Five-Year Fix for Medicare Doctor Pay Cuts in Works

As lobbying intensifies, momentum is building to provide a five-year reprieve that would block a 21-percent fee cut to physicians who treat Medicare patients. If no legislative action is taken this month, the physician pay cut is set to go into effect in March, according to a report in The Hill.

The Senate recently passed pay-as-you-go legislation requiring Congress to offset new spending or tax cuts with corresponding spending cuts or tax increases, and the House passed a similar bill last year and is expected to take up a new version next week, The Hill reported. The Senate bill includes an exemption from pay-as-you-go for the physician payment fix. Specifically, it would allow Congress to spend up to $82 billion for physician payments without having to find offsetting savings or revenue sources. This amount would be enough to lock in fees at their current rates for five years.

The American Medical Association and other physician groups — joined by AARP — have been lobbying for a more expensive overhaul to the Medicare physician payment system, known as the sustainable growth rate formula, or SGR. Passing a permanent fix could cost $200 billion, according to a Feb. 2 report in Politico. Finding such a solution tops the AMA’s healthcare reform agenda.

Read The Hill’s report on physician fee cuts.

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.

Obama’s 2011 Budget Includes $25B in Funding for Medicaid

Pres. Obama’s $3.8 trillion budget for 2011, which was submitted to Congress, includes $25 billion to states for funding Medicaid, according to a report by the Wall Street Journal.

The $25 billion was originally intended to fund healthcare reform after a bill had passed. The stall of reform efforts will allow the $25 billion to go toward extending by six months the Medicaid funding increase given to states as party of last year’s stimulus package, according to the report.

The extended Medicaid increases are intended to cushion any strain on state budgets as effects of the recession has led to increases in Medicaid recipients.

Read the Wall Street Journal’s report on Medicaid funding.

President Obama’s Healthcare Summit: 5 Observations

1.  Its very unlikely that President Obama gained any Republican votes through his most recent healthcare summit and efforts on healthcare reform. President Obama’s more than seven hour healthcare summit yesterday most likely did not win over any Republicans in support of any specific healthcare plan, including the draft legislation President Obama released on Monday.

The draft legislation, based largely on the Senate’s healthcare bill and including several concepts from the House bill, would extend coverage to 31 million Americans at the cost of $950 billion. While the White House estimates it would actually reduce the deficit by $100 billion in 10 years as a result of spending cuts and new taxes, very few members of Congress, whether Democrat or Republican, seem to perceive it will truly reduce costs.

The Congressional Budget Office has not yet scored the plan, and most lawmakers seem to agree that these savings are unlikely to materialize. Dramatic cuts in Medicare payments included in the legislation are likely to be revisited over the next 10 years, likely reducing the savings the plan will ultimately provide.

The Wall Street Journal Health Blog reported that the summit produced “no significant breakthroughs,” and the New York Times reported both parties remained divided at the end of the summit.

According to a New York Times’ article:

Republicans said there was no way they would vote for Mr. Obama’s bill, and Democrats were talking openly about pushing it through Congress on a simple majority vote using a controversial parliamentary maneuver known as reconciliation (Feb 25, 2010).

Although the summit was promoted as an forum for reconciling legislation, Washington Post’s Michael Gerson called the Democrats outreach a “sham”:

By signaling a willingness to use reconciliation in passing a Democrat-only bill, Democratic leaders have revealed their outreach to be a pose, a sham. The purpose of reconciliation is to dramatically reduce the influence of Republicans and moderate Democrats in the Senate negotiating process(Gerson, Febuary   25, 2010).

For a discussion of 12 key concepts in President Obama’s proposed healthcare bill, click here.

2. There is a very clear divide between Democrats and Republicans as to whether healthcare reform should be approached with a comprehensive plan or on a more issue by issue basis. President Obama vowed to move forward with plans for sweeping legislation with or without Republican support, and “chided Republicans for advocating ‘baby steps,’” according to the New York Times‘ report.

The Republicans, in contrast, advocate addressing healthcare on an issue by issue basis beginning with issues where there is very broad agreement (e.g., not permitting the denial of coverage to people with pre-existing conditions). Most Republicans contend that the best way to fix healthcare is to start over. House Minority Leader John Boehner (R-Ohio), for example, called for current Democratic legislation to be “scrapped,” according to a report by the Wall Street Journal.

The Republicans, even if there are parts of the bills they agree with, generally seem uninterested in providing the President a large legislative victory, even if it may harm Democrats in the November elections. While they may not admit this explicitly, it is pretty clear they do not want to provide the President with this victory.

Despite Republican calls for beginning anew, the Democrats may try to push ahead, using the budget reconciliation process if necessary, according to statements by President Obama and other high-ranking Democratic leaders in this regard. It is unclear whether President Obama actually has the votes to achieve this.

For a discussion of the budget reconciliation process, click here.

3. Despite vows by Democrats to push ahead, it remains unclear whether or not Speaker of the House Nancy Pelosi will have enough votes to push forward legislation based on the Senate bill. If Democrats use the budget reconciliation process, the House must pass the Senate bill or some type of legislation advanced by President Obama, which is likely to be based largely on the Senate bill. Although the House needs only a majority vote to move the legislation through, remember that the original House bill passed 220-215 in Nov. 2009, with 219 Democrats and one Republican, Anh “Joseph” Cao (R-La.), voting in favor, according to a Wall Street Journal report. Since then, a handful of Congressmen have said they no longer will vote for legislation based on the Senate bill.

Moreover, in a show of either political smarts and/or a lack of political courage, Speaker Nancy Pelosi has signaled to Senate Majority Leader Harry Reid that he ought to try and pass reform legislation among Senators first.

4. Moderate Democrats, including those representing moderate to, in some cases, Red states, are in a very bad spot, politically. As Democrats push to move legislation ahead and Republicans work to block it, moderate Democrats will face difficult decisions regarding whether or not they align with the left wing of their party or side with the constituents of their states.

Some, as a result, are simply choosing to quit politics for the time being and not run for office this November.

5. While both parties remain largely divided, there was a general consensus on some issues. Both parties generally agreed that some type of legislation to curb medical malpractice suits would be included in final legislation. Here, the Republicans drove the issue with President Obama yesterday agreeing to address it in some form. Both parties also generally agreed that legislation should prohibit insurers from denying healthcare coverage to individuals with pre-existing conditions, according to the Wall Street Journal Health Blog report. However, these areas of consensus did not help to move either party toward agreement on how to address them, thereby failing to build consensus on any particular language that could be included in legislation.

Medical homes in practice

Healthcare is notorious for trying out solutions that seem to work in theory, only to watch them collapse in practice. Like throwing spaghetti at the wall, players from all segments have experimented, looking for new ideas that might stick.

The most recent concept that is showing real sticking power is the patient-centered medical home.

Since 2006, more than 30 states have initiated projects to apply the medical-home concept to Medicaid and Children’s Health Insurance Programs. Reduced costs, better support for chronic care and improved population health are the impetus behind the local efforts, which comprehensively hold the potential to effect system change, piece by piece.

Although no two projects are identical, all reflect core principles of aligning reimbursement, supporting primary-care practices, measuring results and scaling the model beyond an initial pilot phase. Early results have shown promise, which is inspiring more payers and providers to adopt the model.

The general arrangement of a team of clinicians providing a home base of individualized, coordinated care and prevention emerged through the American Academy of Pediatrics in the 1960s for specific pediatric populations. It wasn’t until recent years—as the industry began to focus more on healthcare value—that the medical-home idea was identified as a potential formula for improvement of service delivery within broader primary care practice.

In 2007, four major physician groups defined a set of joint principles to describe a patient-centered medical home, which was soon followed by the creation of the Patient-Centered Primary Care Collaborative (PCPCC), which represents employers, plans, providers and other organizations that endorse the principles. The National Committee for Quality Assurance (NCQA) is currently in the process of updating standards for its medical-home recognition program, which were initially released in January 2008.

Policymakers and the healthcare industry continue to assess the local projects, anxious to determine their financial worth and their promise for large-scale implementation.

MANAGED HEALTHCARE EXECUTIVE recently brought together a roundtable of executive thought leaders to discuss the issues related to patient-centered medical homes. The panel includes:

• Paul Grundy, MD, chairman of the Patient-Centered Primary Care Collaborative and director of healthcare technology and strategic initiatives at IBM;
• Lori Heim, MD, president, American Academy of Family Physicians;
• Len Nichols, economist, New America Foundation;
• Jerry Salkowe, MD, vice president of clinical quality improvement, MVP Healthcare; and
• C. Edwin Webb, PharmD, associate executive director, American College of Clinical Pharmacy

MHE: What do you see as the long term potential of applying the medical-home model in the next five to 10 years?

Grundy: The early pilots’ results are—well, first of all, they’re early—but I think they’re quite impressive. The PCPCC presented data from 10 of those pilots to the White House a few months ago, and what we’re seeing is better integrated, coordinated care.

When you have comprehensive, accountable, accessible, integrated, coordinated care, that results in lower downstream costs. We’re seeing hospitalizations dropping by 20%. We’re seeing hospitalization readmissions dropping by 40%. We’re seeing emergency room utilization dropping by 12% when patients have access to more robust, integrated primary care—which is better upstream care. That bodes well for the future, in which we really need to look at value creation.

Salkowe: The enthusiasm is growing by leaps and bounds outside of the pilots, so physicians who have been either ignoring or sitting back and watching what the earlier doctors did aren’t sitting back and watching anymore. They’re getting very engaged and very interested in pursuing [NCQA recognition] and many of the features in medical homes now, even if they’re not an active part of an organized pilot.

Heim: I see the medical home being integral when you look forward to whether or not it’s an ACO [accountable care organization] or just more generally talking about value-based design. As hospitals and big health organizations begin to look at this, how they integrate with the small practice is going to be one of the biggest challenges.

If you look at the North Carolina Community Care project, that was community based. It showed incredible cost savings and increases in quality, but that was another way to virtually link a bunch of community based practices, which is going to be one of the models we’ll have to accept because large health organizations are not going to be in all communities. But yet, the hospitals and the communities are still going to have to figure out a way to control the costs. And the other critical component then is getting the IT linked up.

MHE: Some say medical homes will not solve the problem of fragmented care. Primary care will continued to be siloed apart from subspecialists. Do you foresee that?

Heim: If people are saying that medical homes will further fragment care, I don’t think they understand the model because it’s the opposite that’s true. The basic tenet of the medical home is the personal physician is the coordinator of the care, and there’s integration of the patient’s needs, not only when they walk into the office, but by taking advantage of knowing your population and doing population management, using IT and tools and a team approach to coordinate that care.

Without something like the ACOs and aligning incentives, we have a mismatch in terms of how much the subspecialists and the other members of the team are brought into integrating that care. I definitely would say it’s not going to go in the opposite direction.

Webb: I’m not sure we could fragment healthcare any worse than it is right now, particularly across professions and disciplines. One of the things that is exciting to the pharmacist community is the potential for the medical home model to integrate across professional care concerns—again, assuming that we can find mechanisms to realign payment incentives, also understanding it’s obviously not possible to have a pharmacist in every three- or four-person medical practice in the United States.

Community Care in North Carolina has done an excellent job of integrating pharmacists’ services as part of the team in a virtual environment across several small- and medium-size practices. The only way we can integrate health professionals into a team is with the medical home because the current payment methodology and our cottage-based industry of silos just isn’t doing the job anymore.

Grundy: From the standpoint of the patient, the patient wants to see the specialist or the person who focuses on a certain part of the body as part of their medical home team. When they need a hip replaced, they have more than a hip. They have a whole bunch of other parts that somehow interconnect, and there has to be medication management adjudication, for example. There have to be linkages and integration, and that’s not happening now at all.

There are places in the United States where it will cost $177,000 for the last six months of life and other places where it costs $17,000. When you look at the places where it costs us seven times as much, what you’ll find is seven specialists doing seven different things—none of it linked, none of it coordinated, none of it integrated, and some of it, by the way, toxic to what the other providers are doing.

I just happened to be in New Mexico at Presbyterian Hospital recently and in Dallas and Tulsa where they’re doing a fantastic job of actually integrating the specialists into the medical home, where everybody’s practicing at the top of their license. In Tulsa, the primary care docs will email the specialists and integrate and pay for an email consult, which the specialists love, and the primary care docs love, but most importantly, the patients love it because it keeps them from wasting half a day [at a medical appointment] when the primary care doc’s doing a good job.

I would agree that whoever asks that question doesn’t understand the model.

Salkowe: There is one aspect of this we need to be conscious of. There are individuals who have one major chronic illness, and 90% of their care is being provided by a specialist: a gastroenterologist, rheumatologists or an oncologist, for example. And health plans are expected to and allow such a specialist to function as a PCP, even though we know that the focus of that care is on specialty needs, and there may be gaps in preventive health needs or other unrelated health conditions. That’s an important reality.

Now, I think we all agree that in a well managed medical home, care that specialist is providing is enhanced because of the improved communication coordination with other physicians that invariably are involved, whether it’s preventive services or hypertension or something else. There is a bit of hesitancy on the part of some of the specialists because of the scenario and uncertainty of whether a PCP should be treating everything. What happens when I have a patient where I really need to be out in front in terms of making decisions?

Heim: There are certainly many patients that I have had over the years, when the oncologist is functioning as the patient-centered medical home. I have no problem with that. From the standpoint of being recognized as a patient-centered medical home, that’s different than a subspecialist who then begins to assume the majority of the care and becomes the director. The problem is that oftentimes they’re handling maybe 70% of what’s currently going on in that patient’s life. However much of the other stuff gets either ignored or sidelined.

So if a rheumatologist becomes the patient-centered medical home, then in order to make sure that they are truly functioning in the whole aspect of managing that patient, they need to fulfill some sort of recognition program. In order for this model to work, you have to realign the payment. That would not be a major barrier if the payment were going to switch from the patient’s PCP to a subspecialist as the designated patient-centered medical home and have the payment model then switch over to that of a patient-centered medical home. That’s not a problem so long as they are then willing to take on the requirement to manage or coordinate the entire care of the patient.

MHE: What is the best strategy for reimbursement in medical home models?

Salkowe: The model that most programs seem to circle around is one that preserves perhaps 60% of the compensation as traditional fee-for-service reimbursement with the other 40% divided between process measures, care management activities and outcomes. The numbers that I’m generally seeing are 30% for the care management piece and 10% for the outcomes piece, although from the early projects where the outcomes just haven’t been measured yet, it may focus solely on care management.

That seems to get us to the dollars that are needed for support, the additional resources the practices need, whether it’s trained staff or new systems, and also to include the extra remuneration that’s needed to really engage the primary care physicians and the work around this new model.

Nichols: I like the structure that Jerry just described, and it makes a whole lot of sense, especially in transition, which is what we’re going to be in probably for three to 10 years—with a fee-for-service base but with a lot of incentives packed around care management and outcomes. Those proportions may very well change over time and may be different in different parts of the country.

The most creative thing we can do in the pilots that we hope come out of healthcare reform is to work out different kinds of shared-savings models. What’s an average cost for a diabetic? You think about the number of diabetics and different comorbidities and you can work out an expected expenditure over the year, including, in my view, expected hospitalizations and utilizations of specialists.

Then instead of holding a primary care team or even a formal medical home at risk, you could have them share in the savings that they might achieve if they hit the targets to achieve savings. Then you really do align incentives. A 2.0 model might include some incentives back to the patient so they too can see a real monetary gain in participating, because after all, health is a participation sport. You want the patients very much engaged. It’s unambiguously true we have to find a way to leverage our rather short supply of primary care professionals, in particular as we think about expanding coverage and access to care in the next five years.

Heim: One of the concerns that I’ve had with shared savings is it being time-limited. If you look at the efficiencies you will gain over time, eventually those efficiencies are going to diminish. Have you thought about making sure that the shared savings don’t become the major component of the blended payment model?

For example, I was in the Air Force for 25 years and after I had a stable population and managed them, I had already found disease and managed it and achieved significant cost savings and decreasing utilization. But then we reached a steady state, relatively. Were you saying, Len, that would be something on top of a designated funding stream for the blended payments?

Nichols: Well, Lori, remember I used the word ‘transition,’ and you are talking about a steady state and a longrun. I would agree that the ideal would be we will get to a place where all patients, especially those with chronic illnesses, are managed optimally and there are no savings to be reached out of the system. I think we all know we are a very long way from there.

What I’m talking about is a mechanism that can enable us to turbo-charge the transition. Ultimately I think you’re right. You would want to go to a more blended payment at the end, but I don’t see how you get from here to there fast without a shared savings component.

It enables you to reach beyond the primary care team to enable the hospital and the specialist and the pharmacist and everybody else to participate. That has a greater potential for aligning interests quicker in a way that is much more likely to be transformative. And yes, once we’ve reached the level of efficiency you reached with your patients in the Air Force, it’ll be a different world. But we’re a long way from there.

Webb: The blended payment model approach that PCPCC has recommended has one other interprofessional political advantage, and that is it defuses some of the potential battles at the feeding trough of fee-for-service. If all members of the team are participating in a blended payment approach, that brings revenue into the medical home based on those performance parameters, then the physician-directed leadership of the practice can then pick and choose among the various members of the team who are needed to be involved in the care of a particular patient at a particular time. There’s not that kind of competition for the fee-for-service dollars among the providers blended into a payment model that rewards team performance rather than individual fee-for-service performance.

As a profession that’s been fighting for years and years to have its non-dispensing services recognized under Medicare Part B—pharmacists have been fighting that battle for 10 or 15 years—this may be a very good thing in terms of an approach that blends all of the qualities that have been mentioned already because that really is what will generate patient-centric care among all the team members.

Grundy: I think there’s another constituency that we need to include in the considerations around shared savings. There’s also the reality that our employers are not competitive in a world market, and in many ways that’s because of healthcare costs. We have large numbers of individuals who can’t afford insurance so some of the savings really needs to come back to those who are actually paying for the healthcare…which will allow them to be more competitive with other parts of the world where healthcare may be more heavily subsidized by the government.

Nichols: That’s right and trust me, they can get their share of the same things, too. I definitely would concur in the short run, the best thing we could do is incentivize clinicians to work together across the traditional silos. Then I’m pretty sure the employers and plans will figure out how to get their piece of that.

MHE: Are behavioral health professionals increasingly being included as part of the medical home?

Grundy: I was in Albuquerque at Presbyterian, and they had a very integrated behavioral health model and a very integrated pharmacy model. The combination was really magic. We were seeing medication-management education and behavior-management education that was enhancing care and amplifying and cadencing the message that the primary care provider was delivering—on ’steroids.’ I mean, it was really impressive.

I was in Dubuque, Iowa, with a primary care provider who was seeing an 84-year-old nun. The issue with her was medication management and care coordination. Once the relationship part of it was established with the primary care provider, it migrated over to a nurse care coordinator working with the pharmacist who was working with a behavioralist with a team approach to care for the next year. I saw that mapped out for the nun, and it had gone over well enough to the point that she really began to understand it and give feedback.

MHE: With all these easily accessible services, what about the potential for increased utilization?

Webb: Particularly with regard to the use of medications, the some of the evidence from the model in North Carolina does indicate that in some cases, the medication-use costs go up. But with a concomitant reduction in consumption of some of the other more expensive services, particularly emergency department business and things like that, the increased utilization of some things may well be a very good thing and what the patient may benefit from most. You have to look at utilization across the entire spectrum of service consumption rather than just in the silos.

Grundy: From the perspective of the buyer of care, we really do want to see increased utilization of appropriate medication, and we want our patients to be healthy and productive. For us, the cost of the care is just the tip of the iceberg. We also have the whole issue of productivity. So it’s really a matter of appropriate utilization addressing both under- and overutilization of services. It’s a win-win for the pharmaceutical companies because increased utilization means they sell more medication, also a win for us because we want our folks healthy and productive. The best way to do that is for them to take their medication and comply with wellness instructions and other things.

Heim: Look at some of the data that came out of the Kaiser Foundation surveying patients. Twelve percent of the patients said the doctor had to redo a test or procedure because they didn’t have the earlier test results. So those are the low hanging fruit. We can decrease unnecessary procedures just from that standpoint alone.

MHE: How do we measure the success of medical homes? How can we quantify whether they’re doing any good?

Grundy: The state of Vermont’s early studies indicate a 7% reduction in overall costs. That’s a real bending of the curve. That’s data, right? We’re seeing improved outcomes in terms of indicators of compliance with diabetic management and asthma management. I was just at a physician’s practice in Florida where he used to have on average of one patient a month hospitalized for asthma. In the past 19 months, he’s only had one asthma hospitalization, and that’s data, right? We’re beginning to see pretty robust data and would love comments from other folks on that.

Nichols: I think another aspect of measuring success has to do with the experience of care both from the patient and the physician perspective. For this to be sustainable, patients need to recognize that this is something different, and it’s something different that they really like. It may not be an easy sell for some patients who’ve just been accustomed to picking a specialist out of the yellow pages or calling a friend to see who to go to next.

From the provider’s side, there are two big issues around the experience. There’s a lot of work up front [in creating a medical-home model] so it’s important that physicians see this as being something very positive, something that they advocate to their colleagues. But perhaps even more importantly is one of the underlying driving factors, which is the critical state of primary care in this country and the need to convince more and more of the upcoming graduates from medical school to pursue primary care as a field. The more convincing stories there are about the positive experience that these models are bringing to practice, the more likely we’ll succeed from that perspective.

MHE: What cautions do you have for the industry regarding medical homes?

Heim: Coming from the TransforMED demonstration project that AAFP did, we learned you have to provide enough resources to pull this off. It has to be adequately financed, and the transformation process can be stressful. So provide strong leadership to enable that to occur. The other problem that we’ve seen is that many of the projects have too short a timeline. They’re looking for a quick return on investment in less than two years, and two years is probably the bare minimum.

Nichols: Payers have to have a realistic timeline, and I do think five years is a much better frame. It’s easy for a think-tank guy to say, but I just think that’s the reality. The clinicians will tell you the same thing because of the up-front investment.

I would also hasten to emphasize my favorite phrase from Ronald Reagan: ‘Trust but verify.’ The people who claim that these models don’t work are stuck in defending the status quo, fee-for-service, unaccountable model. They’re just afraid of change, that’s part of it, but they don’t want to move to a world in which they’re going to be held accountable and things are going to be measured.

Not every patient is going to go to some quantitative provider comparison on a Web site, but enough will as we evolve as a society. Look at the number of people using smart phones. And now we’re going to move to a world in which if you can’t show that your treatment modalities and your health plan are achieving outcomes as good as [top-rated] systems and medical homes and health plans, you’re going to be at a competitive disadvantage.

Just look at the companies that…are in many ways poised for the new world because they’ve invested in information systems and information management, and selected forward-thinking and better organized providers. The other plans are really going to have to step up and participate in that ‘trust but verify’ competition or risk very serious competitive problems.

Grundy: That is not an easy transition for the providers to make. We learned in working with MVP Healthcare and others that we need to help pay for the process of this transformation. We’re dealing with oftentimes small groups of providers that are trying to survive on either a -1% margin or a 1% margin. We need to instill a bit of hope in them. If we’re reaping the benefit of that, we as the buyers have to begin to pay for the process of this transformation.

Heim: What we hear most from people who are practicing in a patient-centered medical home is that they feel like they’re back to practicing medicine the way they were trained to. They’re back to taking care of their friends, their patients and their communities, and that is incredibly rewarding for them.

Salkowe: I think just one area that we need to be careful with is the enthusiasm around this topic and the eagerness to move forward.

There’s been a tendency to slip outside of the structured pilots and just throw money at the medical home by financially recognizing providers solely based on recognition rather than how well they’re coordinating and managing the care of their patients.

The practice transformation that’s required goes well beyond whatever any individual recognition can possibly measure. In the pilots, for the most part, there’s been a structure that’s enabled practices to learn from each other and to share and develop communitywide resources. It’s going to take some time for resources to be well enough established in a community that all physicians in the community might be able to readily become a part of this.

We just need to be careful that we don’t get ahead of that infrastructure development and make sure we’ve figured out how to do this right before it becomes a standard for everybody.

Heim: Jerry, are you talking about concern whether or not the NCQA recognition program now truly recognizes those things that are of value?

Salkowe: No. I think it does recognize those things that are of value. It’s necessary, but I don’t think it’s sufficient. Over time we’ll come up with additional measures that will help, but testing itself never really tells the whole story, particularly in something like this, which isn’t just about what an individual practice does. It’s really about what’s happening in a community and how that practice interfaces with the community. Unless you have the right infrastructure in place, a practice might pass the test and really still not be able to deliver on the promise.

Webb: One of the challenges that we face is being flexible enough to recognize that how you construct these teams virtually in small communities and small practices is going to take a lot more creativity. It’s a lot more difficult to do than in those settings where you have large physician groups or managed care organizations or hospital-based teams where that functionality has been existent for a long time.

Particularly from the pharmacy side, we’re looking to create models that integrate pharmacists into the team in a very creative and constructive way. For the small medical practices, the best way to do that remains to be defined… With IT and with virtual framework, it’s entirely possible to do this even if we can’t all be physically present in this mythical place called the medical home.

President Obama to Release New Healthcare Reform Legislation Before Monday

President Obama is expected to release a new healthcare reform legislation over the weekend, before his healthcare summit with Republicans scheduled for next week, according to a report by the New York Times.

Analysis Shows Senate Health Reform Bill Would Cut Number of Uninsured in Half

Healthcare reform legislation passed by the Senate in December would cut the number of uninsured Americans to 25 million by 2019, a 53 percent decrease, according to a new study released by RAND Corp.

The proposed changes would cost the federal government $899 billion over the same time period.

“While our forecast concludes the Senate plan would cover slightly fewer people than the legislation passed by the House, the costs of the Senate bill also would be much lower,” said Elizabeth McGlynn, associate director of RAND Health, in a press release announcing the study.

The Senate plan would increase overall health spending by 2 percent but it would also help drive down insurance premiums, according to the study. RAND found the individual mandate is responsible for most of the increased insurance coverage and would itself reduce the number of uninsured by 41 percent. If there were no penalties for individuals who do not purchase insurance, 10 million more people would be uninsured.

Read about the RAND analysis of the Senate health reform bill.

President Highlights Spiraling Healthcare Costs in Annual Economic Report to Congress

President Obama highlights the unsustainable rate of growth of healthcare spending and renews a call for healthcare reform proposals that stalled late last year in his Economic Report of the President to Congress, released Feb. 11.

Nevada Governor Considers Dropping Out of Federal Medicaid Program

Nevada Governor Jim Gibbons has asked Health and Human Services Director Mike Willden to examine a possible opt-out of the federal Medicaid program, according to a report by the Las Vegas Sun.

Current healthcare reform legislation would require states in the program to expand their individual programs to cover additional poor, disabled and elderly Americans. At present, Nevada spends 30 percent of its general fund on the program, according to the report.

While the cost of expanding the program would be federally subsidized until 2013, Nevada estimates that the expanded program will cost the state $636 million from 2004-2019, according to the report.

If Nevada was to opt-out of the Medicaid program, enrollees in the program would instead receive federal subsidies to obtain private insurance on healthcare exchanges. However, some argue that subsidies would not cover the entire cost of obtaining coverage.

Gov. Gibbons stated that he is only considering the possibility of an opt-out at this point but the move signals the Republican Governor’s increasing wariness of federal health reform efforts.

Read the Las Vegas Sun’s report on a possible Nevada Medicaid opt-out.

Columnist Explains Why Healthcare Reform was Bound to Fail

President Obama’s health reform is failing because the U.S. healthcare system is too big and complex to be changed through New Deal-style legislation, according to an opinion piece by Daniel Henninger in the Wall Street Journal.

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