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Bungled Payments

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By PAUL KECKLEY

Paul KeckleyThe proposal involves a five-year bundled payment model across 75 geographic areas whereby hospitals would be eligible for a bonus if their costs and outcomes were optimal or be penalized if not based on results 90 days post-discharge. The agency noted that in 2013, it spent more than $7 billion on hospitalization for these procedures with the payments for hospitalization and recovery ranging widely from 16,500 to $33,000. Comments about the proposal will be received by CMS through September 8, 2015, aiming for implementation January 1, 2016.

Their rationale, according to Secretary of Health and Human Services Sylvia Burwell, in the HHS statement announcing the proposal: “By focusing on episodes of care, rather than a piecemeal system, hospitals and physicians have an incentive to work together to deliver more effective and efficient care. This model will incentivize providing patients with the right care the first time and finding better ways to help them recover successfully. It will reward providers and doctors for helping patients get and stay healthy.”Continue reading…

HIMSS Unplugged

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By ANDY ORAM

HIMSS has opened and closed in Florida and I’m in Boston with snow up to my rectus abdominis. After several years of watching keynote pageants and scarfing up the amenities at HIMSS conferences, I decided to stay home this year.

Writing articles from earlier conferences certainly called on all my energy and talents. In 2010 I called for more open source and standards in the health care field. In 2012 I decried short-term thinking and lack of interest in real health transformation. In 2013 I highlighted how far providers and vendors were from effective patient engagement.

In general, I’ve found that my attendance at HIMSS leads moaning and carping about the state of health IT. So this year I figured I could sit in my office while moaning and carping about the state of health IT.

In particular, my theme this year is how health IT is outrunning the institutions that need it, and what will happen to those left behind.

The scissors crisis: more IT expenditures and decreasing revenues

Although the trade and mainstream press discuss various funding challenges faced by hospitals and other health providers, I haven’t seen anyone put it all together and lay out the dismal prospects these institutions have for fiscal health. Essentially, everything they need to do in information technology will require a lot more money, and all the income trends are declining.

Certainly the long-term payoff for the investment in information technology could be cost reductions–but only after many years, and only if it’s done right. And certainly, some institutions are flush with cash and are even buying up others. What we’re seeing in health care is a microcosm of the income gap seen throughout the world. To cite Billie Holliday: them that’s got shall get; them that’s not shall lose.

Here are the trends in IT:

  • Meaningful Use requires the purchase of electronic health records, which run into the hundreds of thousands of dollars just for licensing fees. Training, maintenance, storage, security, and other costs add even more. The incentive payments from the federal government come nowhere near covering the costs. EHR providers who offer their record systems on the Web (Software as a Service) tend to be cheaper than the older wave of EHRs. Open source solutions also cost much less than proprietary ones, but have made little headway in the US.
  • Hot on the heals of Meaningful Use is ICD-10 compliance, a major upgrade to the diagnostic codes assigned to patient conditions. Training costs (and the inevitable loss of productivity caused by transitions) could be staggering. Some 80% of providers may miss the government’s deadline. The American Medical Association, citing estimated prices for a small practice of $56,639 to $226,105 (p. 2), recently urged the government to back off on requiring ICD-10. Their point of view seems to be that ICD-10 might have benefits, but far less than other things the providers need money for. Having already put off its deadline, the Department refuses to bend further.
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    • Obamacare’s Payment Pilots Are Struggling To Prove They Work. Here’s Why It’s OK.

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    By DAN DIAMOND

    When Barack Obama was merely a senator running for the White House, he told one physician association, “I support the concept of a patient-centered medical home” and would encourage the model if he ever became president.

    Six years later: Mission accomplished.

    Nearly 7,000 primary care practices have officially been accredited as PCMHs, and thousands of other providers have adopted some features of medical homes, which use a team-based approach to coordinated care. And while the movement toward medical homes might have evolved without Obama, his health reforms clearly laid the groundwork for rapid adoption.

    The only problem? There’s still no clear evidence that the model even works.

    A prominent Journal of the American Medical Association study last month found that after three years, one of the nation’s largest medical home pilots didn’t lead to lower costs or significantly higher care quality.

    “There are folks who believe the medical home is a proven intervention that doesn’t even need to be tested or refined,” lead study author Mark Friedberg told the Wall Street Journal‘s Melinda Beck. “Our findings will hopefully change those views.”

    An accompanying editorial also sounded caution. “It is time to replace enthusiasm and promotion with scientific rigor and prudence,” Thomas Schwenk wrote, “and to better understand what the PCMH is and is not.”

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    The Great ACO Debate: 2014 Edition

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    By Joseph Damore & Wes Champion

    With the beginning of 2014 comes another year of the great accountable care organization (ACO) debate.

    Is it a model to deliver high-quality, cost-effective care and improve population health management (PHM)? Or, just a passing fad, similar to the HMOs of decades ago?

    Many opinions exist, and they’ll continue to be debated, especially during an election year. One thing most of us can agree on about ACOs is they are a work in progress.

    We can say with some certainty that ACOs are taking hold; look no further than their growth, which now exceeds 600 public and private ACOs nationwide with the recent addition of 123 ACOs to the Medicare Shared Savings Program. But they still beg more questions than answers. What types and sizes of hospitals are forming ACOs, and where are they located? What does the pipeline of emerging ACOs look like, and how long will their journey take? And what capabilities, investments and partnerships are essential to ACO participation? What is the longer term performance?

    Who better to ask than the decision makers running the organizations that participate in an ACO?

    In August of 2013 we surveyed 115 C-suite executives– primarily CEOs (43.5%), chief financial officers (17.4%) and chief operating officers (16.5%) – across 35 states to collect data on their perspectives on ACO and PHM.

    Survey results support the increase in ACO popularity. According to respondents, ACO participation has almost quadrupled since spring 2012: More than 18% say their hospitals currently participate in an ACO, up from 4.8% in spring 2012. This growth is projected to accelerate, with about 50% of respondents suggesting their hospitals will participate in an ACO by the end of 2014. Overall, 3 out of 4 senior executives surveyed say their hospitals have ACO participation plans.

    Since survey respondents also represent hospitals of different locations, sizes and types, we are able to obtain a broader look at current and future ACO participation and found that:

    • Non-rural hospitals (82.1%) are most likely to participate in an ACO overall, followed by hospitals in an integrated delivery network (81.1%).
    • The lowest rates of projected participation are among rural hospitals (70.7%) and standalone hospitals (72.6%).
    • Large hospitals are moving more quickly, as 30.8% said they’d be part of an ACO by the end of 2013.
    • And though they’re equally as likely as large hospitals to ultimately participate in an ACO, small hospitals say they require additional time, with 48.6% planning to join in 2014 or 2015.

    But some providers have been more deliberate and cautious about when they start their ACO journey. The pace of ACO adoption has been slower than originally anticipated 18 months ago, when more than half of executives predicted their systems would create or join an ACO by the end of 2013. Current survey results show that about 1 out of 4 will meet that projection.

    Continue reading…

    The Critics Are Wrong About IPAB

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    By Peter R. Orszag

    For Medicare, this has been a summer of good and bad news. On one hand, the program’s costs continue to rise remarkably slowly. So far this fiscal year, they have gone up by only 2.7 percent in nominal terms, the Congressional Budget Office reports.

    On the other hand, opposition to the Independent Payment Advisory Board — created as part of the Affordable Care Act — continues to mount. And opponents continue to mischaracterize the whole point of the board.

    What they seem not to understand is that the board is needed mostly so that that Medicare can continue to encourage slower growth in costs.

    One reason costs have been rising so slowly is that systems for paying hospitals and doctors are changing. We’re moving away from the old fee-for-service plan and toward paying for value in health care — and we’re making the shift more rapidly than expected.

    Redesigning the payment system is a fundamentally different approach to containing costs. The old way was to simply slash the amounts that Medicare pays for services. And here is where the criticism of the Independent Payment Advisory Board becomes somewhat Orwellian.

    The point of having such a board — and here I can perhaps speak with some authority, as I was present at the creation — is to create a process for tweaking our evolving payment system in response to incoming data and experience, a process that is more facile and dynamic than turning to Congress for legislation.

    Medicare Experiments
    In particular, as Medicare experiments with accountable care organizations, bundled payments and other new strategies, the agency will inevitably need to make adjustments. Questions will come up, such as: How should the payments to doctors, hospitals and other providers be changed to reflect what is learned about the quality of care they provide? How much should the penalties or bonuses be? Is it better to have hospitals face all the costs associated with patient (as in an accountable care organization) or only the costs incurred during a specific episode of care (as in bundled payments)?

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    Why Medicare Cuts Will Quietly Kill Seniors

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    By MICHAEL L. MILLENSON

    The recent news that thousands of seniors with cancer are being denied treatment with expensive chemotherapy drugs as a result of sequestration-mandated budget cuts raises the question of whether other patients are being equally harmed, but less visibly.

    A careful study of the impact of past federal budget cutting suggests a troubling answer. That study, in a National Bureau of Economic Research Working Paper published in 2011 and revised last year, established an eerily direct link between slashing hospital reimbursement and whether Medicare patients with a heart attack live or die.

    Using data from California hospitals, researchers Vivian Y. Wu of the University of California and Yu-Chu Shen of the Naval Postgraduate School examined mortality rates for heart attack patients following the Medicare payment cuts resulting from the Balanced Budget Act (BBA) of 1997. The impact of the BBA was not as sudden or clear as the current situation, where Medicare’s two percent across-the-board cut on April 1 instantly transformed some expensive chemotherapy drugs into money losers, but it was significant and long-lasting.

    The researchers examined hospitals claims data for a three-year period before the BBA, a three-year period when the BBA first took effect and, finally, a six-year period after budget cuts had either permanently changed care or failed to do so. They also tried to adjust for the severity of illness of the heart attack patients – the condition is formally known as acute myocardial infarction (AMI) – and other factors.

    In the end, the researchers were able to trace a clear path from Congressional budget decisions to the patient’s bedside. Payment reductions triggered by the BBA , Wu and Shen concluded, led to “worse Medicare AMI patient outcomes, and more importantly, that the adverse effect only became measurable several years after the policy took place.”

    They even quantified the effect: every thousand dollars of Medicare revenue loss from the BBA translated to a six to eight percent increase in mortality rates from heart attack.Continue reading…

    How Using a ‘Scorecard’ Can Smooth Your Hospital’s Transition to a Population Health-based Reimbursement Model

    By Russ Richmond, MD

    The US healthcare system’s myriad of problems again seized the headlines recently with the release of an Institute of Medicine report, which found that 30 percent of healthcare spending in 2009 – around $750 billion – was wasted. Citing the “urgent need for a system-wide transformation,” the report blamed the lack of coordination at every point in the system for the massive amount of money wasted in healthcare each year.

    One critical area in particular need of transformation is the business and operating model that drives healthcare in the US. There is broad-based agreement across the healthcare industry that the current fee-for-service model does not work, and needs to be changed. The sweeping health reform law enacted in 2010 included a range of more holistic, value-based payment structures that are now being referred to as “population health.”

    Population health is an integrated care model that incentivizes the healthcare system to keep patients healthy, thus lowering costs and increasing quality. In this value-based healthcare approach, patient care is better coordinated and shared between different providers. Key population health models include:

    · Bundled/Episodic Payments – This is where provider groups are reimbursed based on an expected cost for a clinically defined episode of care.
    · Accountable Care Organizations (ACOs) – This new model ties provider reimbursement to quality and reduction in the total cost of care for a population of patients.

    Continue reading…

    How Health Care Changed While You Were Watching the Election

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    By Dan Diamond

    After a seemingly endless presidential campaign, we’re just days away from the Nov. 6 election. And to be sure, health care issues remain at the forefront.

    Both Barack Obama and Mitt Romney have tried to claim the high ground as Medicare’s number one defender. In his latest column, the New York Times’ Paul Krugman argues that next week’s vote “is, to an important degree, really about Medicaid.” And writing on Bloomberg View, columnist Ezra Klein takes an even broader stance, concluding that “this election is all about health care.”

    But health care isn’t all about the election, despite politics’ seeming ability to draw every sector into its gravitational pull.

    In fact, many of the most significant stories in health care from the past two months haven’t come from the campaign trail — where candidates have mostly rehashed their existing policies — but from the private sector, as employers and providers have made aggressive, and sometimes unexpected, deals and changes. Reforms that will continue regardless of who’s sitting in the Oval Office next year.

    Here are some of those stories.

    Top Employers Move to Defined Contribution

    As previously discussed in “Road to Reform,” Sears Holdings and Darden Restaurants have made plans to shift away from their current “defined benefits” — where they choose a set of health insurance benefits on behalf of their workers — and roll out “defined contribution” instead.

    Under that model, firms pay a fixed amount for employees’ health benefits and allow workers to choose their coverage from an online marketplace, such as the Affordable Care Act’s health insurance exchanges or the emerging number of privately run exchanges.

    In theory, the model would slow employers’ health costs while allowing employees to have more control over their own health care spending. And Sears and Darden’s announcements aren’t wholly unexpected, given that many employers have signaled their interest in making a similar shift.

    But given the long-entrenched employer-sponsored health coverage model, some employers needed to be the first movers before the rest would be ready to follow.

    Will they? That will be a major industry issue to watch across the next months.

    Continue reading…

    How Bundled Payments Just Might Save Health Care From Itself

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    By Wes Champion

    In the 1960s, Texas Instruments developed the first handheld calculator. It could display up to 12 digits while performing addition, subtraction, multiplication and division. And it cost $2,200.

    Since then, the calculator has come a long way. Competition forced continuous innovations, and today’s models are more lightweight, have longer battery life, are capable of performing more complex computations –all at a dramatically reduced price point.

    That’s the typical cycle in virtually every sector of the American economy. Innovations are introduced, competition forces design improvements and cost reductions and products are continually improved until the next big thing comes along to start the process over again.

    But that’s not the way things work in healthcare.

    Like the calculator, Medicare was first created in the 1960s.

    But even though the practice of medicine has changed dramatically over the last 40 years, the Medicare program has stayed largely the same. And, since most commercial insurers tend to follow the government’s lead in terms of payments and benefit design, even private markets have played a role in limiting innovations in the way we pay for healthcare.

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    Health Care: An Alternate Economic Universe

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    By Jeff Goldsmith

    In July, 2012, the US economy produced roughly the same volume of goods and services as it did five years earlier with five million fewer workers. Yet, during the first four years of the recession (May 2007 to May 2011), the US health system, despite slowing or declining utilization, added 1.149 million workers. Key sectors, specifically hospitals and physician offices, grew their workforces despite declining admissions and office visit volume. (Employment data in this post comes from the Bureau of Labor Statistics’ (BLS) National 4-digit NAICS Industry-Specific Estimates from May 2007 and May 2011.)

    Compared to the rest of the economy, health care seems to exist in an alternate economic universe. This would be good news, rather than a problem, if we were not borrowing roughly half of every dollar of general revenue the federal government is spending on health care and if employers were not robbing their workers of wage increases to fund their health benefits.

    Hospitals and physician offices saw declines in their core activity in the past few years. Hospital admissions have been flat the past five years, and have shrunk the past two. Even hospital outpatient volume growth has subsided into the low single digits, only partially offsetting the lost admissions. Yet hospital employment rose by over 220,000 workers, or 4.4 percent from mid-2007 to mid-2011.
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