “There must be a renewed focus on providing care in an outpatient setting and less concern about filling hospital beds, while still having high quality inpatient care available for patients whose clinical needs demand it. Hospitals must also drill down on every expense category to ensure maximum efficiency and utilization of resources. They must also re-evaluate their revenue cycle management process and exert their best efforts to collect all funds due to them both from insurance companies and patients.”
Hospitals also are looking for revenue streams that are not dependent on insurance, Lewis noted.
“We see a proliferation of health systems opening wellness centers that provide a broad spectrum of retail health services for which patients are willing to pay out-of-pocket,” he said. “These include fitness programs, personal training, nutrition counseling, aquatics and spa treatments, along with regular medical services.”
Some hospitals also are changing their employment approach to cope with the reimbursement structure.
“The challenge for hospitals is to work with physicians to refer patients with good insurance coverage so that the return on investment improves,” Lewis explained. “In some cases, this means employing those physician specialists — cardiology, vascular and interventional radiology — rather than having the physicians remain independent and risk having them set up procedure rooms in their private practices.”