Iowa seeks $225 million for Medicaid managed-care losses and other regional news

Iowa's privatized Medicaid program has asked the federal government to pay up to $225 million in risk-corridor payments to make up for losses experienced by the health insurers that run the year-old managed-care program.

The three insurers that operate the state Medicaid program—Anthem's Amerigroup, AmeriHealth Caritas and UnitedHealthcare—have lost an estimated $450 million since the program began in 2016.

Amy McCoy, a spokeswoman for the Iowa Department of Human Services, says she anticipates the CMS will approve the payments in the “coming weeks.” Risk corridors are commonly used for Medicaid managed-care programs, she said.

State taxpayers will also pay about $10 million after June 2018 to help the program. But by outsourcing its $4.2 billion Medicaid program to managed-care companies, Iowa saved about $110 million, McCoy said.

Still, the program has been controversial. The insurers have complained it is “drastically underfunded,” calling it a “catastrophic experience.” Gov. Terry Branstad, a Republican, defends the program and has said he will work with managed-care companies to determine “what makes the most sense going forward.”

The Iowa Medicaid program serves about 500,000 residents.

More than two-thirds of states, including Iowa, outsource some or all of their Medicaid program to private companies, but the benefits of the practice and its impact on quality and cost of care have been unclear.

—Maria Castellucci

Detroit Medical Center has received federal approval for a corrective action plan after failing a surprise inspection in January that found numerous violations of federal infection control and patient safety rules.

The violations the federal inspectors reported include failure to maintain enough sterile surgical equipment for surgeons, insufficient cleaning of dust in sterile areas and lack of containment of refrigerated medications.

DMC hospitals cited were Children's Hospital of Michigan, Detroit Receiving Hospital and Harper University Hospital, according to the CMS report.

Medical center officials contend many of the corrective plans have been implemented. They include: reorganization of the central sterile processing department, review of all processes related to the pretreatment, decontamination and sterilization of instruments, investment in new instruments and equipment, and creation of an instrument assessment and inventory process.

DMC's problems with sterile surgical processing were uncovered by a six-month investigation by the Detroit News. State and federal regulators found a variety of problems at DMC's downtown sterile processing department that serves four hospitals.

Last fall, the CMS announced that DMC had corrected more than a dozen violations of regulations covering employee and management training problems, lack of documentation and various infection control practices.

Deficiencies included staff not wearing protective gear when dealing with bodily fluids, not having enough instruments to start surgeries, and continually unclean instruments.

—Jay Greene, Crain's Detroit Business

A $265 million investment gain in 2016 offset a tough operating year at five-hospital Inova Health System. Though revenue jumped 10% last year to $3.3 billion, Falls Church, Va.-based Inova's operating income fell to $130.9 million before special charges compared with $221.4 million in 2015, Inova's audited year-end financials show.

Income was affected by an increase in staffing, including more physicians.

Not-for-profit Inova also was hit with a $64.5 million charge for terminating its pension plan and another $48.4 million charge to reduce the book value of its InTotal Health Medicaid health plan acquired in December 2012.

InTotal competed for a new Virginia program in 2016 that put the special needs Medicaid population in its own program so as to better manage their care.

But the plan wasn't selected, a loss that “could result in an annual premium reduction of up to $40 million annually” for InTotal Health, according to the financial disclosure.

With the special charges, Inova's 2016 operating income totaled $18 million compared with $221.4 million in 2015.

—Dave Barkholz

The Texas division of Catholic Health Initiatives laid off 459 employees last week as part of its ongoing restructuring plan.

The cuts, which represent less than 4% of the Texas division's workforce, affect employees at CHI St. Luke's Health and CHI St. Joseph Health. All in all, the division eliminated 620 positions, with 161 of those currently vacant.

Englewood, Colo.-based CHI has been in the midst of a turnaround plan to decrease debt and improve finances as it pursues a merger with San Francisco based-Dignity Health.

CHI proved last month its turnaround plan was gaining traction when it reported improved finances in its second quarter. The 103-hospital system posted operating losses of $75.6 million before charges in the quarter ended Dec. 31, compared with operating losses of $93.7 million in the year-earlier quarter. Revenue rose to $4.2 billion from $4 billion a year earlier.

Despite the improvements, S&P Global Ratings and Moody's Investors Service recently downgraded CHI's debt rating two notches above junk. An S&P analyst said it will take “several years on the current financial improvement trajectory for CHI to return to a higher rating.”

—Maria Castellucci

The California Senate has introduced legislation that would impose staffing requirements and yearly inspections on the state's 562 dialysis facilities.

The bill, which passed the state Senate health committee last week, addresses concerns that nurses are overworked at dialysis centers, leading to subpar care for patients. But dialysis providers oppose the bill, saying it is too restrictive and won't improve care.

Currently, dialysis clinics in California are inspected every six years on average, according to state Sen. Ricardo Lara, a Democrat and lead sponsor of the bill.

While most states—including California—allow dialysis centers to determine appropriate staff levels, the bill would require dialysis clinics to employ one nurse for every eight patients. In addition, social workers could not be assigned more than 75 patients per clinic.

Only seven states currently require minimum staffing requirements at dialysis centers. The California bill also goes further, mandating a 45-minute transition time between patients at treatment stations. That transition period would allow staff to take breaks and clean up stations between treatments.

—Maria Castellucci

New York City has emerged as a major hub for healthcare technology companies because they can take advantage of the area's renowned academic medical centers as potential investors and testing grounds, according to a new report from the not-for-profit Center for an Urban Future.

The city is second only to the San Francisco Bay Area in terms of venture capital investment in digital health and is home to companies with billion-dollar valuations, such as Zocdoc, Flatiron and Oscar.

New York City-based digital health companies received $908 million in venture funding last year, a nearly tenfold increase from 2010, when 15 companies raised $93 million, according to the center's report.

There are almost 100 New York companies in the sector, with at least eight of them employing 50 or more workers. Given the industry's growth potential, digital health should be part of the mayor's plan to create 100,000 jobs that pay more than $50,000 a year during the next decade, said Jonathan Bowles, executive director of the Center for an Urban Future. Bowles recommends that the city help create a more centralized digital health ecosystem by forming campuses with affordable office space and hosting networking events.

—Jonathan LaMantia, Crain's New York Business