Health Reform’s New Customer Journey

By Lindsay Resnick, October 9, 2012

Health reform makes 2014 an important milestone for every health plan: market leaders protecting their turf and opportunists setting up for a land grab. At the same time, a value-based consumer experience has never been more important as the center of power shifts into the hands of the health insurance customer. The retailization of healthcare means consumers are in control and taking a new healthcare journey: budgeting for their health benefits, navigating care delivery, and recommending preferred health plans.

It’s time to anticipate and prepare for this new journey by putting a plan together built around a series of sequenced, deliberate action steps:

• Know existing and prospective customers better than any of your competitors.
• Build an actionable roadmap to secure a differentiated, believable market position.
• Establish an arsenal of B2C marketing tools to reach, motivate and bond with consumers.
• Integrate & optimize sales outlets (broker, worksite, telesales, online, mobile, retail).
• Design a high engagement customer experience to drive retention and loyalty

A health plan’s ability to anticipate market shifts and prepare for strategic and tactical execution has reached a new level of urgency. Informed decision-making will separate winners from losers as companies manage through uncertainty. It calls for laser focus on two strategic imperatives:

1. Protect and retain existing customers. With public and private health benefit exchanges now in hyper-speed development as a new distribution channel, plans need to deepen relationships with existing customers across product-lines, market segments and distribution channels. This means identifying and profiling a Plan’s most valuable and most vulnerable customers.
2. Leverage “big data” to target growth opportunities. Across the country, the Affordable Care Act is expected to bring access to 30 million new customers; 24 million entering a new customer journey (aka Exchange), and possibly 16 million new Medicaid enrollees. Having a deep understanding of these prospective customers through demographic, attitudinal and behavioral data-driven segmentation is the only way to build an actionable, first-to-market sales and marketing plan.

In a retail healthcare marketplace it’s the consumer’s responsibility to deal with intimidating, complex benefit and health care decisions. Whether driven by reform or natural marketplace competitive pressures, if the cry for “personal responsibility” means asking consumers to step-up and take control of their healthcare destiny, they need to be educated in order to make smart, individualized choices. The burden falls on health plans to guide customers with a roadmap of relevant decision support.

To read more about preparing for health reform get KBM Group: Health Services’ newest Solutions Brief - Healthcare 2014: Leverage Opportunity Buffer Risk - Click Here

ACO Explosion

Bill Demarco, October 1, 2012

Medicare Shared Savings

Feasibility studies for three ACOs in North Carolina, a medical group in Arizona, a physician alliance in Illinois, a hospital system in Indiana and consultation with several Pioneer Plans has kept us very busy over the last several months. Most of these are physician owned medical groups, while several are IPAs with medical homes who want to collaborate with one another to form the primary care base of a Medicare Shared Savings ACO.

Over 490 applications for new ACOs are in process and due to CMS by September 6th. Add to this the several hundred earlier ACOs approved in April and June of this year and it becomes clear that the 600% growth rate in ACOs since November of last year when final rules were published brings excitement to the marketplace.

This easily represents 20% of Medicare beneficiaries who will be connected to Medicare through their ACO by January 1, 2013. When adding the Medicare Advantage beneficiaries that represent 27% of the Medicare population and growing, it is a factual statement to say that 50% of all Medicare beneficiaries will be receiving their benefits through Medicare contractors instead of Medicare directly. These contractors are all being held accountable by CMS to follow stringent guidelines including patient satisfaction.

This means Medicare has been permanently changed by focusing on shares savings for improving quality instead of merely paying claims. We anticipate ACO mergers and acquisitions will be the next step as investors and hospitals catch up to the opportunity to invest in the new chronic care business model.

We are excited for the plans with whom we have worked and their enthusiasm and innovation encourages us to expand our own resources and capabilities to serve this emerging transformation of the local delivery system.

Cautioning new applicants for next spring

We are talking to people about getting their Notices of Intent (NOI) submitted in the spring. This would make them eligible for submitting an application in fall of 2013 with a start date of January 1, 2014.

Applications that look simple are not acceptable by CMS with simple answers. Some of the key points we have heard from CMS include:

• Several workflow adjustments need to be made to make the patient process coordinated and all encompassing.

• Early charge reconciliations indicate the patient population notified by CMS may be different than the original ACO defined population discussed in early planning.

In addition, beneficiary engagement is a vital area of the application and connects with population management which is the backbone of successful care management. Tools and techniques vary by service area.

What’s an AHO?

What is the difference between a Medicare Shared Savings ACO and an Accountable Health Organization (AHO)? Is an AHO a private ACO?

Many people continue to be confused by private ACOs such as those sponsored by Cigna, Aetna and Blue Cross versus the Medicare Shared Savings opportunity to contract for Medicare lives in their area. While many of these private ACOs represent more of a bundled payment experiment paying global fees to doctors and hospitals tied to some sort of risk banding, the Medicare ACOs have a stronger focus on quality scores versus production of services and in so doing are able to raise the bar for both quality and cost. Private ACO sponsors are slowly making this transition but providers need to read closely what they are obligating themselves to in the future. Some are asking insurers for 2 side risk on day one and some are asking for one side risk only.

Remind Me Why We Have Insurance

By Kim Bellard, September 24, 2012

A recent article in The Columbus Dispatch reported on the practice of doctors providing discounts to patients if they paid directly instead of using their insurance.  It got me thinking about far health insurance has strayed from its original purpose.

We ask health insurance to do a lot of things: lessen concern about catastrophic expenses, reduce financial barriers to care, smooth out cash flow of health expenses, even help us manage chronic conditions via disease management and wellness programs.  Insurance does these things because, frankly, there haven’t been many good alternatives.  But that doesn’t mean there couldn’t be.

The Affordable Care Act -- ObamaCare -- requires expanded coverage for preventive care with no cost-sharing, on the premise that this will help people get those serves.  It troubles me that some, perhaps most, people won’t get necessary preventive services unless it is “free” to them at point-of-care.  That tells me something is really, really wrong with how we look at health.  But why does health insurance needs to be the mechanism for providing incentives to take care of one’s own health?

The Dispatch gave several examples of physicians and hospitals offering significant discounts – up to 40% - to patients who pay directly, in order to avoid the administrative burdens of dealing with health insurers.  It also quoted Tom Blue of the American Academy of Private Physicians as indicating they believed there were 4400 physicians nationally who replied in part or entirely on direct payments from patients, although that would seem to include uninsured patients. 

A more direct patient-physician financial relationship may be an idea whose time has come…again.  So-called “concierge medicine” started several years ago, and has developed to the point where it has its own trade association, the aforementioned American Academy of Private Physicians.  The concept of concierge medicine is that patients pay a fixed fee, monthly or annually, and in return they get guaranteed 24/7 access to their personal physician.  No insurance, no billing, no out-of-pocket payments.  

Examples of concierge practices include EliteHealth, MDVIP, and SignatureMD,  There’s even a television series featuring a concierge practice, USA Network’s Royal Pains.  Prices for concierge service vary widely, with some practices aimed at wealthy families and costing tens of thousands per year, while others are more affordable at $1,500 - $2,000 annually.  Proponents believe it greatly reduces the number of patients physicians have to see, reduces hassles with third party payors, and ensure a closer, more accessible physician-patient relationship.

Then there’s “direct primary care” model.  Like concierge medicine, patients pay flat fees for access to personal primary care physicians.  The lines between the two approaches are somewhat blurry, at least to me, but direct primary care tends to use monthly fees instead of annual retainers, and appears to be generally less expensive, often under $100 per month.  It also has its own trade association – Direct Primary Care – and has had legislation passed in both Oregon and the state of Washington to specifically allow the approach. 

Examples of direct primary care practices include Qliance and MedLion.   The DPC website lists over 80 practices in 19 states, some of whom are also listed in the American Association of Private Physicians website.   DPC argues that by cutting out insurers and the practices expenses devoted to billing and administrative hassles associated with third party payors, direct primary care can save 40% of the health care dollar.   

Concierge medicine and direct primary care both emphasize primary care and flat payments to cover essentially unlimited access to primary care services (and, in some cases, many routine services).  Both seek to eliminate insurers from the equation.  It’s interesting that while these efforts are happening, Medicare and many insurers are experimenting with patient centered medical homes (PCMH), which also seek to reestablish primary care as the centerpiece of a patient’s health care needs.  In the PCMH model, of course, insurance is still very much part of the picture, providing additional financial support to the involved primary care physicians.  In an ACO world, though, health insurance may be less integral to PCHM practices.

For all these models, I can’t help but be reminded of 1990’s capitated gatekeeper approaches, which also featured fixed per-member payments (from insurers) and primary care physicians coordinating all care.  It will be interesting to see how these new approaches – concierge, direct primary care, or PCMH – deal with patients with complex needs.  Just as there was with capitation, there will be financial temptation to triage them off to specialists who are still on fee-for-service, and there will be similar concerns about such practices skimming off healthier patients, not to mention wealthier patients. 

I don’t know if concierge medicine or direct primary care will ever evolve out of niche offerings, and their development will be interesting to watch.  The model I think is potentially even more disruptive to the current system is the encroachment of corporate approaches to retail medicine – e.g., TakeCare, Minute Clinic, Walmart’s recent entry into immunizations, among others  All of them work with health insurance, because that’s where the money is now, but all are also quite happy to take consumer’s money directly and to do so in a way that is more like we buy other goods and services, with clearly delineated lists of services and prices.  If other parts of the health care system think those kinds of approaches aren’t coming to them, they are deluding themselves.

Two things I feel strongly that our health care financing mechanisms should achieve is that low income people need assistance with paying for health care services, and no one should have to go broke due to medical bills.  Even for those, though, I can think of solutions which do not require health insurance.  As for cash flow management and chronic condition management, health insurance may actually be one of the less efficient solutions to address those. 

I am not saying there shouldn’t be any sort of health insurance, but given the mess we find out health system in – expensive, uneven access and quality, high administrative costs, etc. – maybe it’s time we rethought what it looks like.  It’s too bad that, as we start to decide what constitutes essential benefits under ObamaCare, we’re still playing small ball.

Round Up the Usual Suspects

By Kim Bellard, September 11, 2012

Two recent reports have added more empirical support to the widely held belief that our health care system wastes significant amounts of money.  I’m shocked, shocked!  As Captain Renauld said in Casablanca, round up the usual suspects. 

The first report, published in Health Affairs, was from UnitedHealth Group.  The authors examined data from 250,000 physicians around the country, focusing on the privately insured population.  Consistent with the years of data from the Dartmouth Atlas on the Medicare population, it showed widespread variation.  The authors report episode costs for procedures vary 2.5 times, while episode costs for chronic conditions vary 15-fold.  Overall, the report concludes that costs could be 14% lower if delivered by physicians meeting certain quality and cost-efficiency designations. 

An even more assertive claim was made by the prestigious Institute of Medicine (IOM).  Their report, Best Care at Lower Cost, believes that as much as a third of spending is wasted – some $750 billion based on 2009 health spending.  The IOM is no stranger to big claims, including the oft-quoted 98,000 deaths annually due to medical error in their landmark report To Err is Human.  In their new report, they conclude that 75,000 deaths could be avoided if every state delivered care as well as the best performing state.  The IOM was more granular than simply claiming the waste is all unnecessary care: $210 billion in unnecessary services, $190 billion in excessive administrative costs, $130 billion from inefficiently delivered services, $105 billion due to prices that are too high, $75 billion in fraud, and $55 billion in missed prevention opportunities.  That’s a lot of targets of opportunity.

The IOM notes some lessons from other industries, and believe significant improvement is possible, on a variety of fronts: using information technology more effectively, creating systems to manage complexity, more focus on making health care safer, improving transparency of costs, quality and outcomes, promoting teamwork and communication between providers, partnering with patients, and decreasing waste/improving efficiency. They believe that the technology is here to support all these, and the problem is better application of it to health care systems and processes.  No mention was made of “death panels” (!), although I’m waiting for someone to bring up that specter.

There are too many examples that illustrate the flaws in the current system.  For example, Johns Hopkins recently reported that as many as a quarter of adult patients in ICUs may die as a result of missed or incorrect diagnoses, resulting in some 40,500 deaths annually.  The authors note that is more people who die each year from breast cancer.  One would think that ICU patients are getting pretty close attention, more than other patients, which make these results all the more troubling (to be fair, of course, they likely have complicated sets of conditions, making diagnosis harder).

More troubling are recent allegations and lawsuits about unnecessary heart surgeries aimed at increasing hospital revenue/physician income, including HCA and St. Joseph-London in Kentucky.  If these allegations are shown to be valid, these practices may just be the tip of the iceberg.  Throw in recent warnings about the overuse of well-intended but over-used diagnostic tests like screenings for ovarian cancer or prostate cancer, or the cost-benefits from increased exposure to radiation via increased imaging, and it makes one wonder if treatment recommendations should come with a warning label. 

The IOM cited technology as a tool to help support improvement in how the health system performs, and there is data which suggest this hope is not in vain.  The CDC reports that 55% of physicians had an electronic health record in 2011, and half of the remaining physicians expected to be using one in the next year.  Clearly, HITECH has helped spur this adoption, as has the trend of health systems purchasing physician practices.  Solo practitioners significantly lag in adoption (29%), and CDC reports a statistically significant difference in adoption from physicians over 50: 49% versus 64%.  More importantly, about three-quarters of adopters believe that the EHR both enhances patient care and meets Meaningful Use criteria. 

Also encouraging is a report from Medpage Today on physician technology use.  They report 9 out of 10 physicians experienced an increase in the use of the Internet in their practice: 71% spend 3 or more hours a day on a computer, 24% use a mobile device 3+ hours a day, and 18% use a tablet 3+ hours per days, all in support of their practice.  Unlike the CDC results, though, they see very little impact of age on technology adoption, except in use of a smartphone.  The Medpage respondents are a stressed bunch, seeing more patients each day and, as a result, seeing fewer drug reps, spending less time with each patient, and reading fewer medical journals/attending fewer conferences.  The last point is particularly concerning to build the nimble “learning” culture that the IOM advocates, which helps account for the finding that almost all respondents are using their devices to keep up-to-date on clinical news and medical education. 

I’ve often been critical of physicians’ reluctance to adopt technology solutions, but I’m increasingly coming to the point of view that it is technology that is failing them.  We’ve laboriously endeavored to get medical records into an electronic state, when the real challenge is deciding what health data we want tracked, and what views/inputs are needed by different types of users – including patients.   I’ll point to a nice column by Shahid Shah that details some of the kind of patient-centered forward thinking we need, as well as to a recent study by Hripcsak and Albers that reminds us that poorly designed data going in has damaging effects on the usefulness of that data. 

Maybe we need to scrap all those legacy practice management systems and EMRs and study what modern CRM systems in other industries can teach us about tracking and knowing patients, as well as take advantage of lessons learned from just-in-time manufacturing to improve care delivery efficiencies.  Add to those all the real-time data that mobile tracking apps and other monitoring devices can provide on patients’ health and we have a shot at disruptive innovation. 

Job number one in improving our health system has to be measuring who is doing what to which patients, and what impact it is having on those patients’ health.  Without better data on those, we’ll still just be rounding up those usual suspects.  

How are Providers Managing the Transition with Conflicting Incentives in Payment Structures?

Clive Riddle, September 7, 2012

In the just released September issue of Accountable Care News,the monthly subscription newsletter covering Accountable Care, a thought leader panel was asked: “Given the conflicting incentives of ACO and other FFS lines of business, how are providers managing the transition? Stratifying patient populations based on payment incentives? Managing all patients the same and absorbing the revenue losses? Structuring compensation differently for care team members and individual physicians?

It’s an interesting question. Here’s what the Accountable Care News thought leaders had to say about this issue:

Joel C. Hoffman, ASA, MAAA, FCA, Senior Vice President, OptumInsight Payer Solutions responds that “Provider-sponsored organizations (PSOs) are not going to change who sees which patients, how they manage/coordinate their care, or what they pay their salaried physicians depending on the type of reimbursement received.   Physicians must move to delivering value regardless of how they are reimbursed.   The historic fee-for-service (FFS) incentives for volume and high-intensity services are already shifting to a blended volume/value system, and this transition will continue to accelerate over time in favor of value.  Many of the leading PSOs are already acutely focused on simultaneously improving patient quality/safety while reducing costs of care, even in their legacy FFS reimbursement relationships. Provider reimbursement will evolve to keep pace with the delivery of clinically integrated, coordinated care – case in point, the growth of value-based reimbursement that is expected to help expedite the transformation of the nation’s healthcare delivery system and make it stick.  But FFS reimbursement by necessity will never totally disappear -- today’s PSOs are showing they can positively transform regardless.”

Douglas A. Hastings, JD , Chair, Board of Directors, Epstein Becker & Green, PC, states in part that  “there is not, nor should there be, any single or simple answer to managing the transition.  The pace of change varies around the country due to historical circumstances, current market activity, and a variety of other variables.  The constants are the need to perform well on evolving consensus quality measures and to contain costs in order to absorb reduced reimbursement in whatever actual form that takes.  In addition, there are affirmative investments necessary to make a successful transition, further underscoring the need for capital and operating cost reductions…..Nevertheless, even the most progressive providers will have a foot in both fee-for-service and value-based payment for a period of time.   Approaches to patient care and financial incentives while different payment methodologies co-exist will vary.   My sense from watching and talking to the most recognized and advanced “Triple Aim”– oriented delivery systems is that they aggressively align treatment protocols and financial incentives within the system toward Triple Aim goals from the outset, even though this approach may cost more in the short run.  They argue that such costs are the price of innovation and doing the right thing and that this approach will pay off in the long run.  I think that they are correct.”

Tom Cassels, Executive Director of Research & Insights, The Advisory Board Company says “disciplined providers aren’t waiting for the conflict created by today’s uncomfortable ‘foot in two boats’ transition to value-based contracting to sort itself out.  Rather they are executing clear strategies to identify areas where investments of time and resources in new care models can yield real near-term returns. For instance, these providers realize that they are already at risk for the total cost of their employee health benefits plans as well as the expense of uncompensated (e.g., uninsured) and under-compensated care (e.g., chronically ill Medicaid patients seeking primary care in the ED).  By following the flow of dollars to areas where reduced spending falls directly to their bottom lines, these organizations are making principled decisions to target segments of the populations they serve where their incentives match the objective of reducing the total cost of care.  This is why some of the most exciting innovation in enhanced primary care, patient navigation, and support for patient self-management is coming out of health systems’ management of their own employees and their dependents.  In the words of one progressive health system CFO, ‘Our own spending shows us where we have the opportunity to create value, and if we can learn to shave on our own face we’ll be more credible to other purchasers as a population health manager in the future.’ ”

Nalini K. Pande, JD, Principal Policy Director, American Institutes for Research  reports that “a recent Commonwealth Fund study has recommended that ACOs align as much of their business as possible with value-based payments.   In fact, providers are currently transitioning to a value-based model that uses incentives to reward value and moving away from the traditional fee-for-service (FFS) model that rewards volume.   How are providers managing this transition?   They have focused on changing their systems and the way they do business.  They are utilizing new care practice models to optimize utilization of services.  This includes predictive modeling to risk stratify a population to identify individual opportunities for intervention.  Providers are also engaging patients in managing their own care and using IT systems to assist with clinical decision support, medical error reduction, and patient safety.  Providers have also adopted new care coordination models with continuous quality improvement and a payment structure that recognizes the added value to patients.  Further, they have set up new infrastructures and systems that allow a shift from quality and efficiency ‘measurement’ to quality and efficiency ‘management’.”

Finally, Peter Boland, PhD, President, Boland Healthcare states in part that “hundreds of organizations are still struggling with variations of the ‘what do we want to be when we grow up’ syndrome. The realists understand that bearing increasing levels of financial risk (and reward) with payers and purchasers is becoming the norm. The straddlers still cling to fee for service and volume-based reimbursement despite the inability of Medicare and employers to support such payment. Many providers have recently taken the plunge into the ‘brave new world’ of Medicare Shared Savings Program with an eye towards a gradual transition to modest risk and gain sharing over a five-year period. ….It is an illusion to think that health delivery organizations can have it both ways.  The industry is at the tipping point where accountability for price and service (the value equation) is ‘the new normal’. Good medicine dictates that patients not be stratified by type of payment.  Good business requires meaningful performance metrics to be agreed upon – and tracked -- as the basis for compensation.”

Accountable Care News includes the Thought Leaders panel answering a timely question of the month in each issue, in addition to several feature stories, industry news briefs, and a profile interview with a prominent person involved with accountable care. You can check it out at www.accoutnablecarenews.com.

Attention, Walmart Shoppers!

By Kim Bellard, August 20, 2012

I’ve been thinking about something a very smart friend of mine wrote me in response to one of my previous posts: “…I can see where technology and information-driven consumerism might work for some highly motivated and educated people ... but not the masses I see at Walmart.”  I’m sure he meant no disrespect to either Walmart or its shoppers, nor do I, but one can go to pretty much any shopping venue and understand his point. 

The grim statistics are well known -- e.g., we’re too fat, we rely too heavily on medications, incidence of lifestyle conditions like diabetes is soaring, and, of course, we spend way more on health care than any other country.  Despite all that, though, Americans remain pretty cocky about their health, with the vast majority claiming to be in “good” or “very good” health, higher than in other industrialized countries. 

We claim to exercise, with over half claiming to exercise at least 1-3 times per week, but we may be kidding ourselves, as only about 5% report exercising on any given day.  Similarly, Americans are in denial about their burgeoning weight, reporting they have actually lost weight when, in fact, they gained.  The bottom line is that most of us are not really in shape, and it is impacting our health.

One of the most telling responses to this problem appeared recently: Dr. Michael Joyner of the Mayo Clinic suggested that our lack of exercise should be considered a medical condition.  I understand his point, since we’re obviously not doing a great job of staying healthy on our own.  Certainly getting more regular exercise would help many people – and, most likely, they know it – but medicalizing lack of exercise seems to me as more of what got us into this mess.

It’s not that various parties aren’t trying to encourage us to live healthier lifestyles.  In a recent post, Clive Riddle reported on the recent Aon Hewitt 2012 Health Survey of employers, citing in particular the widespread use of financial incentives towards lifestyle changes.  That’s encouraging, and a recent survey by the National Business Group on Health echoed employers’ adoption of wellness efforts, but also reported that over twice as many employers – 43% compared to 19% -- see increase use of consumer-directed health plans (CDHPs) as their most effective strategy for controlling costs.  In other words, employers are happy to try dangling the carrot, but they still plan to use the stick.

Employers aren’t the only ones trying to lead us to improve our health; the government is trying as well.  For example, a recent study found that state laws restricting the sale of snacks and sugary drinks in schools did result in children gaining less weight.  That’s notable for at least two reasons: first, that there are a number of states already legislating such choices, and, second, that such efforts may actually work.  No wonder Mayor Bloomberg wants to ban large sizes of sugary drinks in New York City. 

In a country where, apparently, the government can require you to buy broccoli (as long as they call it a tax, not a penalty!), the prospect of it telling us how to live is a little scary.   Then, again, this is a government that can’t even ensure that its retirement payments, whether Social Security or federal employee pensions – meet their one main test, i.e., that the recipient is actually still alive.  So maybe I shouldn’t start worrying about them monitoring my ice cream consumption just yet.

How did it come to this, that we’ve delegated the responsibility of keeping ourselves healthy to third parties, including physicians, employers, or the government?  Some of the problem may come from the fact that parties in the health care system are, in fact, treating us like consumers.  Not in the respect of competing on price or quality, mind you, but in using advertising to drive consumer decisions based on image.   The saga of the impact of direct-to-consumer advertising for pharmaceuticals is widely known, with such advertising spending exploding to close to $5 billion annually after such ads were allowed in 1997.  Some are calling for an end to DTC pharmaceutical ads, as the CBO studied last year.  The hospitals are also getting into the act, pouring money into advertising, as the New York Times reported last year.  Throw in spending by various diet and alternative medicine alternatives, and it becomes clear that we face a lot of forces telling us that some other person and/or product is the key to our health.  When we don’t directly pay for some large portion of those, as health insurance can allow us to believe, the temptation to not shop prudently is almost irresistible.   We may shop for flat screen TVs at Walmart, but when it comes to health care, we think we deserve to be Neiman Marcus shoppers.

There are certainly many situations were medical advice and treatment is not only appropriate but also necessary, and thank goodness that our clinicians are always finding more ways to combat our various maladies.  We have more and better options all the time, even though often those options are more expensive and sometimes not as clearly beneficial as we should expect.  But the responsibility for our health does not lie in those clinicians’ hands, much less in the hands of our employers or government officials.  I don’t have any reason to expect that Americans will be better at managing their health than they are at managing other aspects of their lives, but we shouldn’t be worse either. 

There is a lot efforts around “patient centered medical homes,” which include many good ideas, especially better coordination among health care providers.  As long as the focus is “medical,” though, the “patient centered” part of it is going to lack important components necessary for improved health.  Health is the result of a complicated interaction of genetics, environment, lifestyle, social influences, and medical interventions, to name a few.  We need to break out of the medical model to truly get at health.

We talk about the health care system, but in truth it is still the medical care system.  If we’re serious about improving health, and impacting the quality and cost of medical care, maybe we need to step back and think about a health care system really should look like. 

I’m sure that some Walmart shoppers are spending beyond their means, buying things they don’t need and can’t afford.  Some are perhaps even in bankruptcy.  But I like to think that most of them live within their means, and have learned how to manage their financial health.  We should be thinking about what in our current system leads us to not expect them to do the same with their actual health.

Too Bad About Your Coverage

By Kim Bellard, July 30 2012

There’s more data that shows health coverage is good for people.  Too bad fewer people than expected will have it. 

The New England Journal of Medicine recently reported on a study by Sommers et. alia which showed that Medicaid expansions can be linked to lower mortality rates in the impacted populations, along with better access to care and improved self-reported health status.  Not surprising, really, especially on top of last year’s study from the Oregon Medicaid program, that also showed that those lucky enough to win their coverage “lottery” did fare better. 

ACA was supposed to greatly increase the population covered by Medicaid, but with the Supreme Court ruling’s loophole on states adapting the expansion, that picture no longer looks quite as rosy.  The Congressional Budget now estimates that 6 million fewer people will get coverage through Medicaid and CHIP, although they obviously do not yet know which states will elect not to expand their programs.  CBO believes that half of those 6 million people will get coverage via the insurance exchanges – although I’m not clear why someone who would have gotten coverage in the Medicaid expansion would have income above the magic 133% of poverty level – leaving a net increase of 3 million more uninsured than under the original ACA estimates. 

CBO also believes those 3 million additional enrollees in the insurance exchanges will cost more than average, and as a result add about 2% to the cost of individual insurance in the exchanges.  That is another hidden “tax” on the private sector.

Whenever I think about the injustice of millions of poor people not having access to coverage while middle class people get subsidies, I remind myself that this is nothing new.  We’ve been doing that with the tax preference for employer health coverage for decades, so this latest indignity merely makes things quantitatively worse, but is not qualitatively new. 

Speaking of employer health benefits, Deloitte’s recent survey of employers forecasts 9% of employers will drop their health coverage, with another 10% uncertain what they will do.  This compares to the GfK study estimate from last winter of 12% drop/32% uncertain, and the now infamous McKinsey estimate from last summer that 30% of employers would drop coverage.  Deloitte’s survey, though, was only of employers with more than 50 employees; if smaller employers were included, the number would no doubt be higher than the 9%.

Reasonable experts can probably agree that the estimate of employers initially dropping coverage is somewhere in that 10-20% range, recognizing that many employers have not yet made up their minds.  The trouble I see is that once this ball starts rolling downhill, it won’t stop; it’s only going to pick up speed.  No one is going to want to be the last one in the benefits pool.

A little history lesson might be helpful.  Health insurance used to be virtually all fully insured and community rated.  That worked for a while, until some employers and insurers figured out that both could benefit by offering lower rates to employers with lower cost populations.  That gradually led to the demise of community rating – HMOs were the last to give up the ghost – in the group market, as fewer and fewer employers were willing to subsidize their higher cost fellow employers.  Use of employer-specific claims experience became the norm, especially for larger employers.  In the early 1970s, spurred by the passage of ERISA, employers also realized even with experience rating, being part of the insurance pool at all still had limitations they wanted to avoid, and they began to adopt various forms of self-funding.  It initially was only for very large employers, but, again, gradually became adopted by employers or more and more sizes – some of whom were/are really too small from an actuarial point of view to justify it.  Again, once some employers escaped being insured, other employers became more uneasy about still being part of the insurance pool.

Self-funding had the specific advantage of escaping state benefit mandates, although recent federal mandates, including ACA’s, are rapidly eroding this advantage of self-insurance.  The ACA requirements have added costs to most employer plans – e.g., coverage dependents, unlimited maximums, no coinsurance on preventive services – and the government’s involvement in their benefit design is probably not sitting well with many employers who thought they had escaped it.

At this point in time, most group business is self-funded.  Kaiser Family Foundations’ 2011 Employer Health Benefits survey found 60% of employees were in self-funded plans, up from 49% in 2000.  Over 80% of employees in firms with 200 or more employees are in self-funded plans.   I.e., to the extent they can, employers have made rational business decisions not to subsidize anyone they don’t have to.

Why anyone would believe employers would not act the same way once some employers start dropping their health plans is beyond me. 

Employers have invested a lot in their current health plans.  They have shown much thought leadership in driving changes to both insurers and providers, but the auto and steel industries, to pick two, have shown us how legacy health costs can hamper domestic and local competitiveness.  Right now, not offering health plans is a huge disadvantage in attracting and retaining employees; Deloitte’s survey shows over 80% of employers cite attracting/retaining employees as a key reason for offering health benefits.  However, it would only take a few bellwether employers to start dropping coverage to start a rush by other employers for a similar exit.

Employer coverage still has the advantage of the tax preference, plus the fact is that the health insurance exchanges are not up and running and the individual market is not yet reformed or robust.  Come 2014 or 2015, though, the exchanges may be a more appealing option, especially for smaller employers, and if anyone believes the tax preference will survive as is in the coming deficit reduction wars, well, good luck with that.

People aren’t going to keep their current health plan.  Many poor people will still not be protected by Medicaid.  We will still have some 30 million uninsured.  And we’re still not getting good value for our exorbitant health care spending.  Until that problem is solved, everyone’s coverage is in danger.

ACOs by the numbers

By Clive Riddle, July 27, 2012

CMS now touts that with the 88 ACOs brought on line effective July 1, 2012. “the total number of organizations participating in Medicare shared savings initiatives to 153, including the 32 ACOs participating in the testing of the Pioneer ACO Model by the Center for Medicare and Medicaid Innovation (Innovation Center) that were announced last December, and six Physician Group Practice Transition Demonstration organizations that started in January 2011.  In all, as of July 1, more than 2.4 million beneficiaries are receiving care from providers participating in Medicare shared savings initiatives.”

On the commercial side, Cigna has been a national leader in the ACO arms race, with Aetna also making waves, and a wide range of plans have well-developed regional initiatives. Cigna states they are now engaged in 38 patient-centered initiatives in 19 states, including six multi-payer pilots and 32 Cigna-only collaborative accountable care initiatives, covering more than 300,000 Cigna customers, with more than 4,500 participating primary care physicians. Aetna Inc. is developing commercial ACO and Aetna currently has 10 commercial ACO agreements in place and hopes to 20 by the end of the year.

Perhaps the most prevalent commercial strides with attributed membership to date involve the self-funded employee populations of the hospitals and physician organizations that have developed ACOs, using their own employees as the initial pilots for their respective programs.

Using MCOL research in compiling Version 2 of the Accountable Care Directory 2012, the following are ten identified ACOs with large attributed membership (combining Medicare and Commercial when applicable) at this juncture:

1. Advocate Health Partners, serving Illinois with 350,000 attributed members
2. Partners for Kids, serving 37-county coverage area, stretching from urban Columbus to rural Appalachia with 290,000 attributed members
3. Healthcare Partners Medical Group, serving Los Angeles and Orange Counties, CA with 89,000 attributed members
4. Accountable Care Coalition of Texas, Inc. , serving Houston/Beaumont area, Texas with 70,000 attributed members
5. Heritage Provider Network, serving Southern, Central, and Costal California with 70,000 attributed members
6. Aurora Accountable Care Network, serving Eastern Wisconsin and Northern Illinois with 58,000 attributed members
7. Sharp Healthcare ACO, serving San Diego County, California with 56,700 attributed members
8. Atlantic Accountable Care Organization, serving Bergen, Morris, Somerset, Sussex, and Union counties, New Jersey with 50,000 attributed members
9. Hill Physicians Medical Group, serving Sacramento, El Dorado, Placer counties, California' with 46,000 attributed members
10. Partners Healthcare, serving Eastern Massachusetts with 45,000 attributed members

ACA Is Alive! Now What?

By Kim Bellard, July 2, 2012

It seemed somehow fitting that the first reports about the Supreme Court ruling on the Affordable Care Act got it wrong – both CNN and Fox News initially announced the mandate had been struck down.  Debates and discussions about ACA have never been very accurate, and often not rational.  It would be nice to think that the Supreme Court’s ruling has finally ended the debate, but no such luck.  Gov. Romney and other GOP leaders have already renewed their vows to “repeal and replace” ACA (or, as they call it, “ObamaCare”), so even in the best case scenario we can expect the debate to continue at least through the November elections, which could either throw water on the protest or ignite it further, depending on the results.  

Of course, the Court’s decision also included a couple of poison pills, handing the conservatives another bone to gnaw on by labeling the mandate a tax, and creating the potential for some very strange gaps in coverage by allowing states to reject the Medicaid expansions.  We could end up where poor people still lack coverage while essentially middle class individuals are getting subsidies for their health insurance.  Both aspects of the ruling add fodder for the debate.

Honestly, I’m not sure it much matters.  Certainly there are lots of things about the law I don’t like, especially the shady accounting on which it was passed, but having 50+ million Americans without financial protection against health care expenses is unacceptable, so until someone else comes up with a better plan to address that, ACA it is.   However, I keep remembering that ACA doesn’t really solve the underlying problem of getting value for our health care spending, ACOs and VBP initiatives notwithstanding.

The math doesn’t work for me.  For example, under ACA, subsidies for insurance premiums and cost-sharing are available to people under 400% of the federal poverty level.  I.e., we’re subsidizing health insurance for over two-thirds of the population.  That is not a sustainable number, especially given the fact that close to 50% of the population pays no federal income tax.  We have an unaffordable product being funded by too few people.  Any actuaries in the crowd can tell how that story will end up. 

Then there is the bottleneck caused by our physician shortage.  According to the federal government, almost 60 million Americans already live in Health Professional Shortage Areas, and the American Academy of Medical Colleges forecasts a shortage of 124,000 physicians by 2025.  AAMC also says that the average medical student graduates with over $160,000 in debt, and that number keeps going up with annual tuition increases.  Throw in the existing $12 billion of costs for residency programs, and one has to wonder how we will afford all those new physicians; all those costs are before those new physicians start generating additional health care spending. 

So we’ve got a product that is apparently too expensive for two-thirds of the population, whose costs are largely driven – directly or indirectly -- by a resource that is in short supply and yet is very expensive to train and maintain.   Throwing more money into this system doesn’t seem like a particularly prudent action.  

There are clues to what a different type of health care system might include.   Take, for example, Minute Clinic and its competitors.  These so-called “retail clinics” are booming; NPR says there were more than 1300 at the beginning of the year, and Minute Clinic itself plans to have 1,000 of its own clinics by 2016, double its current number.   These clinics have in common features such as the use of physician alternatives like nurse practitioners, convenient locations, and reliance on technology to improve the patient experience and reporting.  They won’t soon replace, say, surgeons, but there is a host of health problems for which they are well suited.

Technology is another inarguable part of our health care system’s future, and not just the HITECH push to EHRs and HIX.  In a previous post, Clive Riddle talked about the potential role of self-service in health care, referencing Accenture’s recent report on the topic.  Long story short, Accenture reports that, yes, patients overwhelmingly want more self-service in their interactions with the health care system.  They still want an option of dealing with their doctor in person, but they also want a host of other options, such as online appointments and prescription refills, or email communications with their doctors.  All of these technology options already exist, but are not widely available.  Our health care system still features large numbers of decentralized, technologically backward providers.  In 2008 (the most recent data I found), almost one-third of physicians worked in practices with one or two doctors, with another 15% in practices of three to five physicians.  Presumably these small practices are much less likely to be able to provide patients many technology options.  This is one reason physicians are rushing towards being purchased by hospital systems, although many of those systems don’t have a great record on patient-oriented technology. 

PWC sees a similar shift towards a technology/patient-centered future in their recent mHealth report.  Their report is broader than just self-service, and surveyed patients, payors, and physicians, in the U.S. and elsewhere, but focused more on mobile solutions.  They found that patients are fairly positive about the potential for mHealth solutions to help them, while physicians are much less so – 42% worry mHealth will make patients too independent.  The Pew Research Center recently found that 88% of Americans own a cell phone, over half of whom use it to go online, and 17% of who do most of their online browsing on the phone.  The number and breath of mHealth applications is astonishing, and growing rapidly, and it certainly is one of the most exciting parts of health care right now.  The future of health care may not be mHealth, but it will most definitely include it. 

I particularly liked one of the final quotes in PWC’s report.  According to Peter Benjamin of Cell-Life, “the bits of mHealth that work won’t be call ‘mHealth’: they will be called ‘health’, in the way that nobody talks about ‘electric health’ and no country has a ‘stethoscope society’.”  We shouldn’t get caught up in mobile versus other technologies -- as PWC concluded, it’s the solution, not the technology.  Whether eHealth or telehealth or Health 2.0 or any of the other plethora of terms that are out there; what works – to improve patient care and the patient experience – need to get incorporated into our health system.  Except we shouldn’t just layer these new things on top of the current dysfunctional system; we really need to make them part of a reengineering process that rewards solutions that provide better value.  If we were to design a health care system from scratch, with better value as a focus, what would it look like and how much cheaper could it be?

I don’t know the answer to that question, but I think it starts with moving away from a physician and institutional orientation to a true consumer orientation.  We need to provide consumers with appropriate, on-demand support, assistance and advice at the right time, not just when they happen to stumble into a doctor’s office or hospital.  Bricks and mortar aren’t going away, but they are an awfully expensive approach.  Interestingly, some third world approaches to health care – like some of their mHealth solutions -- may have something to teach us, if we can learn to have the best of both worlds.

If the drama about ACA has taught us anything, it’s that expecting a legislative approach to such reengineering is like waiting for Godot.  Change is going to have to be driven by the parties in the system – the payors, the providers, and especially we patients.  Change will be hard, and will create many new “winners” and leave many existing parties in the system out of luck.  Our choice, though, is either to let our current system drive itself, and our economy, to collapse, or to change it in ways that make more sense.   The good news is that there’s no reason our system can’t be both better and less expensive – there’s so much waste, inappropriate care, fraud, and inefficiency that, if we have the brains to identify the sources of these and the courage to eliminate them, we can get a system that provides the value we all say we want.

Sigh Heard Round the World: Accountability and the ACA

By Cyndy Nayer, June 28, 2012

The tension across the US this morning was palpable, emails quieted, phones didn't jingle, 10am ET came and went, and suddenly, there it was:  The Supreme Court Upholds the Affordable Care Act's individual mandate, which allows the changes to go forward.  Later, we heard that the Roberts Court did alter the clause on mandatory expansion of Medicaid by the states who accept Federal dollars.  To be clear, the law said that if a state accepts Federal Medicaid dollars, then it was required to accept the ACA dollars and expand Medicaid; that, the Roberts Court said, was not ok, that the Federal system could not mandate behavior at the State level, which, frankly, is alignment with the known position of Justice Roberts.

So, the kids can stay on their parents' plans till they are 26, the individual mandate means a penalty on those who don't participate (it moved from a commerce clause--you have to buy-- to a tax clause--if you don't get in, you pay a penalty, a lot like not reporting your income and paying your taxes), no one will be denied insurance after 2014, the donut hole for Medicare-covered drugs closes (a savings that seniors have felt this year), state exchanges move forward.  Or, the fight might go into November and beyond with Republicans vowing to cast this law aside.

Some of the pundits are saying the country is weary of this fight.  Others are saying it's not over.  I say it just took on a new dimension:  the actual issue is jobs, the very essence of the American dream is owning a house (NYT survey June 2011:  Which is more important your job or your house?  Majority answered "House.").  By closing, even for awhile, the arguments over the ACA, we can rise up to the real problems, of which health care is a prime cause, but jobs and house are the endposts.

This is the sigh, not one of relief, but one of checking off the box that says "ACA" and refocusing on what matters:  the economy, the jobs.  Most folks understand that taxes are paid through jobs, houses are bought with jobs, health care is delivered mostly through jobs (either at the worksite or through the money earned at the worksite).  Most folks don't want that to change.  Most folks understand that the costs of the insurance have been going up, that US businesses are buckling under the weight, and, when insurance is not in place, the whole community pays in taxes for uninsured coverage in the emergency room.  Health care derails jobs, productivity, sales, activities, and taxes, which pay for police, firemen, new roads and bridges, and so much more.  So, control the health care costs, and we can actually make a dent in this job/house situation by preserving revenues for rebuilding and purchasing, preserving jobs and communities.

Today's affirmation of the individual mandate is a subtle reminder that we all have an individual responsibility to take care of our assets, including our health.  The door has been opened wider for Americans to manage their health as they manage their wealth:  we can invest in our health checkbook with better eating habits, better activity habits, better stress management habits.  The more we do individually and with our families, the more we will save in health care costs.  As we lower our risk profiles (overweight, sedentary, smoking, no prevention screenings, no immunizations, too much alcohol or pain medication, for example), the less CARE costs us and the more HEALTH we achieve.

I've mentioned before a book I wrote years ago--Lifetips:  101 Tips for Personal Health Management (that was the name the publishing house assigned to it, I didn't get to choose)--that included the concept of health-wealth portfolio, managed by the person/CEO-of-my-health, that leads to better health and wealth and performance.  It's time we revisit the concept.

In today's lexicon, 4 years after I wrote the book, the word to use is "Accountability."  We read about Accountable Care Organizations, but I  posit an innovative thought:  The Family is the Accountable Care Organization.  Every decision we make about what to eat, stepping up our activity, cutting our risky behaviors, getting the right care at the right place at the right time, affects the health and wealth and performance of the family.  Diagnosed with an acute sickness or chronic condition?  That will cost the whole family, could cut down on vacation time, or, worse, on education savings.  Need a new car?  Might have to make-do with the clunker because the medication you need has a higher co-pay.

You understand, I don't need to belabor this discussion.  What we witnessed today is the revival of our spirits as we experienced the revival of the belief in the American system:

"The Framers created a Federal Government of limited powers, and assigned to this Court the duty of enforcing those limits. The Court does so today. But the Court does not express any opinion on the wisdom of the Affordable Care Act. Under the Constitution, that judgment is reserved to the people." John Roberts, Chief Justice of the United States Supreme Court (thank you MCOL).

Any doubt we had about partisanship on the Supreme Court has been dissolved.  Justice Roberts used the rule of law to search for solutions that upheld the Congressional will, and only in the case of the state Medicaid mandate was the revision made, still leaving the law intact but one clause modified.  The headline surprised many, but the Supreme Court did was it was supposed to do:  SCOTUS was the Accountable Organization to assure the law of the land was upheld, according to the voted representaties of our government.

Now, the collective sigh must be turned to the jobs and houses.  It starts with each of become our own CEO of our self-defined Accountable Care Organization.  Our consultants in the medical community, our beneficiaries in the neighborhoods where we live, will thank us.

We can do it.  Turn our collective will to the rebuilding of our economy and our communities.  Do the best we can at managing our everyday health and watch the wealth begin to flow again.  Make small changes, track progress and stay the course, recruit others to join.

Accountability is our action, health is our goal.  Choose wisely, my friends.  Now, inhale deeply, and sigh audibly:  it's time to make America the healthiest nation in the world.

What to Do Whilst Waiting for SCOTUS

By Clive Riddle, June 14, 2012

At times it may feel like the pending Supreme Court decision regarding the Affordable Care Act may play out like Waiting for Godot, but exercise some patience for The Decision on The Act that hopes to encourage exercise for patients, among a bazillion other things. Decision-Day will come soon enough. Too soon, for some stakeholders on one side of the fence or the other, undoubtedly.

While you’re waiting, it’s interesting, although not entirely instructive, to review the past SCOTUS cases involving various aspects of health care and health insurance law. FindLaw provides a summary of these cases, with links to each case.  A quick listing of these 15 cases is available in a healthsprocket list: Historical Supreme Court Health Law Related Cases. This accumulation of cases will be bookended by Roe v Wade in 1974, and the pending 2012 Affordable Care Act decision. In between are less-distinguished cases all being decided upon during the first decade of this century. These other cases include:  two involving health plans (Aetna and United’s PacifiCare) stemming from the managed care backlash era; three abortion related cases (in addition to Roe v Wade); two Medicaid cases (regarding provider payments and eligibility);  prescription solicitation; medical device safety claims; employer liability for mental anguish due to potential future work-related health claims; due process involving mental illness; punishment of mentally disabled criminals; physician-assisted suicide; and medical marijuana.  

You can consider the private marketplace response, back when implementation of the Act was still pending, and now when The Decision is pending. Back in the spring of 2010, “early adopter” health plans extended coverage provisions well before their required effective date. Now that the entire Act may be in jeopardy, “post-adopter” health plans have indicated they will continue to provide a number of coverage provisions in the event the Act is overturned.

You can also produce your own History Channel version of when we went through all of this before, and review the literature on the public and stakeholder controversy surrounding adoption of Medicare into law in 1965. Déjà vu – perhaps everything old is new again? One might wonder if and how the current SCOTUS might have weighed in on that.

Or you could read through a litany of papers on the implications, permutations, considerations and expectations for The Decision. RAND just released a good study on How Would Eliminating the Individual Mandate Affect Health Coverage and Premium Costs? Here’s some recent typical articles: Employers' 'plan B' if health reform is axed (CNNMoney, June 14, 2012); Health spending likely to keep rising with or without Obama's plan (Los Angeles Times, June 13, 2012); Undoing health law could have messy ripple effects (Associated Press, June 11, 2012)

Still don’t’ know what to do with idle time while impatiently waiting for SCOTUS? You can always use this healthsprocket list, offering five things you can do while waiting for the Supreme Court Affordable Care Act decision.

PPSA: What will come of the Physician Payments Sunshine Act?

by Clive Riddle, June 8, 2012

One of the oodles of components of the Affordable Care Act is the Physician Payments Sunshine Act, which, according to the CMS proposed rule issued 12/19/11 “would require applicable manufacturers of drugs, devices, biologicals, or medical supplies covered by Medicare, Medicaid or the Children’s Health Insurance Program (CHIP) to report annually to the Secretary [of Health and Human Services] certain payments or transfers of value provided to physicians or teaching hospitals (‘covered recipients’). In addition, applicable manufacturers and applicable group purchasing organizations (GPOs) are required to report annually certain physician ownership or investment interests.”

Of course stakeholders and studies have come out on both sides. Various physician and pharmaceutical interest groups have invested in arguing the administration costs and burdens to be borne outweigh the potential benefits. The Archives of Internal Medicine published a Research Letter last week: Effect of Physician Payment Disclosure Laws on Prescribing describing results of study of two such state laws that did not produce intended results. Consumer interest groups have placed count-pressure to fully implement the Act, such as the Pew Prescription Project.

Perhaps in response to such conflicting pressures and 300 comments received to date, CMS last month blogged that they were delaying issuance of the Final Rule until later this year, and provided assurance that no data collection would be required before January 1, 2013.

In the midst of all this, Deloitte has just released a 28 page report: Physician Payment Sunshine Act: Physicians and life sciences companies coming to terms with transparency? The report is based on a survey conducted by Forbes Insights for Deloitte, was conducted in January and February 2012 among 110 U.S.-based physicians and 223 global executives from life sciences companies worldwide. Their findings would seem to indicate we’ll all get through this somehow.

The survey indicated that, when posed the question “Are you in favor of a public, searchable database of all physician-industry relationships to be available to the public?” 54% of physicians responded “yes, as long as patients understand how to interpret the data” and another 14% went further, stating “yes, the more information patients can get, the better.”

Deloitte reported that “with about 12 months to go until the first reporting requirements under PPSA (March 2013), two-thirds (66 percent) of the life sciences executives responding ...said that their companies are either “100 percent ready” or are “50 percent done and hoping to be ready in time” for the PPSA and other new compliance requirements. Meanwhile, the majority (55 percent) of life sciences companies expect to see their HCP transparency-related compliance investments to continue to increase in 2012 and 2013. Almost half (48 percent) of these investments are expected to go into in-house training programs, 34 percent to in-house software upgrades and integration, and 25 percent to hiring new full-time employees.”

But will these new requirement ultimately achieve positive objectives? Seth Whitelaw, Director, Deloitte & Touche LLP U.S., tells us “as the survey results illustrate, physicians, the life sciences industry, and even governments are expected to expend significant time, effort, and resources complying with PPSA. Yet it is too early to tell whether the PPSA will significantly alter the landscape of provider-industry relationships.”

Deloitte cautions that “almost three-quarters (72 percent) of physicians responding to the survey believe that new regulations will not change provider-industry relationships. Moreover, despite all the efforts to comply with the new regulations, 38 percent of life sciences executives responding to the survey said that they either don’t know how, or have no plans, to use and leverage the publicly available data regarding other companies.”

Clinical Integration: Déjà Vu All Over Again?

by Nathan S. Kaufman, June 1, 2012

Last year, the Centers for Medicare & Medicaid Services (CMS) published proposed regulations for the formation of accountable care organizations (ACOs). Release of the regulations represents the latest of many efforts by the federal government to encourage healthcare providers to become “clinically integrated” and work together to coordinate care, thus reducing the cost and improving the quality of care provided to patients.  

The Federal Trade Commission (FTC) considers physicians who work in different practices to be competitors; thus, under most circumstances, joint negotiation by independent physician practices is considered to be illegal price fixing (Casalino 2006). In a 1996 statement, the US Department of Justice and the FTC provided a new antitrust safety zone to enable independent providers who work in separate practices to jointly negotiate with payers if they are sufficiently “clinically integrated”—that is, if they have formed a network in which there is an organized process to control costs and improve the quality of care resulting from a significant investment of monetary and human capital (Casalino 2006).

According to Gosfield and Reinertsen (2010), the FTC has been “fairly unwilling to define the boundaries of clinical integration, because they wish neither to stifle innovation, nor to encourage anticompetitive behavior.” In her remarks to the American Hospital Association in April 2009, FTC Commissioner Pamela Jones Harbour (2009) stated:

The essence of clinical integration is the interdependency among health care providers. Put simply, each provider must have a vested interest in the performance of the other providers such that their financial and other incentives are closely aligned to meet common objectives.

Since the publication of the guidelines in 1996, several provider networks have been deemed to be clinically integrated by the FTC. These networks have several key common factors:

• Clinical practice guidelines or protocols to measure performance
• Information technology to monitor care
• The ability to evaluate provider performance and to act on the findings
• The willingness to share data with payers

Medicare’s Physician Group Practice (PGP) demonstration (Iglehart 2011) and mature clinically integrated networks such as Advocate Physician Partners (Shields et al. 2011) have demonstrated that clinically integrated networks have been able to improve performance for select quality indicators. Even so, there is little empirical evidence that these networks have affected the overall cost of care. Even Advocate Physician Partners, one of the most mature clinically integrated networks, notes that a number of its inferred medical cost savings “are based on the achievement of key clinical outcomes that have been demonstrated in the literature to reduce costs” (Shields et al. 2011). One must question whether networks that were developed in part  to use their market clout to negotiate premium rates with payers are able to achieve significant measurable cost savings.

Compliance with FTC legal guidelines provides no assurance that a clinically integrated network possesses the competencies to improve quality, reduce cost, or remain a viable business model over the long term. As was the case in the mid-1990s, many “first-generation” clinically integrated provider networks can be expected to delude themselves into voluntarily taking economic risk for the care they provide. Because few possess the necessary competencies and culture, many will experience financial distress or worse.

The Law of Reciprocal Economics states that one person’s cost is another person’s revenue. In order to reduce the cost of healthcare, someone has to get paid less. With hospitals and physicians accounting for over 80 percent of health insurance benefits spending (PwC Health Research Institute 2011), one must assume that in order to reduce the overall cost of care, revenues for hospitals and high-end specialists, in aggregate, will have to decline.  

Implications for Hospital Leaders

To truly impact costs, provider networks must be committed to reducing utilization of high-end services and must possess the “second-generation” clinical integration competencies that are essential to create a financially successful, sustainable provider network. These competencies include:

A common electronic health record (EHR) with point-of care protocols. In order to monitor cost and quality and coordinate care, it is essential for providers to share a common electronic record. Embedding evidence-based care plans in the EHR can encourage their use by an entire provider network. Geisinger Health System has demonstrated that compliance with care plans can be enhanced by “hardwiring” the protocols into the EHR (Paulus, Davis, and Steele 2008).

As an interim step, networks have created data warehouses to which providers submit their encounter data for analysis and reporting. Transparent reporting of accurate data in near–real time is essential if a clinically integrated network is going to reduce cost and improve quality.

Sufficient primary care capacity. The primary care office serves as the “medical home” for the patient, ensuring that the patient receives appropriate preventive care and monitoring. Given the anticipated shortage of primary care physicians, a model of care involving physician extenders—for example, physician assistants and nurse practitioners—will be essential.

Engaged physician champions. By definition, a clinically integrated network requires independent physicians to work as a team to coordinate care. The evidence from first-generation clinically integrated networks is that physicians will volunteer to surrender their autonomy only to a physician-led enterprise.

Evidence-based inpatient and outpatient care plans. The high variability in the cost and quality of care for specific diagnoses is well documented in the Dartmouth Atlas (Brownlee et al. 2011). Looking at length of stay, compliance with core measures, and readmission rates, my personal experience indicates that this high degree of variability exists within local health systems as well. To have a predictable impact on the cost and quality of care for a population of patients, it is essential that all providers use a common set of evidence-based care plans.

Proactive programmatic approaches to chronic disease. There is some empirical evidence that patients with diabetes and congestive heart failure who participate in disease management programs have better outcomes at lower costs than patients who do not participate in these formal programs (Stock et al. 2010; Russell and Chambers 1999). Home visits, telephone coaching, and web-based monitoring are components of disease management programs that can improve health status and prevent expensive hospital admissions.

Dedicated, sophisticated, mature infrastructure. In addition to the aforementioned information technology solutions, infrastructure will be needed to develop care plans, enroll and train physicians and their office staffs, design disease management programs, and report results. Most health plans possess this infrastructure. Facing a make-or-buy decision, many clinically integrated networks are exploring the prudent approach of joint venturing with one or more payers.

Performance-based rewards and consequences. A fundamental requirement for being clinically integrated is a process for evaluating individual provider performance and acting on the findings. Positive incentives usually involve financial rewards for compliance with key metrics. It is also necessary to sanction providers for poor performance and ultimately eliminate noncompliant providers from the network.

Pilot-testing network performance with health system employees and their beneficiaries. Most health systems are self-insured, giving them significant latitude in structuring benefits and provider incentives. Reducing the use of high-end  services  by employees and their beneficiaries has an immediate positive impact on the health system’s financial performance. Only after a clinically integrated network successfully manages the care of the system’s employees should it consider taking risk for other patient populations.

Proceed with Caution

Compliance with the legal requirements for clinical integration does not guarantee that all participating providers will be better off in the long term. Many providers are forming clinically integrated networks so they can negotiate better rates. But rate pressure on health insurance premiums and the formation of narrow, low-cost networks will limit the ability of clinically integrated networks to negotiate premium rates in the future. 

To succeed over the long term, clinically integrated networks must possess the second-generation clinical integration competencies listed above. They must be flexible enough to adjust to a rapidly changing healthcare landscape, and they must truly be committed to improving measurable quality and lowering the cost of care regardless of the short-term impact on provider revenues.

Getting Started

Clinical integration requires a significant investment in both human capital and dollars. It requires:

• Strong physician leadership committed to reducing cost and improving quality
• Sophisticated, proven infrastructure, including personnel and IT similar to that existing in most health plans
•  A strong, geographically distributed base of primary care physicians
• Access to a comprehensive set of acute and postacute services.

Healthcare provider s learned in the early 1990s that if a health system does not possess the attributes and competencies necessary to succeed in a new delivery model (which at that time was capitation), it is better off seeking a partner that does, or saving its money and doing nothing.

References

Brownlee, S., J.E. Wennberg, M.J. Barry, E.S. Fisher, D.C. Goodman, and J.P.W. Bynum. 2011. “Improving Patient Decision-Making in Health Care: A 2011 Dartmouth Atlas Report Highlighting Minnesota.” [Online information; retrieved 8/24/11.] www.dartmouthatlas.org/downloads/reports/Decision_making_report_022411.pdf

Casalino, L.P. 2006. “The Federal Trade Commission, Clinical Integration, and the Organization of Physician Practice.” J. Health Politics, Policy and Law 31 (3): 569–85.

Gosfield, A.G., and J.L. Reinertsen. 2010. “Achieving Clinical Integration with Highly Engaged Physicians.” [Online information; retrieved 8/23/11.] www.reinertsengroup.com/publications/documents/True%20Clinical%20Integration%20Gosfield%20Reinertsen%202010.pdf

Harbour, P.J. 2009. “Clinical Integration: The Changing Policy Climate and What It Means for Care Coordination.” [Online information; retrieved 8/23/11.] www.ftc.gov/speeches/harbour/090427ahaclinicalintegration.pdf

Iglehart, J.K. 2011. “Assessing an ACO Prototype—Medicare’s Physician Group Practice Demonstration.” New Engl. J. Med. 364 (3): 198–200.

Paulus, R.A., K. Davis, and G. D. Steele. 2008. “Continuous Innovation in Health Care: Implications of the Geisinger Experience.” Health Affairs 27 (5): 1235–45.

PwC Health Research Institute. 2011. “Behind the Numbers: Medical Cost Trends for 2012.” [Online information; retrieved 8/24/11.] pwchealth.com/cgi-local/hregister.cgi?link=reg/behind-the-numbers-medical-cost-trends-2012.pdf

Russell, B., and D. Chambers. 1999. “Congestive Heart Failure Disease Management Program.” [Online article; retrieved 8/23/11.] www.dcmsonline.org/jax-medicine/1999journals/sept99/chf.pdf

Shields, M.C., P.H. Patel, M. Manning, and L. Sacks. 2011. “A Model for Integrating Independent Physicians into Accountable Care Organizations.” Health Affairs 30 (1): 161–72.

Stock, S., A. Drabik, G. Buscher, C. Graf, W. Ullrich, A. Gerber, K.W. Lauterbach, and M. Lungen. 2010. “German Diabetes Management Programs Improve Quality of Care and Curb Costs.” Health Affairs 29 (12): 2197–2205.

Exchange Exchanges for What?

By Kim Bellard, May 21, 2012

Last week HHS released new guidance on their approaches for health insurance exchanges, as well as announcing $181 million in exchange establishment grants.  This brings the exchange grants to $1 billion over the last two years.  Among the states, only Alaska did not apply even for a planning grant.  (For detail on state activity, see here). 

HHS has bent over backwards to give states options for their exchanges.  The most recent guidance allows states to run the exchanges or to partner with the federal government in running them.  Of course, if a state does not act, the federal government would run an exchange on behalf of the state’s residents.  States have until November 16, 2012 to inform HHS about what type of exchange they intend.  HHS had also previously given states discretion in defining necessary benefits.  The exchanges are scheduled to go into effect as of January 1, 2014, under the provisions of the Affordable Care Act (ACA).  The interested reader can view a nice overview of the recent guidance here or read the actual guidance.

Many states are not keen on the idea of an exchange under ACA.  New Jersey Governor Christie recently vetoed a bill to set up an exchange in that state.  Other states that have recently expressed wariness about setting up exchanges include Illinois, Louisiana, Michigan. Minnesota, and South Dakota.   Curiously, Illinois and South Dakota were among the states in the most recent set of grants announced by HHS, which illustrates that taking money from the federal government is not the same as agreeing with what it wants you to do it.

Of course, much of the resistance is ideological, with Republican legislators and/or Governors doing what they can to offer resistance to ACA in an election year.   It’s too bad that exchanges are caught up in that fight, because there are good reasons to see them as important components of the health care system with or without ACA.

The two operational exchanges in the country – Utah and Massachusetts – predate ACA, and were set up for distinctly different ideological reasons.  Massachusetts, of course, had its own health reform bill, including a mandate for coverage, while Utah was seeking to facilitate coverage for uninsured but employed individuals.  As might be expected by the political make-up of each state, the Massachusetts exchange has a more regulated approach, and the Utah exchange a more free market approach, which only demonstrates that health reform solutions can cover the political spectrum. 

Even more interesting is that the private sector is interested in the exchange concept as well.  On one level, shopping sites such as ehealthinsurance are a type of exchange.  ehealthinsurance has been providing a consolidated online shopping experience for health insurance for over a decade, and are a leading source of sales for many carriers.  They’re even licensing their underlying technology, such as to power a private exchange for Blue Cross Blue Shield of Minnesota.  That exchange supports a defined contribution plan that employers can use to give their employees more choices.  The Minnesota Blues may have felt pressure from competitor Medica, which announced its own private exchange earlier this year.  The Medica exchange is powered by Bloom Health, which itself was acquired last fall by Wellpoint, HCSC (the holding company for Blues plans in Illinois, Texas, New Mexico, and Oklahoma), and Blue Cross Blue Shield of Michigan.   Obviously those large Blue plans see a big future in exchanges.

Other Blue plans are joining the movement, including Highmark (with Array Health) and Blue Cross Blue Shield of Kansas City.  Of course, it’s not only the Blues that see a new world in private exchanges.  Companies such as Liazon or ConnectedHealth started out aiming to assist consumers in selecting health insurance, but now are reorienting themselves to an exchange approach.  Consulting firms such as Aon Hewitt and Towers see themselves in the exchange business, because even their larger customers – even self-funded ones -- are interested in that approach.  Towers just purchased Extend Health, which claims to be the largest private Medicare insurance exchange.     

Let’s face it: employer-based coverage may have seen its heyday, regardless of what happens to ACA.  A recent survey by GfK Custom Research found only 56% of employers are sure they would keep offering coverage once ACA fully kicks in; 12% said they would drop coverage, and almost a third did not know what they will do.  CBO recently estimated only a small – 3 to 5 million people – loss in employment-based coverage due to ACA.  Time will tell how large the effect is, but it’s a safe bet that the number is going down, not up.  EBRI’s analysis of Census data suggest that the percentage of people with employer coverage has steadily declined over the past decade, dropping from 69% to 59% from 2000 to 2010.  Those numbers reflect both a shift in jobs into industries less likely to provide coverage and employers finding offering coverage increasingly too costly, and neither of those trends is going away, regardless of ACA’s fate.  There is going to be more directly purchased individual coverage. 

Exchanges – private or public, through an employer defined contribution approach or for individual coverage – should help consumers by providing more choices, facilitating meaningful comparison of choices, and simplifying enrollment.  What’s not to like?  

When you come to think about it, the tax preference for employer-based coverage is nice, but it may increasingly rankle more consumers to have their employer dictate not only what options they have but also what specific treatments, diagnoses, or procedures are covered – as the recent contraception mess highlighted.   I have previously written on these negative aspects of the employment-based system.  Shouldn’t we all have broad choices, with easy comparisons? 

The bitter partisan feuds over ACA and the American Recovery and Reinvestment Act (which included HITECH) obfuscate some of the good ideas contained in them.  I have a hard time seeing a future of our health care system (absent single payor) that does not include:

• provider structures similar to ACOs;
• payment approaches based on value-based purchasing;
• increased health IT, such as EHRs and health information exchanges;
• health insurance exchanges.

Those genies may be out of the bottle, as both the public sector and the private sector are pursuing these concepts aggressively, and neither is likely to stop even if ACA is struck down or repealed.  It would be fitting, and perhaps ironic, if the fruits of these approaches end up being ACA’s true legacy.  

The Price Is (Not) Right

By Kim Bellard, April 25, 2012

I noticed several recent articles and studies about some of the problems caused by the crazy ways we price care in our health system.  If they made a reality show about it, it’d be less The Price Is Right than it would be Survivor. 

Let’s start with a study published in the Archives of Internal Medicine, titled “Health Care as a Market Good?  Appendicitis as a Case Study.”  The authors studied costs for treatment of acute appendicitis, looking at data in California hospitals.  One might assume a fairly small range of cost for this, given that the treatment options are not wide.  They found that costs varied from $1,500 to $183,000; the patient who cost $183,000 admittedly had cancer, but received no treatment for cancer for the stay in question.  Dr. Renee Hsia, the lead researcher, told The New York Times, “There’s no rhyme or reason for how patients are charged or how hospitals come up with charges.  There’s no other industry where you get charged 100 times the same amount, or 121 times, for the same product.”

Indeed. 

Of course, when patients have insurance and go in-network, they usually don’t get exposed to most of the impact of this variation, although increased cost-sharing even for in-network services still makes this an issue.  For uninsured patients, or patients who go out-of-network, it can be much worse.  The Minnesota Department of Health recently alleged consumer protection abuses of a company – Accretive Health -- hired by hospitals to ensure patient bill collection.  According to the report, the company used “boiler-room-style sales atmospheres'' at Fairview's seven hospitals using collection quotas, cash inducements and in-house competitions to squeeze cash from patients before they were treated.”   The practices addressed deductible, coinsurance or other patient responsibilities, either from the current services (yet to be rendered) or from prior unpaid bills.  I wonder if they at least were specific about how much the patients would owe.  I also wonder if they add treatment for the high blood pressure or twisted arms caused by the strong-arming to the list of services. 

Not surprisingly, this problem isn’t limited to Minnesota or to Accretive Health.  For example, the Charlotte Observer and the News and Observer of Raleigh investigated how area hospitals were suing patients to collect debts.  The newspapers found North Carolina hospitals filed such suits over 40,000 times for the five years ending in 2010.  The majority of lawsuits came from two systems, both of which are non-profit.  The investigation notes that some of the hospitals in question made sizeable earnings over the same period, despite their non-profit status, and found numerous instances where the hospitals did a poor job of determining if the patients qualified for programs that would assist with their bills.  It’s tough to get sick, especially when your health care provider slaps a lien on your house for charges that you had no way of predicting in advance.

Then there is what has happened with Fair Health.  This is the database that was set up to settle New York’s 2009 dispute with Ingenix about how that company established “usual and customary” charges, as used by many health insurers around the country to set payment limits on out-of-network services.  It seems that many insurers have decided to adopt a different methodology to calculate out-of-network liabilities, based on a percentage above the Medicare payment levels.  New York regulators believe that many New Yorkers are ending up owing more under the new methodology, even though insurers pay anywhere from 140 to 285 percent of Medicare rates.  It’s not entirely surprising that insurers have adopted the new approach, given that Fair Health wasn’t actually up and running until last year and the Medicare rates are much more predictable than the approach based on “usual and customary.”   I suppose it is possible that Medicare payment levels truly are that low, or that some providers truly deserve payment levels several multiples over what Medicare would pay, but both seem doubtful.  One would think that, say, 200 percent of Medicare payment rates would be sufficient as a payment level, but maybe the patient is getting an appendectomy in California. 

It boils down to some usual culprits:

• Provider charges aren’t subject to competition.  They can calculate them in virtually any way they want, at whatever level they choose, because their payor customers negotiate more realistic levels and their retail customers usually aren’t told charges in advance.  Virtually no one is shopping services based on price.  It’s crazy that the most vulnerable patients are the ones most likely to be subject to these entirely arbitrary and often unrealistic prices.
  
• The data are hard to find and often not very useful.  Many health plans have versions of price or quality data, and there are a variety of state and federal requirements for providers’ posting of some prices.  Be that as it may, consumers usually don’t have a good idea about what set of services they’ll receive, much less how much they will cost.  And it’s not just consumers who are ignorant; physicians are often in the dark about how much things cost as well (see, for example, Sehgal and Gorman).  Many providers probably have some idea of their costs for the services they most frequently provide, but I’m willing to bet that few have any accurate idea about the costs in the rest of the health care supply chain their patients will go through.  Think Apple doesn’t know the prices throughout their supply chain?
  
• Consumers don’t care enough.  The vast majority of consumers – even those in consumer-directed plans – still don’t seek out cost or quality information, even when it is available (see, for example, EBRI’s Consumer Engagement Survey).  Consumers also don’t necessarily make great decisions even when they get data – for example, Hibbard, et al. found that when just shown costs, consumers still thought higher cost would translate into higher quality.  The researchers found that the cost data needed to be paired with easier to understand quality of data for consumers to make better choices.
  

Perhaps they should make a health care version of The Price Is Right after all.  It might be amusing to watch various participants in the health care system try to guess how much things cost.  Then, again, it might just prove boring, because I doubt anyone would “win.”

Three ‘Brutal Facts’ That Provide Strategic Direction for Healthcare Delivery Systems- Preparing for the End of the Healthcare Bubble

By Nate Kaufman, April 10, 2012

In August 2005, David Lereah, chief economist of the National Association of Realtors stated “All of the doom-and-gloom forecasts of a housing debacle are not only irresponsible, but downright  wrong” Lereah was not alone,  economists from Goldman Sachs, National Association of Home Builders and the Mortgage Bankers Association all stated similar opinions. Wall Street firms such as Lehman Brothers and Bear Sterns bet their companies on the strength of the housing market. Eventually the lack of financial sustainability inherent in sub-prime mortgages burst the housing bubble and the industry collapsed. (shilling)

 The lack of acceptance of the housing bubble by industry leaders is a clear example of “cognitive dissonance”.  The theory behind cognitive dissonance is “the more we are committed to believe something is true, the less likely we are to believe its opposite is true, even in the face of clear evidence that shows that we are wrong.”  (Marshall Goldsmith)  Refusal to recognize new market realities is a fundamental strategic flaw that has lead to the demise of many organizations. As Admiral Stockdale noted in his discussion with Jim Collins:  “You must never confuse faith that you will prevail in the end—which you can never afford to lose—with the discipline to confront the most brutal facts of your current reality, whatever they might be” (see Collins web site)

The recent passage of the Patient Protection and Affordable Care Act (PPACA) has created uncertainty about the future of the nation’s healthcare delivery system.  Regardless of how PPACA is implemented, or funded or modified, there are certain ‘brutal facts’ regarding the future of healthcare delivery in the United States.  In order to prepare for the ultimate impact of these ‘brutal facts,’ healthcare organizations must begin today to modify both their core beliefs and clinical practices.  By focusing strategy on these new market realities (regardless how brutal they may be), a healthcare organization can begin to position itself for success in the future.

Our Healthcare Bubble Will Eventually Burst

In their open letter to the American people published in November 2010, several months after PPACA became law, the bi-partisan Debt Reduction Task Force:

“The federal budget is on a dangerous, unsustainable path. Federal debt will rise to unmanageable levels, which will push interest rates up, endanger our prosperity, and make us increasingly vulnerable to the dictates of our creditors, including nations whose interests may differ from ours…. we must take immediate steps to reduce the unsustainable debt that will be driven [in part] by the aging of the population and the rapid growth of healthcare costs...”

Even the Congressional Budget Office (CBO) appears to be skeptical about PPACA’s ability to reduce the deficit as was reflected their original ‘base line’ projections. As a result, the CBO produced an “alternative fiscal scenario” using the more realistic assumptions that: 1) tax revenues would remain at historical levels (i.e., 19% of GDP) and 2) cost control features of the new law would only have a moderate impact. (Frakt)  This more realistic scenario further supports the Debt Reduction Task Force’s assertion that healthcare costs will contribute to the destabilization of the economy.

 Richard Foster, the Chief Actuary for CMS supported this concern when he testified before congress that the new law will increase the nation's overall spending on healthcare by $289 billion through 2019. (Modern Healthcare)

The State Budgets are in no position to absorb the cost of PPACA.  According the Wall Street Journal,

“PPACA puts cash-strapped states in a tenuous position, forcing them into one or more unattractive policy choices: cut spending in crucial areas, such as public safety and education, to compensate for the additional health care costs, raise taxes to fund the new spending, or borrow money to pay the bill and sink further into debt. (WSJ)

Thus it is a brutal reality that we are in an economic healthcare bubble that will eventually burst.  Out of necessity, both State and Federally-funded healthcare programs will intensify their pressure on providers to reduce the per capita cost of care. In the immediate term this pressure will take the form of draconian reductions in fee schedules (as we are currently seeing from some states Medicaid programs.) Over the longer term, government-funded healthcare will move from the fee for service reimbursement methodology to either bundled/episodic or population based payments. Given the historical pace with which government implements changes in payment methodologies, one  can expect these new payment systems to be phasing in between 2016-2018.

Both the Shared Savings ACO Program and ‘First Generation’ Clinically Integrated Networks Will Not Produce Desired Results - Buyer Beware 

An Accountable Care Organization (ACO) is a group of providers (physicians, hospitals etc.) that share accountability for the cost and quality of care they provide. PPACA established a “ Shared Savings Program” for Medicare fee for service patients in which ACO providers would share in cost savings should the ACO meet certain quality and cost benchmarks.

The ACO concept has been pilot tested under the “Physician Group Practice Demonstration Project.” (PGP.)  Ten of the nation’s most integrated medical groups participated in the PGP demonstration. The demonstration provided groups the “opportunity to earn performance payments derived from savings for improving quality and efficiency of delivering health care services through better coordination of care and investment in care.” (CMS fact sheet)

After four years, these ‘all star’ group practices achieved a 40% success rate. That is, during the first year only two groups received a shared savings payment. By the fourth year five groups received a payout. Ultimately, over the four years, only sixteen shared savings payments were distributed out of a possible 40. (i.e., 10 groups times 4 years.) Among the brutal facts from the PGP demonstration project are:

1. It is difficult for even the most integrated medical groups to generate significant savings on Medicare fee for service patients
2. When a group received shared savings payments, the magnitude of these payments were not sufficient to cover the infrastructure cost associated with operating an ACO.

The Center of Studying Health System Change recently noted:

"the economic and market rewards [for ACOs] may not materialize for a long time, if ever,"… "None of the organizations [in the PGP] indicated positive return on investments related to improvement activities,"  (Modern Healthcare)

There is little hard data documenting the primary source(s) of the cost savings that generated the shared savings payments. Both the PGP participants and CMS reported anecdotally that the savings came from reductions in both admissions and high cost procedures e.g., imaging. It is a brutal fact that ROI for the ‘successful’ PGP participants was negative even before accounting for the loss of admissions and procedural revenue.  From a financial perspective, the PGP participants would have been much better off not participating in this ACO-like demonstration.  From the PGP experience it appears that the only parties that will receive financial benefit from the establishment of a Medicare-ACO are the lawyers and consultants retained for this purpose- buy beware!

Many physicians and hospitals have formed ‘clinically integrated’ networks which they believe will evolve into ACOs. While these networks have noble goals and some have positive results, few have demonstrated the competency to significantly lower the cost of care. Even Advocate Physician Partners, a joint venture clinically integrated network in operation for over 15 years could not document “medical cost savings” in real green dollars but stated that improvements in the cost of care are “inferred.” (see health affairs)

One could argue that even though it is unlikely that ACOs and first generation clinically integrated networks will fail to achieve cost saving benchmarks, these ACOs will eventually evolve into an effective delivery model. However, as the noted futurist Jeff Goldsmith points out, the track record for past efforts for physician-hospital collaboration has been ‘dismal’ and there is no reason to assume that this time it will be different. (goldsmith)

Based on the brutal fact that ACOs and ‘first generation’ clinically integrated networks’ will not generate sufficient cost savings to be relevant, it is recommended that healthcare organizations skip the first generation models and move towards the creation of ‘second generation clinically integrated networks’ capable of managing risk and targeting the 20% of the population that consume 80% of the cost. The most current research on reducing the per capita cost of treating Medicare patients conclude:

“Health reform policies currently envisioned to improve care and lower costs may have small effects on high-cost patients who consume most resources. Instead, developing interventions tailored to improve care and lowering cost for specific types of complex and costly patients may hold greater potential for “bending the cost curve.” (Reschovsky)

 Also, rather than pilot test an ACO model on Medicare and/or commercial fee for service patients where reductions in admissions will impact the revenue of the health system, it is recommended that these networks ‘cut their teeth’ on the self-funded pool of hospital employees and dependents, where a reduction in admissions/cost results in savings for the organization.

Critical elements for a successful ‘second generation’ clinically integrated network include: primary care-based medical homes, digitally connected electronic medical records with point of care protocols, disease management programs and a culture committed to improving the cost and quality of care for a population of patients vs. maintaining individual provider income and autonomy. (Kaufman)

Physician Autonomy and the Organized Medical Staff Will Become Less Relevant

On January 13, 2011 CMS published the proposed rule for the Value-Based Purchasing Program for Medicare inpatient services (VBP.) Starting October, 1 2012, hospitals can earn incentive payments based on the care they deliver to Medicare inpatients. These incentive payments will be funded by a one percent reduction in the base DRG payment. Thus hospitals that underperform will see a relative reduction in their Medicare payment rate. The VBP incentive will be based on adherence to clinical processes, (e.g., Aspirin prescribed at discharge for AMI patients) and patient experience ( e.g. communication with doctors, responsiveness of staff etc.) CMS will eventually include mortality-related measures in VBP as well. In addition, as part of the National Patient Safety Initiative, by 2015 9% of a hospital’s Medicare reimbursement will be “tied to public reporting of errors and provision of safer more reliable care with particular focus on hospital acquired infections and readmissions.” (cms proposed regs)

Traditionally the  medical staff had the responsibility for monitoring and maintaining high quality care within a hospital. While hospitals have always borne the financial risk for the cost of care ordered by its physicians, VBP now puts a hospital’s revenue at risk for their physicians’ clinical practices and communication skills. The evidence is clear from Geisinger, Thedacare, Virginia Mason and others that the standardizing care through thoughtful process redesign can improve efficiency, quality, safety and patient satisfaction. Most medical staffs have been unwilling to tackle an issue associated with the variability of cost and quality of care unless it exceeds broad limits.

It is a brutal fact that hospitals can no longer afford to delegate the responsibility and accountability of the cost and quality of care to the independent medical staff composed of physicians practicing and promoting the traditional autonomous, highly variable model of care. Hospitals will have to develop a work with the members of their medical staffs to:

1) modify bylaws to require conformance to patient safety, patient satisfaction, process and quality metrics as a condition of keeping hospital priveleges, and

2) develop the clinical infrastructure with a new breed of physician leaders in which medical directors will have the authority and accountability for cost, quality and patient satisfaction in their serviceline.

Not If But When

The nation’s rate of spending on healthcare is unsustainable. As with the housing bubble, the fundamental economics cannot support the status quo and yet many healthcare thought leaders and politicians dismiss claims of a healthcare bubble as “doom-and –gloom.” Others choose to ignore the brutal fact that AAPACA may exacerbate the cost crisis rather than moderate it.

Those that recognize the existence of a bubble and prepare for its brutal realities can actually benefit when the bubble bursts. This was clearly the case with the housing bubble where Michael Burry and his investors earned hundreds of millions of dollars betting against mortgage-backed securities (Wikapedia.) Healthcare organizations that believe in the brutal realities of the healthcare bubble can also position themselves for success when the bubble bursts. These organizations will dismiss the incremental approaches such as Medicare Shared Service ACOs, first generation clinical integration, physician co-management and focus on meaningful transformation into a provider system that is comprised of data driven, digitally connected, physician-lead TEAMS consistently delivering  evidence-based, patient-centered health care, able to treat higher volumes of patients, at lower predictable costs per episode, demonstrating measurable high quality and providing an exceptional patient experience.. As Don Berwick stated Healthcare is hungry for something truly new, less a fad than a new way to be. (VA Mason) 

A Different Way to Fix Medicare

By Kim Bellard, April 5, 2012

Two recent public statements made me both smile and despair about saving Medicare.

The first was President Obama’s recent attack on the budget proposal put forth by Rep. Ryan and passed by the House.  The President has no shortage of issues with that budget, but one of his specific attacks was the way Ryan proposes to reform Medicare, by turning it into a premium support program.  The President and many other leading Democrats charge that the approach would be the end of Medicare as we know it. 

“Ending Medicare as we know it” is a curious bogeyman.  The benefit design is overly complicated and archaically incomplete (forcing most senior to buy Medigap policies), the program is hyper-regulated, it has a terrible track record on combating fraud and abuse, and it is one of the biggest fiscal time bombs for the country.  This is what we are fighting to keep?  The thing Medicare does uniquely well is its near universality, and the existing program structure is not the only way to accomplish that goal.

The critics don’t seem to recognize that the Ryan proposal wouldn’t impact existing beneficiaries, and doesn’t really look all that different from the way they plan to have the under-65 obtain coverage through the health insurance exchanges under the Affordable Care Act (ACA).  By the same token, Republicans shouldn’t be too smug, because it’s hard to rationalize their support for delivering Medicare for all through the private market via public premium support with their bitter antipathy for ACA.  They are two sides of the same coin.  In both cases, the important question is whether the premium support/subsidies would actually be realistic – as opposed to becoming balancing items for future budget cuts. 

Short of a single payor system, it’s hard to see a long or even moderate-term future that doesn’t end up looking like something built on the Ryan-Wyden frame.  Medicare can only limp along so long in its current form.  It’s too bad the partisan politics cannot recognize the areas of commonality and work towards compromise. 

More encouraging was the recent call by nine physician specialty societies to reduce the use of many common tests and procedures.  Each society offered up five such tests or procedures.  “More isn’t necessarily better,” said Dr. Christine Cassel, president of the American Board of Internal Medicine.  “There are a number of things that not only aren’t necessary and potentially costly, but also have a risk of harm for the patient.”  The specialties are launching a “Choosing Wisely” campaign to encourage the various stakeholders to discuss potentially unnecessary care.

Well, kudos to the various specialty societies for finally admitting this, although one has to wonder: why now?  Perhaps they were worried that the IPAB, the review board charted by ACA to recommend ways to slow Medicare spending, would do this for them.  It would have also been nice had the call been accompanied by some teeth.  I.e., are they going to monitor the use of these tests and procedures?  Are there any consequences to physicians who continue to use them unabated?    

Which brings me to fixing Medicare.  We need to recognize that not all care that is delivered is appropriate – and not all physicians are equally good at delivering it.  Yet we continue to pay providers while largely ignoring those facts.   There are “value-based purchasing” approaches in ACA, but are far too modest to have significant impact.  Accountable Care Organizations may well be “the” answer, or at least part of an answer, but they still beg the question of how to identify more effective providers.  This is an area where the federal government can help:

• Quality measures: Give the various medical specialty societies one year to propose how quality should be measured for each specialty, subject approval by CMS.  The societies would most likely object to both the mission and the timeline, but, honestly, they’ve had decades to think about it.  Whatever measures they propose would have to be quantifiable, be based on patient outcomes, and reflect at least in part patients’ views about their care.  They also must not discourage physicians from seeing sicker patients.
• Measuring quality: once the measures are established, there should be a year to collect the applicable data for each physician.  Obviously, obtaining the data through EHRs would most likely be most accurate, but inability to collect data from a physician practice would not be an excuse.
• Tiering physicians: Medicare payment levels would be based on tiers of performance.  I.e., the top thirty percent of physicians would be paid, say, fifty percent above the fee schedule for E&M codes, and perhaps an extra twenty percent on procedure codes.  The next thirty percent of physicians might get an extra twenty percent on E&M.  The next thirty percent would face a reduction of twenty percent on both E&M and procedure codes, and the bottom ten percent (and practices not reporting) would also receive the twenty percent cut, but also would be on “probation.”  Two continuous years of bottom ten percent performance would cause them to be ineligible for Medicare payments.
• Public disclosure: The performance results and tiers of physicians would be readily available and disseminated to Medicare beneficiaries, who hopefully would use them to seek out better performing physicians.  Ideally, Medicare would change its coinsurance so that beneficiaries using higher tier providers pay lower copay amounts (since the payment levels – and thus the corresponding coinsurance amounts – would be higher). 

Of course, the same approach could, and should, be applied to hospitals and other Medicare providers.  There is an implicit assumption that higher quality providers are not also higher cost providers, although that has not been solidly demonstrated.  Cost/benefit could be part of the metrics, but with the specter of rationing and “death panels,” we may not be ready for that. 

Personally, I’d also wipe out the Part A, Part B Part D distinctions and institute a more modern, comprehensive design with unified deductibles and coinsurance, as well as the unlimited maximums ACA imposes on private plans.  The advisability of Medigap policies has to be questioned as well.  Those policies reflect seniors’ desire to limit their exposure, but may end up protecting them a little too much.  Having consumers face some direct financial consequences to health care choices is not a bad thing, as long as those consequences have appropriate limits. 

I have no doubt that such a change would be a tsunami for our health care system, with both intended and unintended consequences.  We probably would not get it entirely right straight out of the gate.  I also have no doubt such proposed changes would meet with fierce opposition from lobbyists and Medicare loyalists.  It’s hard to argue against pay-for-performance in principle, but they could fairly point out that we have neither the desired measures nor effective mechanisms with which to collect them.  Those may be valid points, which simply underscores the point: why not? 

American politicians like to brag that we have the best health care in the world.  It may well indeed be available here, but no one can plausibly claim it is uniformly distributed or easy to find.  Proximity and familiarity cast a rosy glow over local providers.  We can and should do better.  So let’s use the big Medicare stick to finally start measuring and paying for better performance.  

Changing Economics in an Era of Healthcare Reform

By Nate Kaufman, April 2, 2012

Health systems are beginning to prepare for healthcare reform.  Significant resources are being focused on developing Accountable Care Organizations, medical homes, and preparing for bundled payments and population-based reimbursement.  However, current economic trends combined with an analysis of the impact of key healthcare reform initiatives, will require health systems to take significant cost out of their system in order to maintain positive financial performance. Few organizations have the culture or the expertise to implement a cost reduction effort of this magnitude.

These are the Good 'Ol' Days (For Cost Shifting)

Since the late 80’s the hospital industry has subsidized losses from Medicare and Medicaid by demanding premium rates from commercial payers. In 2008, the hospital industry’s aggregate payment to cost ratio from Medicare was 90.9% ;  88.7% from Medicaid and 128.3% from commercial payers.[1] The impact of cost shifting will be diminished as a result of the new healthcare reform law, the aging of the population, continued compression of government/ private reimbursement and increased patient responsibility.  This will require most health systems to reduce their current operating cost structure by 10-15%. The following is a discussion of the key factors driving the need for more focus on efficiency.

Change in Payer Mix

Over the next five years there will be a significant shift in the number of people covered by highly profitable private health plans to deficit-generating government-sponsored plans.  Expanded coverage for the uninsured will not be sufficient to mitigate the negative impact of this shift.  CMS estimates that by 2016, as a result of the new healthcare reform act (PPACA) and the aging of the population, the number of beneficiaries covered by the relatively high margin private insurance will decline by approximately 9 million.  These profitable patients will be lost to government-sponsored plans with non-negotiable provider rates (i.e., Medicare, Medicaid and exchanges.) The financial benefit of providing coverage for the 25.3 million uninsured, most of whom will receive government-funded insurance, will not be sufficient to offset the deleterious effects of the shift away from commercial health plans[2]

Declining Medicare and Medicaid Margins

Future payment increases from Medicare and Medicaid will not keep pace with the historical trend in hospital cost inflation. This will further suppress the margin contribution from government-funded reimbursement making the cost shifting hurdle for private insurance even higher than in the past.  In their 2010 Report to Congress, Medpac acknowledged that since 1996, hospitals margins from Medicare have declined by approximately 1 percent per year.[3]  Their data shows that the average hospital lost 7.2 cents on every dollar of care provided to Medicare patients in 2008. (Note: the Medpac methodology is different from AHA.)  Even before the $155 Billion hospital payment reduction in PPACA, Medpac expressed its intention to force hospitals to operate more efficiently by continuing to provide updates to hospitals at rates that are significantly below cost inflation. Medpac believes that it is possible to provide quality care and breakeven on Medicare:

Medicare margins are low and expected to remain negative… however...a set of hospitals has been able to maintain relatively low costs, while maintaining relatively high quality of care. Roughly half of these providers are [currently] generating a profit on their Medicare business.[4]     

With respect to Medicaid, the Kaiser Family Foundation reports that for FY 2010, a total of 33 states restricted hospital payment rates including 14 states that froze rates and 19 states that reduced rates. For FY 2011, 17 states plan hospital rate freezes and 13 states plan hospital cuts for a total of 37 planned rate restrictions.[5]

Increased Patient Responsibility Will the Limit the Ability to Cost Shift

As patients are forced to pay a greater percentage of their healthcare costs, higher provider charges will result in increased bad debt and lower utilization rather than increased income.  The fastest growing component of bad debt in hospitals is unpaid co-payments and deductibles from patients with insurance.[6]  One health system studied by McKinsey reported that their unpaid balance for patients with insurance was growing by 30% per year, much faster than bad debt from patients without insurance.

 Enrollment in high deductible employer-sponsored health plans climbed from 9% in 2009 to 11% in 2010. Low-income families with high deductibles are more likely to “delay or indefinitely postpone medical procedures.”[7] The increase in patient financial responsibility combined with the poor economy have contributed to the year over year decline in physician visits[8]  and  an unprecedented decline in admissions to not-for-profit hospitals.[9]

Increased Regulatory Oversight on Private Health Plans Will Create Downward Pressure on Provider Rates

The healthcare reform environment has not been kind to the private insurance companies. A number of states have laws or are preparing legislation to enable their insurance commissioners to block or reduce proposed premium increases.  In addition, PPACA gives the HHS Secretary the authority to regulate excessive rate increases.  Last year in Massachusetts, when proposed rates of increase in private insurance premiums were rejected by the Department of Insurance, the insurance companies proposed freezing or reducing payments to hospitals and large physician groups.[10]

The Cost of Physician Integration

The mad dash towards the development of ACOs will only exacerbate the cost issues in most health systems. The infrastructure costs associated with forming and operating a high-functioning ACO are significant and return on this investment is uncertain at best. The law stipulates that ACO’s will be rewarded for improving quality and reducing cost. The majority of these cost reductions will come from reductions in the volume of specialty consultations, high-end procedures and hospital admission.  There is no evidence that the health system’s “shared savings” payments from its ACO efforts will offset the infrastructure costs, the loss in volume, revenue or the political capital being invested in this effort. 

If You Keep Doing the Same Thing, Don’t Expect Different Results

Many health systems continue to operate as though cost-shifting will remain a viable strategy in the long term. Their primary focus is fiddling with ACOs as their organizations begin to bend under the stress of flat to declining revenues.  A new radically-intense focus on the cost of care is essential if a health system is going to succeed in the future.  Getting in shape for 2016 will require the following:

1. Define the efficiency targets for the organization and stick to them. Leadership is critical for setting the course for the organization.
2. Engage the physicians and hospital staff in discussions about the need to significantly reduce the cost of care in the organization.
3. Hold all members of the organization (including medical directors) accountable for:
   
   
   1. non-negotiable, performance based, cost budgets based on industry best practices and
   2. attracting profitable growth in their service lines
4. Develop a plan to reduce the cost structure of the organization to breakeven on Medicare rates. Note: Private payers will continue to pay at rates above Medicare but the ability to absorb declining Medicare margins through cost shifting will be limited.
5. Rationalize your portfolio of services and facilities, eliminating duplication and divesting of services that generate deficits  the organization can no longer afford to absorb.
6. Workforce reductions will not generate sufficient savings. Employ established redesign methods e.g., LEAN to eliminate waste and unnecessary variability of care.
7. Use objective critical analyses to ensure optimal performance of IT, revenue cycle, supply chain and clinical documentation systems. This usually requires an audit by an independent third party
8. Using physician leaders,  create a culture within the employed physician group that is aligned with the objectives of the health system.
9. Begin a process of true clinical integration with your physicians focusing on the basics of  redesigning the delivery of care, but don’t try to be an ACO by 2012. Most health systems will not be ready by 2012.  The only thing worse than not having an ACO, is operating an ACO that fails to achieve desired results.  Eventually  every health system will be held accountable for their cost and quality, either on a per episode or per capita basis but most current models of clinical integration involving retrospective review will not be sufficient.  Becoming an effective clinically integrated organization will take time, discipline and ultimately a cultural change among members of the medical staff. Critical success criteria for  clinically integrated  delivery systems must include the following:
   
   
   1. Physicians in critical specialties must participate and be willing to standardize their clinical practices based on the best science in medicine.
   2. All providers must be able to share an EHR that includes hardwired point of care protocols.
   3. There needs to be sufficient primary care capacity using extenders as the first line of care.
   4. Engaged physician champions must drive the process.
   5. There should be a programmatic approach to chronic diseases such as diabetes, CHF etc.
   6. Hospitalists, intensivists and other key physicians in the care process must be trained in the latest care delivery techniques and be evaluated based on cost, quality and service metrics.
   7. Physicians that do not meet key cost and quality metrics must be sanctioned.
   8. There must be an infrastructure able to manage the delivery system, monitor metrics and report outcomes.

The healthcare delivery system will not change overnight. Organizations that begin repositioning today can phase in the cost reduction strategies necessary to succeed under the post-reform environment.  Transforming a health system will be expensive.  Healthcare leaders will need to optimize income in the fee for service delivery system in order to fund long term investments in their physicians, IT systems, process redesign, clinical integration, etc. The irony is that the primary source of the dollars to fund this transformation will come from cost shifting... get it while it lasts.

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[1] AHA; Trend Watch Chartbook 2010, Table 4.4

[2] Center for Medicare Services (CMS);  Richard Foster Memo | Apr 22, 2010, Table 2

[3] Medpac; Report to Congress: Medicare Payment Policy| Mar 2010; Hospital Inpatient and Outpatient Services, Assessment of Payment Adequacy, Updating Payments,  pp 41-66

[4] Medpac; Report to Congress: Medicare Payment Policy| March 2010; Hospital Inpatient and Outpatient Services, Assessment of Payment Adequacy, Updating Payments,  pp 60

[5] Commission on Medicaid and the Kaiser Family Foundation;  A Look at Medicaid Pending Coverage and Policy Tends Results for a 50-State Medicaid Budget Survey for State Fiscal Years 2010 and 2011; Prepared by Vernon K. Smith, Ph.D., Kathleen Gifford and Eileen Ellis, Health Management Associates; Robin Rudowitz and Laura Kaiser,  | Sep 2010

[6] Mckinsey Quarterly; The Next Wave of Change for us in Healthcare Payments| May 2010,  page 2

[7] Reuters; Cost-Sharing Health Plans Lead Poor to Make More Tough Choices | Nov 23, 2010

[8] www.AMEDNEWS.com; American Medical News | Sep 20, 2010

[9] Moody’s; Flat Admissions Put Pressure on Not-for-Profit Hospitals | Oct 20, 2010

[10] Boston Globe, Insurers May Slash Rates to Hospitals | May24, 2010

Is There Life After Mandates?

By Kim Bellard, March 29 2012

This week the health policy, legal, and political worlds have been focused on the Supreme Court hearing oral arguments about the constitutionality of the Affordable Care Act (ACA).  If the passage of ACA was a once-in-a-generation piece of legislation, the Supreme Court review has been the inevitable sword of Damocles hanging over it.

After two years, ACA remains unpopular, with roughly equal percentages of the population opposed to it as supporting it (see, for example, Pew or Kaiser Family Foundation surveys), with the mandate requirement of the bill driving much of the unpopularity.  Ironically, the provisions that health insurers must cover all comers, without preexisting condition exclusions, are widely popular, even though the mandate was included explicitly to offset the risk of those provisions. 

I have to confess that the mandate never bothered me too much.  I’ve been following health policy long enough to remember that the idea of a mandate is neither new nor a Democratic proposal; it has as many Republican roots as Democratic.  I also remember that candidate Obama opposed the mandate before he became President.  Still, the slippery slope – aka, the Judge Scalia “buying broccoli” – arguments are not without merit: where does the federal government draw the lines of its authority?  The Solicitor General Verrilli had no good response for that line of questioning, which may have doomed ACA.  In the oral arguments earlier this week, several of the Justices showed skepticism towards the mandate, but were less clear about its potential severability – i.e., can ACA survive without the mandate?

There are two reasons why I’ve never been too troubled by the mandate.  For one, it’s not that strong a mandate in the first place.  The mandate never applies to low income individuals – who are most likely to be without insurance – and the penalty for not having insurance caps out at $2000 per family/2.5% of family income.  Depending on one’s age and income, not having insurance might be a rational trade-off; the mandate won’t sweep all those low risk young people in.  Despite having a mandate there for five years now, The New York Times recently reported that 120,000 residents of Massachusetts – some 2% -- still remain without insurance, of whom only 48,000 paid a penalty, so we shouldn’t expect ACA’s mandate to work miracles either.

More importantly, the mandate is, in my mind, less important than the subsidies.  Despite the horror stories trotted out by the Administration and other supporters of ACA, by far the vast majority of people who lack health insurance lack it because they cannot afford coverage, or choose not to buy it – not because they cannot qualify for it.  As evidence of this, HHS admits that only 50,000 people have enrolled under the high risk pools set up by ACA as an interim measure – far short of the 375,000 initially projected.  Think about that: 50 million uninsured, and the most optimistic estimate projected less than 1% of them would take advantage of guaranteed access to health coverage – and those projections proved wildly high.  HS has tried dropping rates to entice more high risk individuals, but they’re not buying.  The problem isn’t access, it is cost.

There is considerable passion on both sides of ACA – people seem to either love it or hate it (and Kaiser Family Foundation says 40% think it has already been struck down!).  The law was carefully designed so that most of the taxes/penalties would not kick in until after the 2012 elections, yet here we are with ACA as one of the focal points of the election anyway, with the Supreme Court decision expected to be delivered in June, just in time for the final campaigns.   One likes to think that the Supreme Court will base its decision purely on the constitutionality of the law, as opposed to the desirability of what the bill accomplishes or the politics of the situation – but that would be naïve. 

Despite the pundits’ predictions, it’s pointless to predict how the Court will rule.  If the mandate does end up being stripped out, there are several options that could help take its place (assuming anything can get through the hyper-partisan Congress).  For example, simply keep the subsidies and the high risk pools.  We might need the health insurance exchanges to help set the market prices for the subsidies, but maybe not.  We could also allow uninsured persons an annual limited enrollment period, similar to how an employer plan operates, and as a last fallback we could always open up the Federal Employees Health Benefit Plan to uninsured citizens – it is one of the largest health insurance programs in the country and so could accept the risk, and it is already closely overseen by the federal government. 

Of course, with a small shift in the political winds, conservatives may find themselves hoist by their own petard – instead of a mandate to buy private coverage, some future Congress could pass a broad-based tax to fund universal coverage, which would almost certainly be constitutional.  Such a program could come with a public option – or simply with “Medicare for all.”  Some cynics think that has been the goal of ACA all along.

I can’t help but to equate, on some level, the opposition to a mandate to the recent (and ongoing) furor over covering contraceptives.  Opponents of contraceptive coverage do not seem to recognize a difference between being required to pay for something they object to from being required to do that something themselves.  We all pay for things that we may morally object to: my federal taxes pay for members of Congress to go on junkets, my state taxes fund the death penalty, and even my auto insurance premiums subsidize premiums of drivers with DUIs.  I don’t approve of those actions, but I’m not forced to drive drunk or to perform the lethal injection.  It’s the same for subsidizing other people’s contraceptive coverage, or coverage generally.  People who live in a democracy, particularly the uniquely American version of democracy – have to accept that they don’t always get their own way, that compromise is necessary.  Other people have rights too.  Democracies require shared sacrifices.

The sad thing about the debate on the mandate, like ACA in general, is that it simply doesn’t address the real problem: exploding health costs and how to reshape our health system to better deliver value.  Mandates and insurance reform should be corollaries to the outcome of that debate, not the core of the debate.

Celebrating an Anniversary Under Threat of Divorce

By Clive Riddle, March 23^rd , 2012

The Affordable Care Act turned two today. If we consider this a birthday, some would say the Act is entering its terrible twos, but DHHS and other are referring to this as an anniversary, which in this context is bittersweet as the Act now sits under a Supreme Court cloud starting next week, with plenty of partisan positioning from both sides. Will the Anniversary result in Divorce, Annulment, Trial Separation, a Second Honeymoon or settle in a routine marriage with ups and downs?

Here’s some key accomplishments that White House touts, in their six page white paper regarding the Act at the two year mark: Affordable Care Act: The New Health Care Law at Two Years:

• A one-time $250 Medicare rebate check to seniors who hit the “donut hole” coverage gap in 2010, and a 50 percent discount on brand-name drugs in the donut hole in 2011.
• Insurance companies can no longer deny coverage to children because of a pre-existing condition.
• In 2014, discriminating against anyone with a pre-existing condition will be prohibited.
• No more lifetime dollar limits on coverage
• Insurance companies prohibited from rescinding coverage because of an unintentional mistake on an application.
• Starting this fall, health plans provide consumers standardized Summary of Benefits and Coverage forms
• Health insurance companies now have to meet the 80/20 Medical Loss Ratio rule.
• Insurance companies must publicly justify any rate increase of 10 percent or more.
• Tax credits for small businesses, in 2011 affecting an estimated two million workers from an estimated 360,000 small employers who will receive the credit in 2011.
• Early Retiree Reinsurance Program (ERRP) has provided $5 billion in reinsurance payments to employers to benefits for retired workers not yet eligible for Medicare.
• 2.5 million young adults who were uninsured have gained coverage by being able to stay on their parent’s health plan,
• 54 million additional Americans now receive coverage through their private health insurance plan for many preventive services without cost sharing such as copays or deductibles.
• More than 32.5 million seniors have already received one or more free preventive services, including the new Annual Wellness Visit and like mammograms and other cancer screening tests for free
• More than 50,000 Americans with pre-existing conditions have gained coverage through the new temporary Pre-Existing Condition Insurance Plan.
• Advancement of Medicare Accountable Care Organizations  with Thirty-two “Pioneer” ACOs already up and running
• Thirty-three States have  received at total of nearly $670 million in Health Insurance Exchange Establishment Grants.
• The Act creates a new type of non-profit health insurer, called a Consumer Operated and Oriented Plan (CO-OP),  run by their members, with seven non-profits intending to offer coverage in eight states h awarded more than $638 million in loans to get up and running.

So what are others saying about the state and fate of the Act on this second anniversary?

Bloomberg BusinessWeek notes huge numbers of the population are enjoying the benefits included in the Act, even as they are caught up in the politics of it, and quotes Paul Keckley, executive director of the Deloitte Center for Health Solutions: "The coverage improvements are very popular. I think all of that will stay regardless of the individual mandate.”

The Center for Studying Health System Change  released a new study: The Great Recession Accelerated Long-Term Decline of Employer Health Coverage and found that “between 2007 and 2010, the share of U.S. children and working-age adults with employer-sponsored health insurance dropped 10 percentage points from 63.6 percent to 53.5 percent.” They conclude that “while there has been vigorous debate about the effects of national health reform on employer-sponsored insurance, the study findings  indicate that the debate often misses a key point—employer-sponsored insurance likely will continue to erode with or without health reform, especially for lower-income families and those employed by small firms.”

The Wall Street Journal reports in an article Untangling Unknowns in Health-Care Law, that as guidance continues to be developed, and the details continue to unfold, we really don’t know enough today about the Act as we think we do. They summarize: “Two years after Congress passed President Barack Obama's health-care legislation, despite all the assertions about what it will or won't do, no one really knows how it's going to work. The U.S. has rarely attempted anything of this scale before.”

Kaiser Health News comments on the possibility that the Supreme Court might strike down the Individual Mandate while keeping the other components of the Act intact, in their article The New Jersey Experience: Do Insurance Reforms Unravel Without An Individual Mandate  in which they state that” or some clues, the justices could examine what happened in New Jersey, a state that tried to reform its insurance markets without a mandate -- and failed pretty miserably”

The Wall Street Journal also informs us the health plans are making their contingency plans, in their article Insurers Set Plans in Case Mandate Is Quashed.

And, The New York Times notes that politicalization of the issue in their article ”Publicity Push as Health Law’s Court Date Nears”, reporting that “Republicans on Capitol Hill have put together a highly coordinated two-week renewed assault on the health care law, seizing on the legislation’s second anniversary and the next week’s oral arguments before the Supreme Court concerning its constitutionality. “