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.

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.

Hospitals remain unsure of future business model

BATTERED BY ONE OF THE WORST recessions in generations, many Americans are holding out hope that government initiatives can pull the country out of its economic funk. While there is room for optimism, hospitals might soon find their already-sagging bottom lines taking another plunge under new healthcare legislation.

“Our biggest concern is about healthcare coverage and extending it to the maximum number of people, but that can lead to the chronic problem of potential government underpayments,” says Richard Umbdenstock, president and CEO of the Chicago-based American Hospital Assn. “Medicare pays hospitals, on average, about 91 cents on the dollar, and Medicaid about 88 cents. If more of our patients are covered by those government programs, or some sort of public option tied to those payment rates, the result is going to be much greater financial instability for the entire system.”

It’s a perfect storm brewing across the healthcare landscape, and the economy is only one part of it, says Gary Blackford, president of Universal Hospital Services, a medical equipment outsourcing company based in Edina, Minn.

“Everyone knows that when the economy takes a turn for the worse, hospitals see an increase in the number of people who can’t pay for the services they receive,” he says. “Then, given the political uncertainty we’re experiencing, hospitals aren’t sure what their business model is going to look like in the future, so they’re frozen in place until that picture becomes clearer. Finally, hospitals have seen their percentage of Medicaid patients grow much higher at the same time states are having a difficult time meeting their reimbursement obligations.”

On the bright side, some experts believe that this difficult period has helped prepare hospitals for a brighter future by forcing them to become leaner and more efficient.

“It’s not like hospitals simply closed their eyes and continued to plow forward during this down period; they made improvements in their ability to control expenses, particularly on the labor side,” according to Gary Pickens, leader of the research and development group for the Center for Healthcare Improvement at Thomson Reuters.

MEETING THE CHALLENGE

Without many other viable options, so far, hospital executives have largely focused on cost cutting: freezing their capital budgets and cutting into their operating budgets. For the most part, experts say they’ve done a good job at that; in fact, some for-profit hospitals have posted record-setting quarter-over-quarter gains. They’ve made a solid recovery, but there is no indication hospitals have returned to business as usual yet. However, it does appear that they’ve at least weathered the storm, Pickens says.

Still, hospitals can only cut costs and put off expenses for so long, because they must continue to purchase supplies, while the clinical equipment accumulates wear and tear. They can’t keep using the same X-ray machines and hospital beds for the next 20 years. Maintenance and new investments are a must.

“The good news is that the bond market has turned around, so hospitals are now able to get long-term financing at attractive rates,” Blackford says. “In addition, while philanthropy and charitable donations did drop—as expected in a tough economy—they didn’t drop as far as hospital executives feared they might. The public has understood the need to support the healthcare system, especially at the community level.”

Hospitals also have done a good job of managing their labor expenses. When it comes to labor costs, the two easiest (though still painful) ways are to cut wages or decrease total headcount.

“But many hospitals found a third way: reducing their labor expense per discharge by shortening the average patient’s length of stay,” Pickens says. “By getting more people through the hospital faster, they have been able to maintain their operating margins despite a slowdown in revenue growth. And our data shows that they’ve done it by more effectively managing their inpatient care, not by cutting corners. In fact, we haven’t seen any fall-off in terms of the quality of inpatient care; quality indicators such as overall mortality rates have continued to trend upward.”

Going the extra mile to improve their operations, rather than relying on instant fixes such as cutting wages or staff, should continue paying dividends into the future. Hospitals have started to adopt continuous improvement programs similar to those in other industries, such as Six Sigma in auto manufacturing, Blackford says.

“Those efforts aren’t just going to improve them financially, they’re going to improve the quality of care and patient outcomes as well, in terms of things like hospital-acquired infections, patient falls, and nurse lifting injuries,” he says. “If pressed, many executives would acknowledge that there has been a degradation in service. For example, the wait times in the emergency room might be longer, and services might have suffered a bit because all of the departments are staffed a little more thinly.”

Overall, despite the challenges, hospitals have kept a close eye on their quality and found ways to improve their operations, he says.

Umbdenstock agrees, saying that while hospitals have had to make difficult decisions, by and large, they’ve made the best they could of the situation. All hospitals provide certain services that are essential to their communities. To ensure they could continue providing those core services at the highest level of quality, some other things had to go, he says.

“Rather than trimming back on all of their services—thus running the risk of slipping on overall quality—many hospitals just offered fewer services,” he says. “For some of the high-end specialty procedures, the volume just didn’t justify continuing to offer them. People who wanted those services simply had to be referred to larger, regional hospitals.”

HEALTHCARE LEGISLATION

Despite the rhetoric and general confusion surrounding healthcare legislation, many realize the danger of low Medicare reimbursement rates. Increasing the number of patients with access to healthcare is great, but if hospitals lose money on each of them, the system will be worse than it already is.

“A good number of our federal legislators understand the problem, as evidenced by the Senate bill [which at press time was still in the debate process prior to the vote],” Umbdenstock says. “Unlike the bills in the House, the Senate is more sensitive to the problems of linking Medicare rates to a public program, and more likely to provide states with a significant role.”

With so much controversy and dissension surrounding reform, the outlook seems to change almost daily.

“Two months ago, or even two weeks ago, I would have said that healthcare reform would be—at worst—neutral to hospitals, and might even have a favorable impact on them,” Blackford says. “After all, they take care of millions of people who can’t pay for their care every year, so if they suddenly start getting reimbursed for that care, it’s going to help.

“The problem is how that reimbursement is going to be structured. If people who are currently uninsured are pushed into Medicaid, the reimbursement hospitals get won’t be enough to cover the cost of their care. The system will break. I’m very worried about the future of hospitals.”

 

Package products for new markets

Even with major industry changes looming, new players are entering the managed care market amid the uncertainty. Experts believe the strategy has promise.

“All the stuff being promoted in the reform language is what we’ve been planning to do the last three years,” says Martin Watson, the CEO of SeeChange Health, the first new insurance company to launch in California in 20 years.

Watson says SeeChange, which offers a product for small businesses designed to reward proactive health management with reduced premiums and copays, can adapt to changing legislation.

Healthcare economist and MHE editorial advisor J.D. Kleinke agrees.

“Sometimes it easier to come in fresh than to adapt,” Kleinke says. “Big insurance companies, such as WellPoint or Anthem, are all good, but they operate gigantic organizations with an older workforce that has been doing the same old thing since the ’80s. Sometimes it’s easier to teach new dogs new tricks.”

To become the organization of choice in the healthcare world, Kleinke says, companies will need to be innovative. The rules are in flux, and the leading success factor is going to change under a reformed system. The landscape will likely depart from medical underwriting and move toward delivering good quality service for a competitive price.

“It’s not going to be who can avoid risk or who can avoid sick people,” Kleinke says. “It’s going to be those that take all comers. There are tons of people who are terrified that they are going to get cancer, who will be happy to write a check to someone that hasn’t been screwing them for the last 10 years.”

Insurance companies stand to gain millions of customers if they play their cards right. According to the U.S. Census Bureau, nearly 47 million Americans under the age of 65 were without health insurance in 2008. Once healthcare reform is enacted, the uninsured will be driven into the market with subsidized coverage, says Kleinke.

With the market expanding, the products that will come out ahead will be those that become available before 2013 and meet requirements of new regulations.

“If they can package a plan that anticipates the reform era, [health plans] are going to clean up,” Kleinke says. “They are going to have the momentum and the excitement of the passage of the bill. It’s a great marketing pitch to somebody and their family for a company to be able to say they are the first ones to have a plan based on the new Obama reality.”

It’s too early to tell whether plans like SeeChange will emerge as leaders. Watson believes the key is to stay ahead of the competition.

ASC Industry Continues Its Agenda as Nation Awaits Healthcare Reform Outcome

By all accounts, 2009 has been a significant year for healthcare-related activity on Capitol Hill. Providing the context for much of the politicking is healthcare reform legislation, which at the time of this writing, is still slogging its way clumsily through Congress. In November, the House of Representatives approved by a vote of 220 to 215 the $1 trillion Affordable Health Care for America Act; the Senate was still crafting a final bill for consideration on the floor.

Still unresolved is physician payment by the Centers for Medicare and Medicaid Services (CMS). A separate bill that aims to align payment rates more closely to the cost of providing care has been supported by the American Medical Association (AMA). In a statement issued in early November, AMA president J. James Rohack, MD, said, “As Congress considers new coverage commitments to the American people through health reform, it must ensure that commitments already made are fulfilled through passage of the Medicare Physician Payment Reform Act of 2009.”

As anticipated, in late October CMS announced that most hospitals will receive an inflation update of 2.1 percent in their payment rates for services furnished to Medicare beneficiaries in outpatient departments, and that ambulatory surgery centers (ASCs) will receive a 1.2 percent inflation update beginning Jan. 1, 2010. (CMS will reduce the update by 2.0 percentage points for hospitals that did not participate in quality data reporting for outpatient services or did not report the quality data successfully, resulting in a 0.1 percent update for those hospitals.) CMS projects that the aggregate Medicare payments to more than 4,000 hospitals in calendar year (CY) 2010 will be approximately $32.2 billion, while aggregate Medicare payments to approximately 5,000 ASCs will total $3.4 billion.

The payment updates are included in a final rule with comment period that revises payment policies and updates the payment rates for services furnished to beneficiaries during CY 2010 in hospital outpatient departments under the Outpatient Prospective Payment System (OPPS) and in ASCs under a revised rate-setting methodology that was implemented Jan. 1, 2008.

In a statement, Jonathan Blum, director of the CMS Center for Medicare Management, observed, “The payment rates we are announcing for 2010 are intended to ensure that Medicare beneficiaries continue to receive high-quality and efficient care in the most appropriate setting.” That may be the case, but to some in the ASC industry, the payment rate still lacks financial parity for the quality, convenience and efficiency delivered to patients in ASCs.

“I appreciate that CMS re-estimated the consumer price index in light of our volatile economy, so we’re definitely pleased that we have a more accurate CPI, but we remain disappointed and somewhat dismayed that CMS continues to use the consumer measure of inflation when all other providers have a medical care or supplies method of inflation,” says Kathy Bryant, president of the ASC Association. “It has been my experience over the last 30 years that persistence pays off, and sometimes having a good policy argument takes awhile before you get the appropriate policymakers motivated to make a change. It’s an issue that we’ll keep working on.”

Comments on the CMS final rule were accepted through late December and Bryant says that this is one area in which the ASC Advocacy Committee will be active. (See related article on page 14.) “I think that what is exciting about the ASC Advocacy Committee is how it is bringing everyone together,” Bryant says. “We—the national association, the lobbyists and ASC companies and associations — have always worked together on the issues but having a new forum in which to do that with the buy-in of all the principals creates a much more cohesive, effective effort. As someone who has been intimately involved, I see huge differences in our efforts already; I think we are coordinated, are responding really well to the issues, and I hope we will see new and improved results.”

In addition to policy changes and payments rates for services provided in ASCs, the final rule continues to expand the list of surgical procedures that Medicare will cover when performed in ASCs. In its review of 223 excluded surgical procedures assigned to the same APC in CY 2009, CMS found that 26 procedures are appropriate for the ASC setting and proposed that they be placed on the 2010 list of Medicare-covered procedures in ASCs. CMS ruled that the 197 unapproved procedures would pose significant risks to patients or would require an overnight stay if provided in ASCs.

A Look Ahead

Considering the uncertainty of the healthcare reform legislation Bryant says that the association’s work will continue to address the topic as it relates to ASCs in 2010. But other critical issues wait in the wings, and Bryant says that healthcare information technology (HIT) is one of them.

“I think that in 2010 technology is going to be a huge issue for ASCs and other healthcare providers,” she confirms. “I understand the challenge that electronic medical records pose to ASCs but it’s pretty clear down the road that we’re all going to have to have them. I don’t believe it’s a ‘must-do’ in 2010 but we all must look at it for the very near future. The ASC Association’s committee on health information technology is making sure that we lobby for what is appropriate for ASCs because as I understand it, the real effectiveness and benefits of electronic medical records come into play when the records at one facility can be exchanged at another facility. And that’s only going to happen with standards that allow for transparency.”

Bryant continues, “We need to ensure that our members are adequately prepared for whatever technology-related changes come along. Related to that of course is quality reporting activities. Although ASCs are not going to begin reporting quality data to the government in 2010, we certainly are expanding our own internal quality-reporting activities; we now have more than 650 ASCs participating. It’s important to take the next steps in what we are already doing, such as looking at what kind of data should be reported to the public and how we teach the public to use it.”

And while challenges to physician ownership and referrals aren’t going away any time soon in 2010, Bryant says that perennial issue is compounded by concern from ASC owners, operators and administrators about the new conditions for coverage (CFCs) introduced in 2009 by CMS. The CFCs of note include a requirement that ASCs have a governing body that assumes full legal responsibility for determining, implementing and monitoring policies governing the ASC’s operation; a requirement that an ASC develop, implement and maintain an ongoing, data-driven quality assessment and performance improvement program; the requirement that ASCs inform patients of their rights via verbal and written notices in advance of surgery; and the requirement that ASCs ensure every patient has the appropriate pre-surgical and post-surgical assessments completed and that all elements of the discharge requirements are completed.

“People continue to be dismayed about regulatory inquiry into physician ownership and really don’t know why policymakers don’t understand the benefits that physician ownership provide, but they are even more concerned about the new conditions for coverage and how CMS is interpreting some of them. We will continue our educational efforts on that issue and again encourage ASC Association members to communicate to us the experiences they have in their surveys.”

Another significant change is a rigorous focus on demonstrated infection prevention and control knowledge and practice in an ASC. CMS now demands that ASCs maintain an infection control program that minimizes infections and communicable diseases, that it provides a functional and sanitary environment for the provision of surgical services by adhering to professionally acceptable standards of practice, and that the facility’s infection prevention program includes documentation that the ASC has considered, selected and implemented nationally recognized infection control guidelines, such as those issued by the Centers for Disease Control and Prevention (CDC). The facility’s program must be implemented under the direction of a designated and qualified professional who has training in infection control; it must be an integral part of the ASC’s quality assessment and performance improvement program; and it must contain a plan of action for preventing, identifying and managing infections and communicable diseases, and for immediately implementing corrective and preventive measures that result in improvement.

Q&A with Lobbyist Marian Lowe

SurgiStrategies asked Marian Lowe, a partner at Washington, D.C.-based firm Strategic Health Care, for her take on some of the issues facing ASCs on Capitol Hill.

Q: Now that we know Medicare will be trimming physician reimbursement by more than 21 percent in 2010, do you think physicians will get a reprieve for another year thanks to healthcare reform legislation? Do you think putting the reimbursement in line with a sustainable growth rate formula is an acceptable way to handle it?

A: The Medicare Physician Fee Schedule will result in a 21 percent rate cut in January 2010 if Congress does not intervene. Consistent with previous years, I expect Congress to avert the fee schedule cut again next year. The Medicare Payment Advisory Commission (MedPAC) has suggested replacing the sustainable-growth rate (SGR) system with an annual inflation update like those used to update other Medicare systems, and this seems more likely to alleviate the volatility caused by holding the physician update accountable to unsustainable spending targets.

Q: What do you think will happen with the healthcare reform bills? Are there indications, in your opinion, that the legislation could be something the outpatient healthcare industry could live with?

A: There is obviously much interest in passing healthcare reform legislation and both resolving differences between competing interests is no small task. Passage of some version of reform is likely, but the scope of reform could be more limited, and the timing for action could slip into next year. The outpatient surgery settings seem to fare reasonably well compared to other provider groups looking at significant cuts. Both hospitals and ASCs will see smaller annual inflation updates under the House and Senate bills compared to current law, but are generally well positioned in the bills.

Q: Any perspective on the ASC payment announcement — do you think the 1.2 percent inflation update is a small victory? A stalemate? Is it still insulting because it’s less than what HOPDS will get?

A: The update in the final ASC payment rule is twice as large as the agency originally proposed, and that is a huge victory for surgery centers. The ASC community continues to urge CMS to use the same update for hospitals and ASCs because they face the same inflationary pressure on their costs.

Q: Is this particular Congressional session without precedent in terms of the lobbying, infighting, etc.? There is so much at stake, and the healthcare reform legislation is so complex and intimidating to the mere mortal — do you think that hurts physicians’ ability to get involved?

A: From the August congressional town hall meetings to ‘Tea Party’ events to busloads of citizens walking the halls of Congress, I think there has been an unprecedented level of grassroots engagement in health reform advocacy this year. We have seen time and again how the groundswell of responses to certain hot-button topics in health reform have breathed new life into certain provisions and created hurdles for others. I think that speaks directly to the power of individuals engaging in advocacy.

Q: From an advocacy perspective, what do you advise owners/operators of ASCs and surgical hospitals to do to be heard above the din of the reform bill and into 2010? Has the political agenda (for this niche of the healthcare industry) changed in light of Obama’s first year in office, some political sentiment changing, some gubernatorial seats changing hands this month, etc.?

A: ASCs need to continuously reinforce their ability to provide value in a cost-conscious reform era. ASCs offer the government more than 40 percent savings over the cost of outpatient surgery in the hospital and provide tangible cost-savings to the consumer. ASCs must communicate to legislators that policies and rates need to encourage services to be performed in the ASC setting in order to secure their viability for the future. Owners/operators of ASCs can get involved by working with state and national associations to raise awareness about the integral role of ASCs in the healthcare system and in their communities.

Rocky Mountain Health Plans to cover heavy babies

Rocky Mountain Health Plans, Grand Junction, Colo., has made a companywide policy change and will now provide health plan coverage for healthy infants, regardless of their weight.

Alex Lange was denied coverage when he was two months old because his height and weight were in the 99th percentile according to Centers for Disease Control and Prevention guidelines. In light of the national healthcare reform debate, news outlets, bloggers and talk show hosts across the country covered the story, showing a healthy-looking Alex and interviewing his frustrated parents.

The situation brought attention to a “flaw in our underwriting program for approving infants,” says Steve ErkenBrack, president and CEO, Rocky Mountain Health Plans. “We have changed our policy, corrected our underwriting guidelines, and are working to notify the parents of the infant who we earlier denied.”

The flaw was attributed to a relatively new trend involving families seeking individual coverage for their children. Underwriting for this age group is a relatively new process, according to Rocky Mountain Health Plans.

“We are constantly working on new, innovative ways to deliver quality, affordable health plans that are designed for the people of Colorado,” says ErkenBrack.

Rocky Mountain Health Plans provides medical benefit plans and services to more than 170,000 enrollees in Colorado.

Encourage depression screening for all pregnant women

The Incidence Of Depression runs high, and the utilization growth of antidepressants is a testament to this common condition. Unfortunately, pregnant women who also need to manage depression present a chronic-care challenge for doctors and health plans.

Between 14% and 23% of expectant moms experience depressive symptoms, according to the American Psychiatric Association (APA) and the American College of Obstetrics and Gynecologists (ACOG). Treatment with antidepressants for pregnant women is a bit tricky, prompting discussion about whether to prescribe and whether women already taking the drugs should continue their regimen despite being pregnant.

“The Management of Depression During Pregnancy: A Report from the American Psychiatric Association and The American College of Obstetricians and Gynecologists,” published in Obstetrics & Gynecology (September 2009) andGeneral Hospital Psychiatry (September/October 2009), weighs the risk and benefits of different treatment options for depression. The new guidelines should serve as a call to obstetricians to look for signs of depression in their patients.

The organizations’ guidelines for pregnant women currently on medication for depression include:

Psychiatrically stable women who prefer to stay on medication may be able to do so after consultation between their psychiatrist and ob-gyn to discuss risks and benefits;

Women who would like to discontinue medication may attempt tapering and discontinuation if they are not experiencing symptoms, depending on psychiatric history;

Women with recurrent depression or who have symptoms despite their medication may benefit from psychotherapy;

Women with severe depression (with suicide attempts, functional incapacitation or weight loss) should remain on medication; and

If a patient refuses medication, alternative treatment and monitoring should be in place, preferably before drug discontinuation.

The study also makes recommendations for pregnant women not on medication for depression, saying risks and benefits of treatment choices should be evaluated and discussed, including factors such as stage of gestation, symptoms, history of depression and other conditions and circumstances (smoking, difficulty gaining weight, etc.).

Nishendu Vasavada, MD, clinical associate professor, Department of Psychiatry at the University of Texas Southwestern Medical Center in Dallas, says it is not unusual for women to be on antidepressants when they get pregnant but cautions against their use in the first trimester.

“It is generally safer to take antidepressants after the first trimester,” he says, recommending the lowest possible dose and the use of Class C drugs. “Women should talk with their providers and find out as much as they can about medication choices to make the best decisions.”

Rajni Lad, MD, medical director at CBHNP, a behavioral health managed care company, agrees and notes added support is beneficial.

“The therapist is able to assess a member’s condition and related issues, oversee medication regimens and communicate with the obstetrician,” he says. “We can determine if a member should remain on an antidepressant once she is pregnant and when it is safe to stop taking the drug. We generally don’t prescribe drugs for depression during a woman’s first trimester, but provide other support.”

CBHNP partnered with its sister company, AmeriHealth Mercy Health Plan, a Medicaid managed care plan in Pennsylvania, in implementing the Perinatal Depression Pilot Program in November 2008. Nurse case managers at AmeriHealth Mercy screen women for depression by phone using a validated set of questions designed for a pregnant population. Those at high-risk (15% on average) are referred to CBHNP behavioral health specialists for evaluation and appropriate interventions.

“While the member is on the phone, a nurse case manager arranges an appointment with a mental health provider to ensure these women receive timely attention. The nurse not only coordinates care but follows the member’s progress, recommends appropriate resources and conducts follow-ups,” says Lawrence Kay, MD, senior medical officer for the health plan. “Access for these women is the most critical issue.”

As of September, 125 women have been screened, nine referred to a behavioral health provider and two to an outpatient clinic.

SPECIAL DELIVERY

After developing a set of healthcare reform principles, King County (Washington State) incorporated them into a Maternal and Child Behavioral Health Pilot, a four-year program that identifies and treats depression in low-income, pregnant women, mothers and their young children. These populations are more likely to suffer from depression and are less likely to obtain treatment due to poverty, lack of community support and substance abuse.

New data presented by the APA illustrate that Medicaid beneficiaries are more vulnerable to depression than other populations. They are more than five times less likely than privately insured patients to attend the recommended three follow-up visits with their physician (5% vs. 29%) in the 12 weeks following diagnosis and a prescription for an antidepressant; less likely to stay on medication for more than 60 days (35% vs. 55%); and half as likely as the privately insured to have their antidepressants augmented or changed—despite equal access to antidepressants.

The pilot, operating in eight ethnically diverse King County safety-net clinics, rests on the evidence that the best way to reduce the negative impact of depression is through early diagnosis and treatment. Anne Shields, manager, community and school partnerships, Public Health, Seattle and King County, notes that screening and follow-up are rare among the low-income population with more attention being paid to children’s health rather than their mothers’.

The pilot’s primary goals are:

Improve mental health outcomes in low-income children through increased access for their mothers to depression screening and treatment;

Improve mental health treatment through the implementation of standardized treatment protocols in primary care; and

Improve primary care providers’ ability to reduce the risk of mental health problems and treat conditions suffered by mothers and children.

Shields says the pilot is guided by the five essential elements of an evidence-based model for depression care known as IMPACT: 1) A PCP works with a care manager to implement a treatment plan. 2) A depression care manager educates the patient about depression, supports medication therapy, coaches patients and monitors their symptoms. 3) The care manager and PCP gain access to a designated psychiatrist. 4) Care managers measure depressive symptoms at the beginning of and throughout treatment, using the PHQ-9 (Patient Health Questionnaire), which evaluates the presence and severity of patients’ depression symptoms. 5) Treatment is adjusted based on clinical outcomes.

“PCPs often don’t know how to screen for depression and don’t have the time, but a care coordinator can serve as an extension of the PCP with the time and skills to offer the best intervention,” Shields says. “It’s easy for a PCP to lose sight of follow-up. One of the best things about our program is access to a psychiatrist who knows how to prescribe appropriate medications for pregnant women, ensure that they are safe to use, provide oversight and change regimens if necessary.

The results are noteworthy. More than 97% of enrolled mothers have been screened at least once for depression using the PHQ-9 tool. All the clinics screen pregnant patients during their prenatal visits; some also have developed successful protocols to screen mothers during their children’s visits. Finally, 75% of women on caseload have participated in numerous follow-up activities, including phone calls, clinic visits and support groups.

CHANGING MOODS FOR MOMS

Shoshana Bennett knows only too well the risks of depression related to pregnancy. As a clinical psychologist in Bodega Bay, Calif., she has learned from her own experiences.

“Obstetricians aren’t trained in mood disorders,” she says. “Every pregnant woman should be screened at least once during the first trimester to make sure she isn’t clinically depressed. Women are most vulnerable when they are pregnant but often depression is dismissed as ‘just being pregnant.’ If a woman has trouble sleeping or has no appetite, she may have feelings of anxiousness but is afraid to say anything for fear of being prescribed an antidepressant. Or if she is already taking one, there is a chance she could experience a relapse if her doctor decides to terminate the drug.”

Bennett recommends counseling first and medications second as well as communication between the obstetrician and a mental health specialist.

“Depression can affect the fetus so if symptoms are affecting a woman’s life, she shouldn’t white knuckle it, but instead use appropriate treatment,” she says.

According to Consumer Reports Best Buy Drugs, 60% to 70% of people with depression don’t receive the treatment they need.

Mari Edlin is a frequent contributor to MHE. She is based in Sonoma, Calif.

Upper Midwest states report best performance measures

When it comes to healthcare, the gap between top- and bottom-performing states is widening, according to the latest state scorecard by the Commonwealth Fund Commission on a High Performance Health System. The scorecard found wide and growing disparity between the states in cost, quality, access and outcomes.

In general, states that led in the way on the scorecard two years ago continued to lead, often setting new benchmarks. Vermont, which ranked fourth in 2007, now has the top ranking, followed by Hawaii, Iowa, Minnesota and Maine. Mississippi again ranked the worst. Oklahoma, Arkansas, Texas and Nevada, which placed in the bottom five in 2007, continued to bring up the rear.

MEASURING THE GAP

According to the report, the lowest ranked states would have to improve 40% to 100% on average to achieve the performance of top ranking states. Gaps in coverage between states were particularly stark, with 32% of working-age adults uninsured in Texas, compared with only 7% in Massachusetts as of 2007-2008.

Overall, the report, which ranks states based on 38 indicators, found that while health insurance coverage for adults declined in a majority of states since the release of the 2007 scorecard, most states made gains in health coverage for children due to federal and state support for the Children’s Health Insurance Program (CHIP). The report also noted that a national push for public reporting of outcomes data has led to dramatic improvements in some measures of quality of care in hospitals and nursing homes.

“The main takeaway of this report is when we take action at the national level we can succeed,” said Commonwealth President Karen Davis, citing the report and the need for comprehensive healthcare reform at a recent press conference. “The states can’t go it alone.”

That’s particularly true for bottom-tier states which lack the tax base to close health gaps without federal participation, according to Joel Cantor, director of the Center for State Health Policy at Rutgers University and one of the report’s authors.

In terms of performance, the report finds that several states in the Upper Midwest—Iowa, Minnesota, Nebraska, North Dakota and South Dakota—were all providing high quality care at lower cost.

If all states could reach the level achieved by the top-performing states, 29 million more people would have health insurance, nearly 78,000 lives could be saved by delivering timely, effective care and the nation would realize a $5 billion annual savings by avoiding preventable hospital admissions and readmissions for vulnerable elderly and disabled residents.

We’re All In This Together

As a physician, Reed Tuckson, MD, has seen his share of suffering. He specifically recalls a hospital patient he treated who had congestive heart failure and diabetes. The woman was discharged home, but many social services in her community had been cut, leaving her without meal delivery, transportation or health aid.

When Dr. Tuckson saw her again, she was in the emergency room, septic and malnourished with decubitus ulcers. She had missed every one of her follow up appointments. Medical science could certainly help treat her conditions, however, what the woman truly needed was support beyond the scope of medicine alone.

Dr. Tuckson, who today serves as executive vice president and chief of medical affairs for UnitedHealth Group, believes optimal healthcare delivery requires pulling the pieces of medical and social services together in a comprehensive way, “so that lovely, wonderful woman is not in a wheelchair at two in the morning, unable to breathe, hungry and in pain.” He says the experience with that particular patient still resonates with him.

During his first week on the job with UnitedHealth Group in 2000, he listened in on telephone support calls between care coordinators and plan members and heard them working to solve complex health and social issues not unlike those of his former hospital patient. As he listened in, he heard the insurer’s resources at work. He says the mission to improve health of populations as well as individuals is what drives him.

“The highest level of our mission requires us to find the common connection with the missions of the other stakeholders, because none of us can do alone what actually has to be done on behalf of each individual person,” Dr. Tuckson says. The insurer’s role—which he believes is generally misunderstood by those outside of the industry—is one of collaboration with providers, employers, patients and policymakers. Insurers have experience with the types of value determinations and cost-effectiveness strategies that many are insisting on to reshape the healthcare system overall.

Making Decisions

Dr. Tuckson believes the industry must be more explicit about what patient-centered healthcare delivery should look like and how it should function, then share the vision beyond the purview of its own ranks. That vision isn’t clear enough now to influence change. In order to generate a meaningful conversation that might lead to improvements in the system, the nation must take a long hard look at making choices and engaging consumers, he says.

“What’s so frustrating about the health reform debate in Washington,” he says, “is that it is so completely uninformed about the real issues: How do we make decisions that are personally appropriate that advance our chance for affordable access for the services that we need as individuals—both medical services and medically necessary social services?”

For example, preventive medicine, which many believe can lead to reduced costs and improved health if encouraged more widely, is often dependent on community situations. And the issues are twofold. First, an individual’s community environment plays a role in health. Lack of affordable and healthy food, unsafe neighborhoods and negative media images create inherent challenges to healthy lifestyles. Also, a lack of health clinics to deliver needed prevention can compound the problem.

It’s unreasonable to expect individuals in traditionally underserved populations with little optimism for the future to make healthy lifestyle choices a priority. Many skip preventive health services because they are struggling simply to get a hot meal on the table each night, Dr. Tuckson says.

“If gunshots are ringing through your community, it is very difficult to think about going jogging in the evening or planting a community garden, if there’s no actual earth in which to plant,” he says. “Those are real challenges that are stated the most dramatically.”

It Can Be Done

United Health Foundation, which was established by UnitedHealth Group in 1999, has committed $23 million to four community health centers in Miami, New Orleans, New York City and Washington, D.C., since 2003. Published studies from the George Washington University Medical Center have documented that these clinics, which are located in medically underserved communities, provide high-quality care that equals or exceeds care provided in the private sector, based on national quality benchmarks without risk adjustment.

The clinics have transformed from “centers of last resort to centers of choice,” according to Dr. Tuckson, who serves on the foundation’s board. In September, the university reported that three of the clinics had exceeded the national average of 30% for the percentage of diabetes patients with blood pressure under 130/80 mm Hg. New York (46%), Miami (40%) and New Orleans (39%) beat the benchmark. The same three also exceed the national average of 73% for the percentage of patients with diabetes receiving at least one LDL-cholesterol test—Miami reached 84%, New York reached 82%, and New Orleans reached 98%.

Through innovation, the clinics have been able to serve patients with chronic conditions who need a high level of comprehensive care. There’s no reason why the model of care, which has been able to make the most of scarce resources, should be limited to just one project, one population or to a certain type of coverage category, Dr. Tuckson says.

“The lessons we learn from the health centers ought to be applied to the rest of society and vice versa,” he says.

When considering underserved populations, he also says it’s important to recognize that absolutely every person in every community has a set of unique issues—medical and social—that require multidimensional responses from the healthcare system overall. Individualizing care for each person has become an emerging trend that complements the opportunity for managing care from a population perspective, regardless of what that population might be.

“When it comes to healthcare, it is exceedingly important to realize we’re all in it together,” he says. “The sense of ghetto-izing or segregating certain people, ethnicities or cultures is becoming inappropriate.”

Bringing It All Together

Three emerging factors are accelerating the ability for health plans to push comprehensive care forward:

Improved data analytics now afford opportunities to identify members with a variety of health needs;

Improved health data can also indicate the health needs proactively and with greater specificity; and

Consumerism is increasing members’ engagement levels in their health.

Certainly much of what enables comprehensive care stems from technology, but the tools still have yet to provide for true integration of care delivery among the healthcare silos. While the pace of such progress is frustrating, Dr. Tuckson says the partnership among payers, providers and other stakeholders is helping to overcome the siloed infrastructure more than ever before. The idea of integrated delivery of care has been talked about conceptually for more than a decade, but only now is the healthcare industry beginning to stitch the fragments together, he says.

For example, medical home projects nationwide are bringing care teams together and offering appropriate reimbursement for coordinated clinical approaches. The coordinated approaches are supported by data analytics that provide a snapshot of the comprehensive health needs of each individual person, he says.

“Putting that data into the primary care physician’s office as part of their traditional clinical capabilities and working in partnership allows for more comprehensive management of the individual,” he says. “That’s the next area. That will be defined, obviously, by how fast we can move the health information technology infrastructure.”

UnitedHealth Group launched a patient-centered medical home pilot in February in which it provides technology, infrastructure and care-coordination support to select primary care physicians in Arizona. There are more than 100 medical home pilots underway nationally, and tracking the data over time will inform plans’ future strategies.

Financial Footing

While furthering integrated care, population management and individualization is all well and good, the benevolent side of the mission only tells half the story. Healthcare has become an economic strategy in the United States. The bleak statistics of runaway costs on pace to reach $4 trillion are repeated so often that average Americans have begun to recite them by heart.

Dr. Tuckson says legitimate value determinations are needed to evaluate the relative cost and quality of medical procedures, drugs and devices. Once the value picture is sketched out with some degree of quantification, the individual member or patient is enabled to make clinically and economically smart care choices with his or her providers.

“There has to be a way in which people and society choose what they want and what they are willing to afford within the reality that there has to be controls,” he says. “The easiest part of that conversation would be that people should have access to care that works and is cost-effective. That ought to be a given, however, we also know we have a very suboptimal research infrastructure available to answer that question for expensive and increasingly important interventions, especially given the pace of discovery.”

The genius of America’s inventors and scientists has produced a difficult dilemma in which medical advances that save lives, improve quality of life and reduce pain and suffering also create an unaffordable inflationary spiral. New and improved treatments don’t come cheap. Likewise, the discrete evaluation of emerging procedures and products might prove that each has merit but fails to judge each one’s merit against comparable treatments.

Comparing the effectiveness of treatments head-to-head through scientifically sound research—comparative effectiveness research (CER)—has become cx. Federal health agencies have just begun to dole out $1.1 billion in stimulus funding for CER.

According to Dr. Tuckson, CER will also need to be taken a step further to create protocols in real-world clinical practice based on research results. He says CER funding is promising but it’s not likely to produce the scope of research needed nor the speed at which it must be delivered to improve the health of Americans affordably. His plea is that stakeholders fight “so much harder for the research infrastructure that delivers the answers to these questions.”

Clinical Expertise

Once the federally sponsored CER begins drawing conclusions, specialty societies, such as the American Academy of Pediatrics for example, could then take a lead role in translating research into best practices then in communicating the guidance to physicians. Specialty societies will need more support for that to happen, however, because they currently don’t have the resources to turn that kind information around in a timely manner.

“It is terribly inappropriate to leave those kind of choices to our industry, uninformed by the best of our nation’s clinical science expertise,” Dr. Tuckson says. “At United, we put our money where our mouth is by putting money into these societies, but with the level of scale that’s needed, no one company can do this by itself.”

He says he is “deeply saddened” when health insurers use their experience to make value decisions, then are criticized for it. Other stakeholders need to be involved, and he says he looks forward to having honest conversations at the national level to address the shared goals of value determinations and controlling the rising cost trends.

No one wants their insurer to exclude any service from the benefit package, Dr. Tuckson says, but on the other hand, no one is pleased by the amount of waste and misuse of services that are prevalent in the U.S. system. The fundamental contradiction of these two attitudes have become more evident in recent policy discussions. It makes for a frustrating process when trying to bend the cost curve and design benefits appropriately.

That’s why Dr. Tuckson believes when it comes to healthcare, everyone is in it together. No matter what operational challenges health plans must confront, sensible contracting, providing affordable access, and maintaining dynamic partnerships with providers and community organizations remain the plans’ responsibility.

“All pieces of that puzzle must all work together,” he says. “And we have to be part of that, acting on behalf of the needs of the person. If we lose sight of that, we do so at our peril.”

Reed Tuckson, MD, on…

The politics of health reform

“Health reform is talked about almost as if it were a political football game, and you’re either on one side or you’re on another. People use terms—public plan, health exchange, single payer—and that sort of lets you know if you’re on this team or that team…I refuse to be on any of those teams. It’s silliness.”

Holding down costs

“You have to get at controlling the inflation of unit costs for physician and hospital reimbursement. You have to get at the issue of appropriateness in the access to services and controlling waste and inefficiency in the delivery.”

Health insurers as stakeholders

“We in our industry clearly understand what it means to try to control unit costs and be fair to the hospitals and physicians who are delivering the care. We absolutely understand what it means to try and take the waste out of the system and all the challenges that come from doing that every day. We also know the anger and the frustration that occurs when you do it. We bring a set of experiential knowledge that is essential when trying to find solutions to problems, more so than anyone.”

Health insurance exchanges

“The health insurance exchange concept today as discussed is a philosophical placeholder for a political or social agenda, as opposed to being something that everyone understands what it means, how it would work and the ways in which it is going to deal with the two fundamental issues on the table: How will it deal with unit cost pricing and how will it deal with utilization and the control of utilization of healthcare services?”

Expansion of Medicaid

“Expanding Medicaid, public insurance, is an important part of the mosaic. It will take a mosaic to achieve our goals, and public insurance is going to be very important in that regard, just as private insurance will be important in that regard.”

Insurers being called ‘dishonest’

“When it comes to health and human survival, this is a profound social ethic that requires and demands the best of all of us. To deliberately and mean-spiritedly deny the participation and challenge the ethical integrity of a major stakeholder in the solution to this problem is to do potential violence to the opportunity for optimal solutions and thereby optimal health of the nation.”
Reed Tuckson, MD, UnitedHealth Group, Executive Vice President and Chief of Medical Affairs
Reed Tuckson, MD, has more than 25 years of experience in healthcare leadership and has been a member of several bipartisan federal advisory committees on genetics, infant mortality, children’s health, violence, radiation testing and healthcare reform. Previously he served as senior vice president for professional standards for the American Medical Assn. In February, Black Enterprise named him one of the “100 Most Powerful Executives in Corporate America.” He earned a bachelor’s degree in zoology from Howard University and his medical degree from the Georgetown University School of Medicine.

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.

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