ACA Cuts Remain Major Pain Point for Hospitals but Priorities Are Shifting, According to Premier, Inc. Survey

Fewer Hospitals Concerned With Reimbursement Cuts; Emerging Care Models Becoming More Important; Legislative Mandate Compliance and Labor Top Cost Drivers

Charlotte, North Carolina, UNITED STATES

CHARLOTTE, N.C., Nov. 12, 2014 (GLOBE NEWSWIRE) -- Although implementation of the Affordable Care Act (ACA) remains a major challenge for hospitals, its impact on finances may be lessening when compared to other issues, according to Premier, Inc.'s (Nasdaq:PINC) fall 2014 Economic Outlook survey, a quarterly study of hospitals and health systems that highlights economic and industry trends impacting alliance members and the overall industry. Respondents cited new care delivery models, such as accountable care organizations (ACOs) and industry consolidation as emerging trends expected to impact providers over the next 12 months.

Reimbursement cuts, including market basket and productivity adjustments, as well as pay-for-performance penalties included in the ACA, remain the most frequently cited trends expected to impact providers over the next year. However, respondents citing these trends as a major concern decreased to just over a third (35.4 percent), down from 46.7 percent in the fall 2013 (Figure 1).

"There's no question that reimbursement cuts put a severe strain on tight hospital budgets," said Michael J. Alkire, Premier's chief operating officer. "But hospitals have also made great strides in improving operational efficiency and clinical quality, which has enabled them to better manage the reductions."

Providers report a number of initiatives to better control spending and improve overall efficiency. More than three quarters (77.5 percent) of C-suite executives have resource utilization programs in place to better control the use of expensive supplies and purchased services (Figure 2). This trend is most pronounced among large facilities (87.1 percent), and integrated delivery networks (IDNs) (82 percent). Similarly, 60.8 percent use clinical quality programs to help them reduce patient length of stay. Length of stay reduction initiatives were more common in small hospitals (75 percent) and IDNs (72 percent).

Compliance with ACA mandates remains a top driver of costs for most respondents, but is also lessening in importance, down from a high of 36.2 percent of respondents in spring 2012 to 23.2 percent today (Figure 3). Legislative mandate costs are cited less frequently by large (13 percent) and mid-sized hospitals (19.5 percent), which instead report labor as their primary cost driver. C-suite executives also downplay ACA compliance when compared to labor costs, with just 13.3 percent reporting the ACA as a primary cost driver, as opposed to the 27.6 percent who cite labor.

Added labor costs may be associated with higher salaries needed to attract scarce primary care doctors. According to the survey, a shortage of primary care physicians remains a concern for 68.3 percent of C-suite executives, with the shortage concentrated in the northeast/mid-Atlantic (70.4 percent) and the southeast (73.3 percent) regions. Respondents reporting the most acute primary care shortages are large hospitals (77.4 percent) and IDNs (79.6 percent) – the very same groups that report labor as their primary cost driver.

In addition, an increasing number of hospitals are shifting their focus to the voluntary programs within the ACA. In particular, 26 percent of respondents cite new care delivery and payment models such as accountable care and bundling, which is up from 14.3 percent a year ago. In part, this focus is creating new cost centers in hospitals, including the management of chronic, high utilization patients (a primary cost driver for 13.4 percent of C-suite executives), and poor care coordination (a primary cost driver for 10.2 percent of respondents overall).

"Shifting to new care delivery models designed to better manage population health involves a heavy up-front investment," continued Alkire. "As more hospitals make this transition, it's probable that we will see these cost centers grow in magnitude over the next few years."

About the Economic Outlook

Premier's Economic Outlook highlights emerging economic and industry trends impacting alliance members and the overall industry. The quarterly publication leverages subject matter expertise to build consensus from diverse points of view while highlighting best practices and strategies needed to drive performance improvement. The survey respondents represent 332 hospitals and health systems of various sizes and types across 42 states. A third of respondents were C-suite executives – primarily CEOs, chief financial officers and chief operating officers.

About Premier, Inc.

Premier, Inc. (Nasdaq:PINC) is a leading healthcare improvement company, uniting an alliance of approximately 3,400 U.S. hospitals and 110,000 other providers to transform healthcare. With integrated data and analytics, collaboratives, supply chain solutions, and advisory and other services, Premier enables better care and outcomes at a lower cost. Premier, a Malcolm Baldrige National Quality Award recipient, plays a critical role in the rapidly evolving healthcare industry, collaborating with members to co-develop long-term innovations that reinvent and improve the way care is delivered to patients nationwide. Headquartered in Charlotte, N.C., Premier is passionate about transforming American healthcare. Please visit Premier's news and investor sites on; as well as Twitter, Facebook, LinkedIn, YouTube, Instagram, Foursquare and Premier's blog for more information about the company.

CONTACT: Morgan Bridges-Guthrie, Premier, Inc.;; 704.816.4152