2010 Management Guide

Dealing with Survey Deficiencies

After receiving 23 pages of citations and a threat of losing its license, a Texas ASC (that had gone three years without a state/Medicare survey) recognized its desperate situation. While many of the citations concerned the new conditions for coverage and multiple notes for the same deficiency, the center still needed to respond with corrections within 10 days. Typical of smaller facilities, the employees responsible for compliance activities are the same individuals involved in routine care. While intending to comply with regulations, patient treatment takes priority and administrative paperwork falls behind.

In addition to their daily routine, management now needed to research, evaluate and interpret the regulations in order to rewrite/update their policies within the response time. The practitioners (both administrative and physician) realized that the task they faced required the resources and skills of an outside expert. The facility searched for a consultant that could help solve their problems. Separated by 1,500 miles, with the days ticking away, recognizing travel arrangement difficulties and skyrocketing travel expenses, they requested FWI Healthcare’s assistance.

Receiving and reviewing their citations, FWI presented a cost-effective proposal to the client that was accepted. The client faxed requested documents for our analysis. We discussed existing materials and the need for changes. FWI also developed some revisions to their policy manual and the plan of correction for submission. This information was provided to the client and after telephone clarification and minor adjustments; the transcripts were ready for use.

The plan of correction was accepted and upon the surveyor’s return for a follow-up visit (finding everything to be acceptable), she recommended the license and certification be renewed.

Many small ASCs do not have personnel with experience, knowledge or time necessary to rapidly respond to deficiencies cited by survey agencies. This is where relying on the resources of consultants (who provide assistance on a fee for service basis) is invaluable. All of FWI’s work was completed with minimal expense and without either party leaving their office.

By Roger Pence, president, FWI Healthcare www.fwihealthcare.com • 419.298.3700

Challenges Unique to De Novo Facilities

De novo projects can be a long and not always painless process, but like turnarounds, they have incentives as well. With a new development, we are able to construct the center from the ground up to ensure our high standards are met and so high-quality care can be administered efficiently from day one. We are also able to form a great group of physician partners with the right balance for a successful ASC. Now, just because we get to make initial decisions on the facility and the business with our partners, it is not always roses when developing a new center. We deal with doubting partners, setbacks, stumbles and roadblocks. In the case of our new de novo facility in Mt. Dora, Fla. we hit an unusual roadblock — gopher turtles. Yes, gopher turtles. This protected species was living on our construction site. We had to have the turtles moved, but that could only be done after three consecutive days of 50 degrees or warmer weather. The turtle relocation caused about a six-week delay in the building process, and while no one could have anticipated a gopher turtle infestation, we took care of the situation and did what we could to get the project back on track.

We found that the perspective of the partnering physicians in de novo projects is quite different from that of partners in turnarounds. While in turnarounds we are often thought of as better managers than we are, sometimes in new developments we are thought of as worse. Partners focused on financial returns view any stumble on the way to distributions as a failure, when in fact, stumbles are a part of the process and sometimes result in positive outcomes. The objective is to have the “wiggle room” to adjust, correct problems, and move forward.

No matter what we encounter along the path to developing a new center, we are committed to our partners and the success of the center and look forward to developing new, successful centers across the country.

By Tom Mallon, CEO, Regent Surgical Health

www.regentsurgicalhealth.com 708.492.0531

Ostrich Strategies for ASCs: Never A Good Idea

The phrase “burying your head in the sand” has become synonymous with hiding from the truth or hiding at the first sign of danger. Ostriches are alleged to do that, but they actually do not. However, owners of distressed outpatient centers sometimes really do.

Our firm gets involved in helping distressed outpatient centers, including surgery centers, and our experience has shown that it is the rare owner who does not “bury his (or her) head in the sand” hoping that something will occur that will cause the source of the distress to simply go away. Employing an “ostrich strategy” is a bad idea, as well as a waste of valuable time and resources because the sources of distress rarely go away simply and easily.

The “ostrich strategy” usually results in the center being behind in payments to lenders, landlords, the taxing authority, staff and most vendors by the time we get involved. The task of pulling your head out of the sand and developing workable strategies is complex and multi-dimensional, and involves lawyers and lots of different personalities. In addition, there are always varying degrees of trust among the owners and the managers (who are also often owners). Getting to the core problems requires information analysis, lots of conversation and a site visit or two. Once those core issues are made clear, then the people leading the charge put a simple strategy in place. It needs to be simple because additional and incremental complexity will only complicate matters and likely make things worse. Our firm often leads the charge, but many times we do it in tandem with the center’s lawyers. Depending upon how far behind the center is with various creditors and what legal actions have already been taken, the lawyers may well take the lead.

Follow your strategies, keep your head out of the sand, stay calm and focused, engage the right professionals for you and you may be able to yourself of the sources of distress that caused you the problems in the first place.

By Robert S. Goodman, managing partner, The Mansfield Group www.mansfield-group.com 609.267.0990

Adding Specialties to Increase Profitability

Foundation Surgery Affiliate of Huntingdon Valley, Pa. is an AAAHC-accredited, multi-specialty ASC that opened in 2003. With four operating rooms, two procedure rooms and 19 surgeon partners, this 18,000-square-foot facility was profitable; however, there was still a tremendous opportunity for growth through increasing OR utilization and case volume. “We continually strive to develop new tools and methods that will enhance the profitability of our centers while also adapting to the changing outpatient surgery environment,” says FSA chief operations officer Thomas A. Newman. He recalls the FSA specialty and case analysis:

1. Take inventory. FSA creates a checklist of all specialties that can be performed at an ASC.

2. Analyze and evaluate. Management performs an extensive cost/benefit analysis, weighing equipment and labor costs against typical revenues provided by the specialty.

3. Determine which specialty is most worth pursuing.

4. Recruit surgeons. Utilize data collected in steps 1-3 and tap existing surgery partners as a primary resource for new partner candidates.

In the case of Huntingdon Valley, a surgeon partner suggested that the center consider adding fertility as a specialty. Based on that recommendation, FSA performed steps 2-4. During the first month of adding fertility, case volume increased 12 percent and overall revenues increased by more than 25 percent. As a result of this exercise, FSA formalized the process and rolled it out to all of its centers.

“Our center was already doing quite well when FSA performed the specialty and case analysis and presented the impact of adding gynecology partners specializing in fertility,” says center administrator Robert Puglisi. “Now, return is even higher as a direct result of adding our reproductive medicine partners.”

Larry Barmat, MD, one of the center’s fertility partners, says, “Reproductive medicine is almost tailored to the ASC environment because the procedures are of short duration and low risk, thereby lending them to being done in an outpatient setting.”

Chairman of the board Robert Mannherz, MD, says, “The addition of reproductive medicine has been positive for the center on several levels. It has increased the utilization of the center and our cash flow, as well as diversified our services to patients.”

By Caleb Germany, Foundation Surgery Affiliates www.foundationsurgery.com800.783.0404

Reimbursement and Billing Compliance Issues

A full financial, business office and clinical evaluation was performed by Surgery Consultants of America (SCA) and Serbin Surgery Center Billing (SCB); however, this case study is reporting only reimbursement and billing compliance issues. The initial findings were determined during the evaluation. The current improvements are results obtained after twelve months of reimbursement management by SCB.

The Medicare-certified, multi-specialty center was open 18 months, has two ORs and performs an average of 100 cases per month; the physician-owned clinic shared the same site with the ASC. The challenges were as follows:

» Practice software not meeting all ASC needs

» Billing outsourced to clinic billing staff resulting in:

•overwhelming volume

•increase in errors due to lack of ASC billing knowledge

» Revenue stream reduced to trickle

» Days in A/R escalating – 97 at time of evaluation

» Claim backlog growing – minimum 7 to 10 days lag time between services rendered and subsequent posting and billing

» Denial rate climbing – 20 percent to 25 percent first time denial rate

» Cost of staffing and supplies as a percentage of revenue continuing to increase because of claim backlog

» Non-compliance concerns mounting

Our findings and recommendations were as follows:

Processes

» Using practice software

» Recommend acquiring ASC software

» No CMS list of ASC covered services or matrix of insurance contracts

» Recommend providing both to scheduler and insurance verifier

» No up-front collections

» Recommend notifying patient of financial responsibility before DOS

Reimbursement

» Billing not up-to-date

» Recommend hiring additional staff or outsourcing

» Coding inaccuracies identified

» Recommend coding audit by certified coder – rebill where necessary

» Not following up on submitted claims

» Recommend audit to determine timely filing, refunds, resubmission claims

Compliance

» Receptionist making patient contact calls

» Recommend moving these calls to back desk for HIPAA reasons

» No notification to payor of out-of-network status

» Recommend notifying payor at time of verification and again at billing

» No advance notification of financial policy to patient

» Recommend providing written policy prior to DOS via phone or brochure

Our evaluation resulted in the following changes:

» Appointed separate ASC administrator

» Changed to ASC software

» Revised fee schedule

» Acquired copies of payor contracts

» Initiated use of bank lockbox

» Created new insurance verification position

» Established process to collect co-pays

» Developed financial policies to handle self-pay patients, payment plans, financial hardship cases, etc.

» Made changes in business office task responsibilities

Improvements included:

» No billing backlog

» Decrease in days in A/R – 58 percent (97 days to 41 days)

» Increase in average net revenue per case – 14 percent

» Increase in average charge per case – 31 percent

» Meeting billing compliance guidelines

By Caryl A. Serbin, RN, SSN, LHRM SURGERY CONSULTANTS OF AMERICAwww.surgecon.com 888-453-1144

Florida ASC Increases Revenues

Acting as a strategic business partner, NovaMeda dedicates an experienced team of experts to help our ASCs grow and prosper, while assuring the best possible experience and outcomes for both patients and physicians.

We recently increased the revenue of our Florida ASCs by employing a comprehensive managed care strategy. Over the last two years, we have renegotiated contracts with major payors in Florida and increased the value of the contracts by as much as 20 percent. This has equated to an increase in revenue of 5 percent to 10 percent for each of our four ASCs in Florida.

Developing and executing an overall managed care strategy can lead to major revenue enhancement and overall improved financial performance of our ASCs. Our strategy is founded upon the principles of maximizing the revenue of all our managed care contracts, assuring that the ASC is getting paid what it should based on the contract, and monitoring the performance of managed-care contracts to ensure the ASC is realizing projected revenue.

Executing our managed-care strategy begins by reviewing our ASC’s total book of business and managed-care contracts. Using best-of-breed financial models, we assign a value to each contract based on payor case/mix and market dynamics, and then negotiate (or renegotiate) each contract to ensure maximum revenue generated for our ASC. An ongoing process, we employ a proactive stance on managed-care contract negotiations to ensure the profitability of our ASCs.

By Lisa Streit, director of managed care, NovaMed www.novamed.com 888-NOVAMED

Implementation, Cons & More

The Practice Partners in Healthcare (PPH) team met with the physicians and began to plan for the implementation of the single-specialty center. During the planning process PPH reviewed volumes, expenses and thresholds in the CON. It was determined that additional surgeons would be necessary to make the center successful. PPH began to recruit additional surgeons to the project. To recruit physicians it was necessary to modify the operating and partnership agreements to make the arrangement fair for all physicians and not have the initial group control the project. PPH negotiated with the groups for a successful operating agreement and partnership arrangement to allow the entry of new physicians.

The ability of a third party to develop an independent plan, negotiate and execute is necessary to assure the original group and joining physicians that the best plan for the total partnership is presented. During the negotiations it was clear that the groups combining were fierce competitors and the role of PPH was to make fair and strategic decisions that would demonstrate to both groups the combined strength in the ASC setting but allowing the market forces to continue in the practice setting. Furthermore, the individuals had to work together to develop block time schedules and utilization of the center that would present the most favorable results. In doing so PPH developed a block time schedule that interfaced with both practices clinic schedule and inpatient surgical schedules. PPH developed a strategy and schedule designed for each group’s physician to follow block time by that same group. In doing so the potential conflicts of another group adding on patients and extending the operative day would only affect that group and not the competitor.

When administrators are considering modifying of implementing block time considerations on the impact of running over to other physician block time may reduce issues by this practice. The physicians could then work within their individual groups to correct reoccurring situations. Additionally, when administrators are planning for block time the utilization of historical operative or procedure times should be utilized when evaluating the duration of the individual block to allow for the anticipated daily throughput for each surgeon.

By Larry Taylor, president and CEO, Practice Partners in Healthcare, Incwww.practicepartners.org 205.824.6250

Joint Venture Feasibility

In early 2005, Alegent Health engaged Health Inventures (HI) to perform a feasibility study for joint-venturing (JV) outpatient surgery services with physicians at their Lakeside and Bergan Mercy Medical Center campuses in Omaha, Neb. HI conducted extensive physician interviews to educate physicians about the JV process and gauge interest. Based on positive feedback from the interviews and HI’s financial forecasts, it was determined that a JV was feasible.

The degree of physician interest showed enough case volume to occupy two new facilities. However, HI determined the most immediate opportunity to establish a JV was to convert an existing two OR HOPD to a free-standing ASC in a medical office building (MOB) on the Lakeside Campus. The conversion process included obtaining licensure and certification to operate as an ASC. This facility would operate for 18 months while a new facility with four ORs and one procedure room was built in the same building.

Throughout 2005, a steering committee with representatives from HI, Alegent Health, interested physician groups and legal counsel met regularly to determine the terms of the operating agreement and the governance structure of the JV. Meanwhile, valuation firm performed a third-party valuation of the existing ASC. Based on financial projections and this valuation, HI and deal counsel developed a private placement memorandum (PPM) and subscription agreement and opened the “offering” for physician investment.

The offering closed in December 2005. Two major surgeon groups and 19 individual physicians invested in the facility for a total of 31 physician users/owners. Alegent maintains 51 percent ownership in the new LLC that leases operating space from Alegent in the MOB.

The owners appointed a management board (MB) and clinical operations committee (COC) as the principal decision making authorities. The MB has equal physician/Alegent representation and the COC is physician-controlled.

In September 2007, the physician owners moved their cases from the upstairs ASC to the newly constructed facility on the ground floor of the MOB. The high subscription rate of the offering and cash flow from the existing facility provided adequate funding for the construction without any term debt financing. Only a line of credit was needed when the facility opened.

By Catherine A. Martin, contract manager, Health Inventures, LLCwww.healthinventures.com 877.304.8940

Compiled by Jessica Barreras

Know Your APCs for ASCs

APCs for outpatient procedures performed in ambulatory surgery centers (ASCs) are part of an averaging and bundling system using CPT® procedure, HCPCS Level II and revenue codes submitted to Medicare on CMS=1500 forms, with UB-04 claim forms used by ASCs to file claims to most other payors. The APC system utilizes “packages” of CPT® and HCPCS Level II codes, based on clinical and facility resources and establishes payment rates for each APC grouping. This means the physical and human resources needed to provide the service and the geographic costs are bundled together using annually adjusted formulae, much as in hospital inpatient billing. Certain medications, services, and durable medical equipment are considered “pass through” and can be reported separately from an APC revenue code.

APCs are assigned based on the CPT® and HCPCS Level II codes reported by the provider for each service. Usually, more than one code will fall into an APC category. More than one CPT® and HCPCS Level II codes can be reported if needed.

But not all CPT® and HCPCS Level II codes qualify. They are all assigned a status indicator denoting the code’s relation to APCs — whether they qualify and how. The ASC must be careful to avoid reporting a code denoted as not reimbursable for ASC services unless a modifier and documentation support it. As a result, a limited group of modifiers are recommended as well. The status indicators can be found on CMS files including the CPT and HCPCS Level II codes, and most commercially published codebooks include them as icons.

Examples of the indicators include the following:

• A: Services furnished to a hospital outpatient that are paid under a fee schedule or payment system other than OPPS. This means fiscal intermediaries are reimbursing this code via a fee schedule not under APCs.
• C: Inpatient procedures. This is the kiss of death for an ASC claim’s success. This procedure is expected to be done in a hospital with the appropriate resources and an overnight stays.
• N: Items and services packaged into APC rates. This is paid under the APC OPPS and payment is packaged into payment for other services; there is no separate payment for this.

Restricted CPT® modifiers include:

• 50: Used when the exact same procedure is done on the exact body part of the opposite side. Also known as “bilateral”. Some insurance companies prefer the biller use the CPT® code twice instead. Ex: 10220-RT, 10200-LT. Check with carrier on which to use. Payment should be 150 percent.
• 51: Indicates multiple procedures were performed. The 51 appends to the second CPT® code and all CPT® codes thereafter. Medicare does not recognize modifier 51 for ASC services as this modifier is for use on physician claims only.
• 52: Indicates reduced services. Use when procedure is not completed as described in the official CPT® description.
• 73: Used when a procedure is discontinued before the anesthesia administration. Patient must be in the room where the procedure would have taken place. Payable at 50 percent of the Medicare allowable rate. Typically seen when patient’s blood pressure arises to a dangerous rate.
• 74: Used when a procedure is discontinued after the anesthesia administration. Patient must be in the room where the procedure would have taken place. Payable at 100 percent of rate. Typically seen when patient’s blood pressure arises to a dangerous rate.
• 78: Used when the patient has to return to the operating room during the global period for a procedure related to the first procedure, such as control of bleeding following a colonoscopy or sinus procedure.
• 79: Unrelated procedure or service by the same physician during the postoperative period. (Same day for an ASC setting.)

Rhonda Buckholtz, CPC, CPC-I, CGSC, COBGC, CPEDC, CENTC, is vice president of business and member development for the American Academy of Professional Coders (AAPC).

Cost spiral slows, stays on upward path

Squeezed by the recession, U.S. health spending growth slowed from 6% in 2007 to 4.4% in 2008, the smallest increase in nearly half a century, according to a new federal report. Still, health costs hit $2.3 trillion, rising from 15.9% of Gross Domestic Product to 16.2% as economic output sagged.

Experts say the slowdown in total spending doesn’t necessarily signal any long-term flattening of the cost curve.

“History would say it’s not sustainable,” says Bob Campbell, the state government leader for Deloitte LLP. “As the economy turns, so do healthcare costs.”

PRIVATE AND PUBLIC SPENDING

Federal healthcare spending grew much faster than private or local government spending. Costs for various federal programs soared 10.4% in 2008, with Medicare increasing 8.6% compared with 7.1% the year before. Healthcare consumed 36% of federal revenue, compared with 28% in 2007.

In contrast, spending by private businesses grew only 1.2% in 2008, while state and local government spending grew 3.4%, compared with 6.6% the year before. Health Affairs, which published the report last month, said business costs for healthcare declined as private plan enrollment dropped by 1 million people—at least partly due to lost jobs.

State Medicaid spending growth declined, according to authors, partly because cash-strapped states cut payments to hospitals and other providers.

The report, compiled by researchers at the Center for Medicare & Medicaid Services (CMS) attributed the overall health cost slowdown to the economic recession. But the jump in federal spending was due to faster Medicare spending growth on hospitals, physicians, Part D drug benefits, and private Medicare Advantage plans, as well as a temporary new infusion of federal funds into state Medicaid programs.

Costs for Medicare Advantage plans soared 21.3% in 2008—to $108.2 billion—similar to the 22.1% growth in 2007. That was due to 13.6% enrollment growth in private Medicare plans, and to a 22.9% increase in Part D drug spending within those plans.

“The slowdown is good news but likely reflects the recession and to some extent anticipation by providers of the threat of controls from healthcare reform,” said Marilyn Moon, a health economist at the American Institutes for Research in Washington, D.C. “When people are feeling more secure, I expect we’ll see it go up again.”

By sector, U.S. spending on hospitals totaled $718.4 billion in 2008, with cost growth dropping to 4.5% from 5.9% the year before—the slowest rate of increase since 1998. Expenditures for physician and outpatient clinical services reached $496.2 billion, representing 5% growth, down from 5.8% and the slowest growth rate since 1996. But outpatient clinical costs rose faster than physician spending—6.6% versus 4.7%.

SLOW GROWTH ON DRUG SPENDING

Prescription drug prices grew 2.5% in 2008 compared with 1.4% the year before; that was still below the average annual growth of 4.1% from 1997 to 2007. Home health spending reached $64.7 billion in 2008, with growth declining to 9% from 11.8%.

Private health insurance premiums and benefits in 2008 grew 3.1% and 3.9%, respectively, the slowest rate since 1967. That was due to declines in enrollment and smaller spending growth for physician and outpatient services and prescription drugs, journal authors said. Consumer out-of-pocket spending growth slowed to 2.8%, from 6%, as people may have forgone medical care due to the poor economy and unemployment.

Moon says the new report shows that congressional health reformers are targeting the right areas for cost control—Medicare spending on hospitals and Medicare Advantage plans, which are among the fastest growing sectors.

Health Affairs authors cautioned that despite the overall spending slowdown, monitoring the drivers of cost growth will remain critical since the proportion of personal income and government revenue devoted to healthcare continues to rise and the nation faces an uncertain economic future.

Campbell warns that health reform could drive up costs as uninsured Americans obtain coverage and seek care. But Moon says reform will have highly uneven effects, with the drive toward ever-increasing prices possibly moderating when there are more paying patients.

“Those things are very hard to predict until it’s all out there in full bloom,” she says.

Innovation & Excellence Intersect at Renaissance Surgical Arts of Newport Harbor

Even before the Centers for Medicare and Medicaid Services (CMS) issued its new conditions for coverage relating to improved infection control practices in ambulatory surgery centers (ASCs), Bruce Wallace and Anthony Pings knew that infection prevention would be the cornerstone of their latest development project — a world-class multi-specialty ASC that would be destined to set the bar enormously high in terms of innovation, patient care, and surgeon and staff satisfaction.

Wallace, the CEO of Congero Development, architect Ping, the CEO of Anthony C. Pings and Associates, and Kathy Just, vice president of Congero and interior designer on the project were the driving forces behind Renaissance Surgical Arts of Newport Harbor, LLC, designed to be a preeminent medical facility led by notable surgical specialists working with cutting-edge operating room technologies within an innovation-rich, patient-focused, healing environment.

“This facility was truly designed around exceptional patient outcomes,” Wallace says, “and much of that has to do with integration of some newer equipment and emerging technologies that were not readily available before in the U.S. It also more fully addresses the needs of healthcare providers, as we have identified the challenges that their lifestyles incur and we have provided solutions for them.” In addition, Congero desired to bring a center of excellence to Orange County, California, as well as a project that was scalable to emerging technologies as they became available, with minimum invasiveness to the operations overall.

This 360-degree approach starts with the patient. “I conduct a lot of direct research with patients and physicians to determine what makes them happy,” Pings says. “We don’t ask patients what they want; instead, we ask them to describe their experiences and that’s when they are going to tell you what works and what doesn’t. Nobody wants to have surgery, so when we work on a project like this, we want to provide patients with the physical and emotional support they need.” To that end, Just worked to ensure that Renaissance was designed as a healing environment, with a sophisticated and rich décor that promotes pre-operative calm and facilitates post-operative recovery. To maintain normothermia and ward off post-surgical complications, patients are provided with forced-air heated garments and blankets, as well as IV solution warmers.

Pings adds, “We start a project like this from a patient-focused standpoint and blend that with needs of the clinical staff to create solutions that supports both parties in the best possible way.” For example, the center places a high priority on patient privacy; patient entrances and exits are separated, and private spaces have been created all throughout the pre- and post-surgical experience. “We believe in giving patients separate waiting areas,” Wallace says. “Because we are multi-specialty facility we don’t want patients sitting just anywhere — we don’t want a woman who has had a mastectomy sitting next to a woman having augmentation.” Wallace continues, “We accommodate patients in a tremendous number of ways, including doing what we can to make them feel welcome, lower their anxiety and make them comfortable. I want them to feel as though the staff and center was there for each of them personally.”

From the time the patient is prepped for surgery until recovery, aseptic technique is an omnipresent concern. “Infection control considerations were integrated into every decision we made,” Wallace affirms. That starts with the replacement of traditional gurneys with operating tables that first function as patient transport systems and then transfer – along with the patient – to a fixed base in the OR. Not only does this system – the first of its kind in the U.S. — save as much as 40 minutes in transfer time, but it helps eliminate cross-contamination during patient transfer. What’s more, the German-made tabletops by Trumpf can be completely sterilized.

“The tabletop you are on was never shared by another person between being sterilized,” Wallace emphasizes. “A classic place where bacteria transfers is the OR table itself. At other facilities, someone goes in with a squirt bottle between patients and they have 5 minutes to sterilize the table and the fact of the matter is that the table is definitely not sterilized in 5 minutes.”

Recognizing that proper decontamination and sterilization of medical devices and surgical instruments eliminates infections and produces operational cost-savings, the facility features a system that has taken patient and staff safety to the next level. Driven by selective automation, Renaissance’s sterile processing department, supported by Belimed equipment, is able to achieve efficiencies in the way surgical instruments are transported, washed and decontaminated, sterilized, reassembled and contained. Upholding the dedication to stringent infection control practices, instruments are sealed in trays and then pass from a “dirty” room to a “clean” room where they are sterilized and processed further, all in a department that has been designed with the goal of becoming more environmentally responsible in water and energy usage. All instruments have been marked with RFID technology, bar-coded, catalogued and tracked from purchase, and when an instrument approaches a sterilizer, the cycle is automatically set to the individual manufacturer’s care parameters – thus ensuring a longer instrument life and a repeatable sterilization process that ensures uniform processing and meets infection prevention standards. According to Pings, the backbone of the facility is a chamber sterilization system comprised of two discreet, low-intensity, stand-alone sterilization areas located between the operating rooms, and a central, high-intensity processing area in the operating corridor. The combined effect of the chamber system, sterilization process and smart utility use, allows for the elimination of up to eight full-time employees, with processing cut to a fraction of standard times while delivering vastly improved sterility assurance.

“Our system reduces staffing in central sterile (CS) and eliminates a lot of the cross-paths that exist elsewhere,” Pings says. People think if you are six feet away from dirty, you are OK, but those numbers don’t work anymore. Hospital CS departments are essentially one big room with workstations, and even the best-trained staff will violate those boundaries. That’s why the chamber sterilization concept works.”

Contributing to maintaining the line between sterile and unsterile is Congero’s proprietary LED system built into the floor and walls with a laser that resembles a light fixture placed before each terminal end of the OR corridor; this system replaces the traditional red-line tape used to delineate non-sterile areas from sterile areas. The center also features sterile lounges in the sterile corridor for staff to use on surgery days without having to gown out into non-sterile cover-ups to conduct business outside of the OR corridor. Staff can use phones and computers in the area while saving vast amounts of time in gowning out both ways; it adds up to a cost savings of approximately $8 per trip per staff member.

Contributing further to physician convenience is an adjacent, separate entity, the “hot office” area, instead of a conventional medical office building set-up where surgeons can have a place for pre-op and post-op patient consults, a design that extends the full use of the facility to office-based surgery convenience, according to Pings, who notes, “When you provide ways for physicians and staff not to work harder but to work more efficiently, they prefer it, and they are happier people.”

Pings continues, “What I push for the most is an understanding of the different needs of everyone involved at the center, and that includes surgeons. That physician lounge is one way to provide them with the productivity tools they need without having to leave substerile. We wanted to give them the support tools they need within their domain; for example, while they chart they can observe monitors that assist them in real-time tracking of pre-op and post-op patients. Go into the average surgical corridor and you see surgeons sitting on stools trying to have some sort of defendable territory between cases, and that’s neither appropriate nor conducive to surgeon satisfaction.”

The center is powered by a sophisticated IT platform that enables a number of progressive processes such as ultrasonic tracking of patients, staff and physicians for quick-location purposes; biometrics identification for narcotics dispersion; Bluetooth wireless monitoring of patient vitals; advanced telemedicine capabilities; RFID-driven nurse call system and much more. The IT capabilities extend to center management and operations such as inventory control, setting par levels and supplies ordering, plus patient scheduling, patient flow and H&P, and coding and billing, all handled with HIPAA-approved transmittal processes. The center’s eight ORs are equipped with state-of-the-art LCD displays, booms and an audiophile system, as well as CT and MRI in-room imaging. Renaissance is also home to a showroom and telemedicine center of excellence for Olympus Corp., which has installed a digital integration system utilizing rigid and flexible scopes, with one cart handling multiple surgical specialties.

How Renaissance fit into the existing Pacific Medical Plaza building is an achievement in itself, Pings says, since the entire project was a retrofit and where the anchor of the building was the nearly 19,000-square-foot ASC. “We were able to be extremely aggressive in our design in the allotted square footage,” he says. “The original ASC design had elements that were extremely challenging when you realized our space limitations. The design had to be created around the main stairwell in the very center of the structure and we relocated a second stairwell from one side of the building to the other.”

The innovations abound at Renaissance, which required a coordinated process of value engineering driven by the collective experience of the development team to deliver a cutting-edge ASC for very close to the cost of a standard facility. “We knew the challenges related to cost control for an ASC as ambitious as this,” noted Wallace. “However, what we could not have anticipated was trying to accomplish this amid one of the worst economic environments in U.S. history.” The upfront effort will continue to be realized through much lower operating costs thanks to better outcomes, automation and other inherent cost controls. “Cost is an overriding concern at any center but you must remember that upfront costs are ameliorated by cost savings in patient safety and efficiency,” Pings notes.

Key to Renaissance’s success is the partnership between stakeholders, according to Wallace. “This center is a culmination of many years of collaboration with Tony and Kathy as well as the relationship with a cooperative landlord who was of tremendous help in the development process and extremely supportive through the financial crisis. It was also critical to have physicians buy into your vision. We couldn’t have done it without the overwhelming support of the physicians; most of them put their money in, signed on the dotted line and sat back, leaving us to do what we were supposed to do.”

According to Wallace, the center is 70 percent physician owned, with Congero operating as a minority management company. Being a physician-driven facility, the opportunity to do things differently presented itself repeatedly, including how the center was staffed. “We created our own registry and share our staff with other facilities in the area,” Wallace explains. “By doing so we can reduce the labor-related load on the facility; for instance, on slower days with a lower case volume, we can share our staff with other facilities in the area. We believe having people standing around is bad for morale and bad for efficiency’s sake, and this arrangement is better for staff, if they need to take a day to meet personal or family obligations. The registry concept is a better way to accommodate staff who can work the hours they would like to work. And it allows physicians to have a schedule that fits their lives, too. It creates a real team spirit. We also incentivize staff to help increase the efficiency and profitability of the center, linking together their individual success and the success of the center for even better outcomes and operations.”

Making Infection Control Central to an ASC’s Operations

In my parallel life, I also edit one of our company’s sister publications, Infection Control Today (ICT) magazine, so as you can imagine, infection prevention in all healthcare environments is dear to my heart. I have been following closely the new conditions for coverage (CfCs) issued last year by the Centers for Medicare and Medicaid Services (CMS) addressing infection control in ambulatory surgery centers (ASCs), and the sense of panic that these CfCs have triggered. ASCs have traditionally enjoyed a very low infection rate, but some rather high-profile infectious outbreaks at outpatient facilities prompted a greater investigation by the government into the state of infection control at surgery centers and a few bad apples have forced a new regime. But perhaps that’s a very good thing in disguise. It’s true that human nature being what it is, people don’t always do what they are supposed to do, and so rules are made to enforce mandatory compliance. It’s always a shame when doing the right thing must be legislated instead of met voluntarily, but the bright spot in the new CfCs relating to infection control is the hope for even better patient outcomes — a distinct hallmark of the ASC industry in the first place.

In this issue you’ll meet Bruce Wallace and Anthony Pings, two people who have made infection control the focus of every decision they have made in the design and development of Renaissance Surgical Arts at Newport Harbor, LLC, a brand new multi-specialty ASC that will surely be a destination for healthcare in the Orange County, California region. Central to the center’s long list of innovations is the numerous concessions made to making infection control an imperative, from the multi-chamber sterile and substerile areas in between the operating rooms, to the extensively automated surgical device and instrument sterilization systems, to the use of touchless scrub sinks and surfaces impervious to bacteria.

OR Technology: A Glimpse Into The Future

As we move into 2010, a new wave of technology awaits us. Highly-developed health information technology (HIT)-driven systems and equipment are becoming the standard in many operating rooms (ORs), whether they are in a single-specialty ambulatory surgery centers (ASCs) or advanced surgical hospitals. It is important to stay up-to-date on these new technologies which not only reduce medical errors, but improve patient comfort and post discharge follow-up. The following case studies highlight this trend.

Enhancing Communication, Collaboration and Education: An Olympus Case Study

Three years after adopting integrated ENDOALPHA ORs, Penn State Hershey Medical Center is ready for more. As the only teaching hospital in central Pennsylvania, Penn State Milton S. Hershey Medical Center is one of the area’s largest healthcare providers. The hospital is equipped with 23 surgical suites and its department of surgery performs more than 19,000 procedures annually.

Staying Ahead of the Technology Curve

As industry trends move toward minimally invasive techniques, the hospital was quick to understand the benefits of integrated surgical suites as a way to stay competitive with the specialized technology demands of increasingly sophisticated procedures. “Several years ago, we realized we had a need for advanced, integrated technologies in our OR as we anticipated the convergence of laparoscopic and flexible endoscopic instrumentation,” says Randy Haluck, MD, professor of surgery and division chief for minimally invasive surgery and bariatrics. “We also recognized the need for a sophisticated system relative to data acquisition, storage, and transfer.”

Penn State Hershey began the process of integration in 2005, building three new Olympus ENDOALPHA surgical suites in 2006 and then converting two existing ORs to ENDOALPHAs the following year. The hospital anticipates completion of four more integrated ORs, for a total of 27 surgical rooms with one-third of them set up as state-of-the-art ENDOALPHAs this year.

Taking a Comprehensive Approach

True systems integration goes beyond the equipment and operating platform. It also takes into account the ergonomic design, workflow and technology optimization of each surgical suite. This means designing rooms with ceiling-mounted booms for holding imaging equipment and monitors off the floor, allowing for more efficient post-procedure clean-up and ergonomic positioning of monitors during the procedure. It means integrated equipment (scopes, imaging platforms, monitors, video and accessories) that work together and can be easily interchanged during a procedure. And it means a cohesive information management system for patient and procedural data, images, and audio that can be captured, stored, and retrieved from both inside and outside the sterile field. “We needed to have multiple surgical services using the same operating room, between general surgery, urology and minimally invasive GYN surgery,” says Gerald Harkins, MD, medical director for minimally invasive GYN surgery. “We’re all able to function in the ENDOALPHA laparoscopic suites, and it’s been a fantastic platform for that utilization.”

Experiencing the Installation Process

Olympus offers turnkey solutions, working with customers from start to finish on the design, construction and set-up of integrated operating and intervention rooms. “The flexibility of Olympus’ ENDOALPHA system means it can be easily customized to create a right-sized solution unique to each facility,” says David Alexander, Penn State Hershey’s Olympus integration consultant. “We were able to incorporate their legacy equipment along with their pre-existing video-conferencing system and streaming video package into their ENDOALPHA ORs to create one seamless solution. Hershey proved to be very knowledgeable, so it was a highly collaborative effort.”

Taking Centralized Control

The nerve center for each ENDOALPHA OR is a centralized control panel. With audio, video, data and images all controlled via a single touch screen, clinicians have the power to connect, communicate and collaborate with others outside the procedure room. Clinicians can also control surgical and room lighting, in-room observation cameras and all information and imaging systems without ever leaving the sterile field. To further enhance efficiency, the ENDOALPHA system provides preset capabilities so that monitors, lighting and all equipment can be custom-tailored to surgeon preferences and made available at the press of a button.

Communication, Collaboration, and Education

Penn State Hershey Medical Center’s custom-placed displays ensure all team members have the perfect view of live images. They regularly create video networks for sharing, collaboration and education from within and outside the hospital. “There’s no question that the Olympus system has dramatically changed how we teach in the OR,” says Peter Dillon, MD, chairman of Penn State Hershey’s surgery department and surgical director of perioperative services. “We’re now able to broadcast these procedures to first- and second-year medical students, exciting them about the wonders of surgery at a much earlier stage in their training. So it really has changed dramatically and in a very exciting fashion how we teach.” Haluck adds that it also gives the Penn State Hershey team a better way to collaborate with other physicians and share information with patients. “We can educate other physicians and record images for colleagues or bring them in when needed to confer and/or assist on a procedure. We are also able to show patients what their surgery was about and why they were having problems. That’s a great benefit to us, and certainly patients appreciate it as well.”

Interventional Radiology Breaks New Ground: A Skytron Case Study

Philips and Skytron have teamed up to help fully realize the promise of a hybrid angiography suite by implementing new cardiovascular solutions with the latest Allura Xper FD technology from Philips and state-of-the-art surgical lighting and boom technology from Skytron.

For more than a decade, Barry T. Katzen, MD, medical director of Baptist Cardiac and Vascular Institute (BCVI) in Miami, has pioneered the integration of surgical and interventional procedures. Katzen and his team continue to show that surgical procedures in an angiographic environment can be accomplished with the same degree of efficiency as in an OR.

“The specialties of interventional radiology and vascular surgery bring more to each other when we work together,” Katzen says. “Procedures that help drive this relationship include aneurysms of the thoracic aorta and abdominal aorta. Having an environment where we can use a surgical option allows us to think out of the box for individualized patient solutions.”

In 2008, Philips Healthcare and Skytron entered into a collaborative agreement to provide comprehensive, integrated solutions for the cardiovascular environment. Katzen seized the opportunity to refine the surroundings. Based on a well-coordinated plan from Philips and Skytron, a room at BCVI underwent a significant upgrade to enhance hybrid functionality.

“One of the great advantages of the new room design is it’s so spacious that we can all function effectively without being in each other’s way. Information can be transferred to the head of the bed — to the anesthesiologist — down to where we’re working very easily,” says James F. Benenati, MD, medical director of the peripheral vascular laboratory.

A Room That Works

BCVI’s surgical team appreciates the changes made. Katzen believes the upgrade has created a better environment for all involved. A recent experience demonstrated how the teams successfully combined surgical access with an interventional solution. A patient presented with critical narrowing of an artery to the brain and chest, and a narrowing of that same artery in the neck. “It was a very complex situation,” recalls Katzen, “but we combined our skills. The surgeons removed the plaque in the neck with an endarterectomy and we used that same access to go down and stent the chest.”

Installation With Minimal Impact

“We’re a busy lab and taking a room down for a period of time is always an inconvenience,” says Katzen. “The one thing everybody remarked upon was how fast this upgrade was accomplished.” In two and a half weeks, Philips and Skytron, working closely with the implementation team at BCVI, completed the staging and upgrade. The new room reflected the input of interventional radiologists, surgeons and anesthesiologists, with each group helping to define the clinical specifications to make it a multi-disciplinary environment.

OR Technology Update: A Steris Case Study

The epitome of surgical technology today is one OR in which surgeons can perform image-guided, catheter-based interventional procedures; minimally invasive endoscopic procedures; extremely precise robotic surgery; or full open surgery, depending on the case load or discoveries made in surgery. In this type of hybrid OR, integrated imaging, computerized patient information and live video routing technologies instantly display test results and critical real-time information on high-definition monitors in the sterile field. This allows surgeons and staff to ascertain the most timely and accurate diagnosis and treatment for the patient. It also helps them achieve the most flexible and effective uses of the room and optimize scheduling and utilization.

These are also the types of rooms in which medical leaders and pioneers train residents and other clinicians, develop new minimally invasive procedures, such as natural orifice trans-luminal endoscopic surgery (NOTES) and trans-catheter heart valve replacement and master new surgical devices.

These highly advanced rooms can incorporate advanced communications, connectivity, LED surgical lighting and high-definition visualization such as intra-operative fluoroscopy, intra-operative computerized tomography, magnetic resonance imaging, image-guided navigation, 3D software extrapolations of the imaging, robotics and many other technologies. Each of these tools are important in today’s hybrid OR, but when integrated correctly they form a seamless whole that is greater than the sum of its parts.

To accomplish this synergy, STERIS collaborates with leading manufacturers to design and install customized, integrated HD360°™ Hybrid ORs for healthcare facilities. STERIS project design managers configure STERIS’s open infrastructure Harmony® Lighting and Visualization systems, equipment management systems and advanced integration technologies with interoperative imaging, robotics, endoscopic and video technologies and more. The result is a suite that enables fully informed staff, highly efficient procedures, extremely flexible room use, successful surgeon recruitment, medical education, ongoing surgical innovation, leading edge robotic surgery, telemedicine, and new possibilities yet to be imagined.

OR Technology Update: A Berchtold Case Study

Problem

Before hybrid ORs existed, imaging and communications capabilities were not an option during cardiovascular and neurosurgery operations, resulting in patients getting diagnosed and treated in two different visits. Separate procedures and imaging consultation can be costlier for patients and surgeons, can result in additional stress, more down time and longer hospital stays for the patient, and are not conducive to emergencies that sometimes arise during surgery.

Solution

Combine minimally invasive and interventional surgical technologies with medical imaging and communications equipment in one operating room: the hybrid OR.

A growing trend involving endovascular procedures during cardiovascular and neurological surgeries requires equipment to accommodate open and closed procedures in the same room, even at the same time, although this is not necessarily planned from the start. The new hybrid OR model provides the surgeon flexibility in performing a variety of interventional, imaging and surgical services in one setting, eliminating the need to transfer the patient.

For example, two of the most popular hybrid ORs are for cardiovascular and neurosurgical procedures:

» Neurosurgical hybrid ORs can include magnetic resonance imaging (MRI); computed tomography (CT) and angiography equipment within a neurosurgical operating room.

»Cardiovascular hybrid ORs often features: Fixed ceiling- or floor-mounted C-arms, ultrasound and endoscopy equipment, coupled with cardiac catheter laboratories.

Because a hybrid OR is specifically designed for endovascular procedures, careful planning from the beginning can help to ensure all rooms are equipped with necessary tools. Some tips to consider while creating a specially designed hybrid OR include:

»Identify factors that are important to the hospital team, such as, should all equipment hanging from the ceiling (surgical arms, flat panel arms, etc.) be able to cover the whole patient in all orientations?

»Think as far ahead as you possibly can to “future proof” the room, reducing the need to renovate the OR moving forward. For example, what is the most extreme type of procedure the team might do in the OR? Then outfit the room in preparation for the procedure.

»Involve the end user at the very start of the project to give a real world perspective for offering scenarios, as well as discussing needs and concerns. This can include nurses, surgical technicians and staff, as well as anesthesiologists.

»Consult with the vendor providing lights, booms and imaging equipment to accommodate all of their needs. For example, many imaging companies have different requirements for ceiling heights.

Hybrid therapies enable hospitals and clinicians to provide less invasive care that is safe and cost-effective for the patient. Careful planning can lead to an effective hybrid operating room design that offers the following benefits:

» Cost-effective operations for patients and surgeons, with better outcomes.

» Reduced stress, faster recovery and reduced hospital stays for the patient.

»Safer procedures, especially in the case of an emergency.

New Bair Paws® Gown Brings “Flex Appeal” to Patient Warming: An Arizant Case Study

The recent Centers for Medicare and Medicaid Services (CMS) adoption of the SCIP-Infection-10 normothermia quality measure has made it more important than ever to simplify the process of warming every surgical patient. Arizant Healthcare’s latest innovation in forced-air warming, the Bair Paws Flex gown, does just that by incorporating a surgical warming product — Bair Hugger blankets — into a comfortable patient gown that warms before, during and after surgery.

While clinical versatility is a key benefit of the Bair Paws Flex gown, so is the practical economic approach of standardizing multiple warming capabilities into one gown that can accommodate most perioperative warming needs. While helping to improve outcomes and boosting patient satisfaction, the Bair Paws Flex gown may save facilities money by supplanting multiple OR warming blankets and the warmed cotton blankets and gowns often used to comfort patients.

Just One Gown Warms From Start to Finish

Before surgery, patients appreciate the Flex gown for its controllable warmth; they can simply dial the temperature of the air flowing through the gown to a level that’s comfortable. The surgical warming products built into the gown are unknown to the patient because they are deployed only by surgical staff.

In the operating room, the same Bair Paws Flex gown offers clinicians the ease and convenience of having multiple patient warming options available during surgery. Seamlessly integrated into the gown are: a head drape, adhesive tape to isolate the surgical field, and deployable arm extensions to transition into a Bair Hugger upper body blanket with tie strips. A second insert in the lower portion of the gown may be used to prewarm before surgery and then warm again as a lower body blanket once in the OR. The gown’s design allows upper or lower body warming for any surgical positioning — supine, prone or lateral.

After the procedure is over, the upper body blanket arm extensions, head drape and surgical tape strip perforate off, returning the garment to a standard warming gown for post-operative use through the lower warming blanket insert.

The Bair Paws Flex gown is comfortable for patients, convenient for clinicians and warms from pre-op to the OR to PACU. Best of all, it’s also economical. One gown handles almost all your warming needs, including contributing to quality goals like SCIP-10 and improved patient satisfaction. It incorporates a highly effective surgical warming device directly into a soft, comfortable hospital gown that does something positive for patients and hospital staff. It’s not just a gown. The Bair Paws Flex gown is a patient warming and patient satisfaction tool. It’s the future of patient warming, and it’s available today.

Practicing Arthroscopic Surgery on Computers, Not People: A Toltech/Sensable Case Study

Learning diagnostic knee arthroscopy is not unlike learning to play the violin — both art forms require a mixture of cognitive and proprioceptive skills that can only be developed through rigorous practice. And while both require intensive mentoring, surgical apprenticeship is unique in its resulting increase in operating room time and potentially patient risk. Just as with a violin that makes no sound, little can be learned from surrogate surgical environments having no objective feedback, including costly and labor-intensive cadaver training. And little transference of either skill can be expected from computer based training lacking the feel of the instrument(s).

In late 2009 the University of Michigan Medical Center’s Orthopaedic Surgery department, led by James Carpenter, MD, became an early adopter of the Knee Arthroscopy Surgery Trainer (KAST) from Touch of Life Technologies (ToLTech). This simulator was co-developed with the American Academy of Orthopaedic Surgeons (AAOS), Arthroscopy Association of North America (AANA), and the American Board of Orthopaedic Surgery (ABOS). It provides both cognitive and haptically-enabled skills training for the proper and efficient techniques required for diagnostic arthroscopy of the knee as done on an outpatient basis — including training to competency, and a modality for complete evaluation of residents’ skills.

In the KAST simulator, trainees hold a customized stylus in each hand — emulating the probe and camera used in actual surgery — that are attached to PHANTOM® force-feedback haptic devices, made by SensAble Technologies. The haptic devices allow trainees to navigate in true 3D space while interacting with high-resolution models that are viewed on-screen, as if through an actual arthroscope. The force feedback devices are programmed to push back on the user’s hand to deliver the “feeling” of the soft tissue, cartilage, and ligaments involved in knee arthroscopy.

The “Virtual Mentor” in KAST guides, critiques, and scores the resident on each part of the procedure. In one module, trainees must perform three steps for examining the medial meniscus with a probe. The Mentor requires the trainee to score 100 percent on each step before attempting subsequent tasks, and finally a time-trial. A special “cheater view,” only available at the novice level, shows the outside image of the knee (seen in the right hand portion of the Mentor screen), to help residents understand where the tools they are using are located with respect to the anatomy. KAST switches seamlessly between a right and a left knee, forcing the trainee to be ambidextrous with respect to the camera and probe.

Haptically-enabled surgical simulation provides cognitive and skills-based training — freeing up the outpatient facility’s attending physicians to teach higher-level skills, and giving residents unlimited autonomous practice opportunities. It allows residents’ skills to be objectively measured and validated before they undertake procedures on patients. The University of Michigan Health System’s Orthopaedic Surgery department plans trials comparing beginning residents who have trained on KAST, against a control group. Separate validation studies led by the AAOS using KAST are underway nationwide during 2010.

Care models come together

When it comes to cost control, integrated care and improved communication among caregivers are among the most frequently cited needs.

Those needs are at the heart of a collaborative effort between the Little Rock, Ark.-based Case Management Society of America (CMSA) and the Washington, D.C.-based DMAA: The Care Continuum Alliance (DMAA). In October, the two industry groups announced the creation of a taskforce that will define the relationship between case management and population health management.

Working together, the organizations plan to develop a consensus statement detailing the interactions between case and population health management strategies and devise a roadmap for quality-based programs for the chronically ill.

“If we truly look at our patient populations and their needs, it’s pretty hard not to cross the line between the two,” says CMSA Executive Director Cheri Lattimer.

Despite the overlap, the two fields have historically acted independently, leading to duplication of services, unnecessary expenses and less than optimal care.

Case management focuses on meeting an individual’s comprehensive health needs through assessment, planning, facilitation and coordination of care, according to CMSA. DMAA’s definition of population health management emphasizes a central care delivery model led by the primary care physician, patient engagement and personal responsibility and the expansion of care through coordinated programs. While the interventions vary, the groups acknowledge there’s a lot of overlap between their functions.

“The two fields are so integrated,” says Lattimer. “If you continue to keep them siloed you continue to have a communication breakdown.”

By working together, the two organizations will be able to devise more collaborative, coordinated models that translate to better patient care and reduce duplication of services. Until the silos come down, legislation will have little impact, she says.

“Communication isn’t all about EMRs,” she says. “It’s about our processes, our basic communication strategy.”

Rule proposed for defining "meaningful use" of electronic health records

The Centers for Medicare & Medicare Services (CMS) has issued a proposed rule defining
“meaningful use” of electronic health records (EHR), a definition awaited by many healthcare
providers before taking advantage of federal incentives for investing in the technology.

Donut hole coverage gap grows, bills aim to help seniors

BLINK AND YOU’RE BOUND to miss something in healthcare. Legislation quickly culminating for Medicare prescription drug coverage will potentially change the benefit structure of every Part D plan.

“Healthcare reform is now an ideological, politically driven effort with little evidence based upon logic or predictability,” says Randy Vogenberg, principal, Institute for Integrated Healthcare, based in Sharon, Mass., and executive director of the Biologic Finance and Access Council.

CMS anticipates that premiums for stand-alone prescription drug plans (PDPs) will only rise slightly in 2010—the average monthly payment is $30, up $2 from this year—and increase 20% by 2019. However, overall prescription drug spending would fall.

The bad news for seniors is that most Part D plans will offer little or no coverage for the donut hole gap in 2010. According to the Kaiser Family Foundation, 80% of PDPs will not offer any gap coverage and 20% of those that do will limit coverage primarily to generics. In 2010, 61% of PDPs will charge a deductible with more than half charging the standard $310.

Once the deductible is met, the beneficiary pays 25% of covered costs up to total prescription costs meeting the initial coverage limit. Only 45% charged a deducible in 2009.

The donut hole has grown from $2,700 in 2009 to $2,830 in 2010, boosting the out-of-pocket threshold to $4,550 from $4,350.

The total covered drug out-of-pocket threshold is $6,440, up from $6,153 in 2009. Maximum copayments up to the out-of-pocket threshold are 15% coinsurance or a copayment of $2.50 for covered generics and $6.30 for covered brand name drugs, whichever is greater. In 2009, the cost of drugs above the threshold was 15% coinsurance or $2.40 for covered generics and $6 for brands, whichever was greater.

That has risen from 2006 figures of 5% coinsurance, above an out-of-pocket threshold of $5,101, or a copayment of $2 and $5 for covered generics and brands, respectively, whichever was greater.

LEGISLATIVE CONSIDERATIONS

Two reform proposals—America’s Healthy Future Act passed by the Senate Finance Committee and the House’s Affordable Health Care for America Act (H.R 3962)—are under the most intense scrutiny. A number of contentious issues, including the donut hole coverage gap, subsidies and non-interference, continue to resurface during the general Part D debate.

The Pharmaceutical Research and Manufacturers of America supports legislation under which drug companies will provide a 50% discount on brand-name drugs to most beneficiaries in the donut hole and which would allow 100% of the discount amount to count toward the annual out-of-pocket threshold that determines when catastrophic coverage begins. The recommendation was included in the Senate and House bills.

Jean LeMasurier, senior vice president of public policy for the Gorman Health Group in Washington, D.C., anticipates that the 50% discount on branded drugs will be a win for drug manufacturers, who will see increased utilization.

The House bill also moves forward the effective date—from Jan. 1, 2011 to Jan. 1, 2010—for reducing the donut hole by $500 and recommends eliminating the gap by 2023.

Major differences between House and Senate bills show up in the asset limit used to determine eligibility for the Medicare Savings Programs and low-income subsidy (the Senate has no provision); Part D premium subsidy for higher income beneficiaries (no House provision); and amount of payment bonuses for evaluation and management services provided by physicians.

The outlook for low-income subsidy (LIS) beneficiaries will not be as rosy in 2010 as in past years. Compared to 2006, there will be 212 fewer plans with LIS offering a $0 premium—a 30% decrease. In addition, 40% of LIS beneficiaries are enrolled in benchmark PDPs that will no longer qualify as benchmarks in 2010.

Nearly two-thirds must switch on their own or pay premiums if they remain on their current 2009 plans. CMS will reassign other LIS enrollees. In general, the number of PDPs offered nationwide has taken a slide, down from 1,689 in 2009 to 1,510.

Despite the fact that fewer PDPs are offering $0 deductibles and first-dollar coverage, Donna Burtanger, senior director of Medicare solutions for Silverlink Communications, a Burlington, Mass.-based healthcare consumer communications company, is optimistic that beneficiaries won’t drop their Part D coverage because they will have no other way to pay for their medications. They just have to do some comparison shopping, she says.

Robert L. Fahlman, chairman and CEO of Oakland, Calif.-based Arcadian, which offers Medicare Advantage health plans and services, predicts that if there are fewer rebate dollars for drugs, formularies will be more limited, more plans will eliminate coverage of generics in the donut hole, and formulary tiers will evolve to differentiate between preferred and non-preferred generics.

“As reimbursement falls, payers will be forced to increase copayments but not so high as to make drugs unaffordable to members,” he says.

Arcadian has introduced preferred and non-preferred tiers for its generics on formulary.

“If we educate our members on generics and their efficacy, they are more likely to gravitate toward using them, keeping them out of the donut hole or at least prolonging their entry,” Fahlman says.

NON-INTERFERENCE AMENDMENT

The House bill supports the measure to strike the non-interference clause, which would enable the government to negotiate directly with drug manufacturers on drug prices under Part D. While the amendment has its supporters, groups such as the Academy of Managed Care Pharmacy (AMCP), are skeptical of the measure’s ability to address the needs of patients or the system.

“If Congress proceeds with direct price negotiations, there will be a potential for higher prices,” says William Hermelin, director of government relations for AMCP. “If there is only one negotiator, decisions will be based on price, not clinical effectiveness and may force payers to include certain drugs on formulary despite the lack of evidence-based medicine.”

Fahlman concurs that direct negotiations by the government are not a viable option. They would narrow drug choices and determine what should be covered based on price alone, he says.

Another issue under debate is reporting pass-through Part D drug prices to be mandated starting in plan year 2010. Part D plan sponsors must report to CMS the amounts pharmacies actually receive for dispensed Part D drugs—the pass-through prices. This means that Part D plan sponsors, which pay their pharmacy benefits managers (PBMs) a contracted amount for each dispensed Part D drug—a lock-in price—will need to ensure their PBMs furnish data on the pass-through prices for dispensed Part D drugs. Senate and House bills have similar provisions requiring PBMs to provide basic information.

CMS making changes for Medicare plans

As Congress weighs revisions in the payment system for Medicare Advantage plans, leaders are stepping up oversight of plan benefits, marketing, pricing and quality. For the 2010 open season, which begins next month, Medicare beneficiaries will continue to have choices in MA plans, plus more assistance in navigating Medicare Part C enrollment options.

The Centers for Medicare and Medicaid Services (CMS) seeks to make it easier for beneficiaries to select appropriate coverage by reducing the number of low-enrollment plans and those with indistinguishable benefit options, according to Jonathan Blum, acting director of CMS’s Center for Drug and Health Plan Choices, which governs Part C and D programs.

Two sponsors discontinued private fee-for-service (PFFS) offerings last spring, and more are expected to follow suit as new curbs on PFFS plans kick in for 2011. Even so, all parts of the country will have some Part C plans next year, Blum reported at last month’s Medicare conference, sponsored by America’s Health Insurance Plans.

NO DISCRIMINATION

A top CMS priority is to eliminate discriminatory enrollment and marketing activities. CMS is looking hard at insurer cost-sharing policies that impose high copays for services used by chronically ill patients. Plans have to communicate coverage and cost changes “in the most responsible way,” Blum said, adding that CMS has its eye out for “bait-and-switch” sales ploys and has “diminished tolerance” for fraud and abuse.

The agency wants to ensure that capitated payments support high-quality benefits and appropriate coverage, and that benefits paid for are actually received by patients. More regulations governing Part C are in the works, with an eye to finalizing more consumer protection rules next year.

A related initiative is to evaluate payment policies to ensure that plans are paid accurately and fairly. While reform legislation could make significant changes in payments to MA plans, CMS intends to collect more data to determine how payment influences delivery of services and to ensure that appropriate payment policies lead to better outcomes.

EXCHANGING INFORMATION

Despite efforts to help seniors learn about appropriate plan coverage, CMS officials fear the abundance of coverage choices offered each year makes it difficult for beneficiaries to navigate the system. Blum said that CMS Web site tools provide too much information or may not provide the right information. The agency wants to assess what factors help a beneficiary understand coverage options and lead to enrollment in a certain plan, including the role of brokers and Web sites.

Seniors also may benefit from proposals to begin the annual open enrollment period earlier to avoid the end-of-year rush. Such a change would put pressure on CMS to distribute plan information earlier and would alter marketing and enrollment operations by insurers.

Efforts to improve the Medicare Web site and beneficiary information services on Part C and D coverage options provide a model for developing more extensive government-sponsored insurance exchanges, as proposed in reform legislation. CMS essentially operates an “exchange” for seniors, which illustrates the importance of accurate payment and benefit information and useful plan quality measures for beneficiaries to be able to navigate choices.

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