Maryland Court of Appeals Upholds State Malpractice Award Limit

The Maryland Court of Appeals has upheld the state’s $812,500 limit on malpractice awards for pain and suffering, overturning a lower court’s award of a higher amount, according to a report by the Baltimore Business Journal.

The state limit was enacted by the Maryland General Assembly in 2004.

“This important decision confirms the Maryland legislature’s intent to ensure that people’s needs are met without allowing a lottery-like system’s limitless awards,” said Carmela Coyle, CEO of the Maryland Hospital Association.

Read the Baltimore Business Journal’s report on Maryland’s malpractice limit.

8 Top Hospital and Health System Trends of the Past Decade

1. Loosened cost controls. HMOs in the late 1990s had successfully slowed growth in healthcare spending, but by the end of that decade they had come to be regarded as heartless conservators of the bottom line. Managed care’s tight controls began to loosen and “the negotiating power slipped back into the hands of the providers,” says Dick Clarke, president of the Healthcare Financial Management Association. Healthcare costs again began increasing faster than the general rate of inflation. “It’s not clear yet how much of that will change if providers come under more pressure to contain prices,” he says. 

2. Healthcare IT. Healthcare information technology, still rough around the edges in 2000, became a major force in hospital operations by the end of the decade, says Michael Rowan, COO and executive vice president of Catholic Health Initiatives in Denver. Innovations like computerized physician order entry and electronic medical records have been shown to improve safety as well as efficiency. Now, thanks to billions of dollars in incentives in the 2009 HITECH legislation, healthcare IT holds the promise of becoming virtually universal in the next few years. But Mr. Rowan reports that HITECH funds will pay for only about a quarter of the cost of the new technology. 

3. Patient safety movement. At the start of the decade, hospitals were just beginning to hear word of one of the most influential reports in the history of U.S. healthcare: “To Err Is Human: Building a Safer Health System,” published in Nov. 1999 by the Institute of Medicine. It concluded that from 44,000- 98,000 people die annually — the equivalent of 10 fully loaded 757 commercial airliners crashing each week, the report stated — due to errors in inpatient hospital treatment.

As a result, “hospitals started to get much more serious about quality and safety,” says Mr. Clarke at HFMA. The industry embraced continuous quality improvement, adds Thomas Dolan, president and CEO of the American College of Healthcare Executives. “Everybody realized that we have to constantly improve quality and it actually lowers costs because it reduces waste,” he says.

4. Physician entrepreneurialism. Many physicians became entrepreneurs, investing in ASCs, imaging centers and specialty hospitals as a way to supplement declining income due to lack of increases in reimbursements and become more efficient. The trend, however, put physicians into conflict with hospitals, who were concerned about losing market share to the leaner, physician-run organizations. By the end of the decade, it seemed that hospitals and regulators had blunted the trend.

“The ban on physician-owned hospitals in the health reform legislation signals the decline of the entrepreneurial physician,” says Nicholas Wolter, MD, a former MedPAC commissioner and CEO of the Billings (Mont.) Clinic. However, ASCs seem to have become a permanent fixture in U.S. healthcare, offering discounts too big for payors to pass up. 

5. Healthcare consumerism. “The future of market-oriented health policy and practice lies in ‘managed consumerism,’ a blend of the patient-centric focus of consumer-driven healthcare and the provider-centric focus of managed competition,” declared Jamie Robinson, a professor of health economics at the University of California, Berkeley, School of Public Health, in 2005 in the journal Health Affairs.

With the decline of HMOs, consumer-driven healthcare became a new way to contain costs. High deductible plans, with or without tax-free health savings accounts, would make patients cost-conscious consumers. Ratings of doctors and hospitals, from HealthGrades to CMS’ Hospital Compare site, would aid patients in choosing the best providers. Retail clinics opened to serve these new consumers. Hospitals developed a new fascination with patient satisfaction surveys. Brand-new hospitals lavished spending on patient-friendly design features, such as single rooms, sunlit atriums and concierge services, and these features seemed to shift market share. 

6. Shortages of healthcare personnel. In July 2007, the American Hospital Association reported 116,000 open positions for registered nurses in hospitals, and the existing RN workforce was aging. Mr. Rowan at Catholic Health Initiatives observes that the recession has erased the shortage for now, at least, as RNs were forced back into the workforce or into full-time work as family income fell.

Physician shortages also emerged. In a dramatic about-face at the beginning of the decade, the federal Council on Graduate Medical Education abandoned its long-held forecast of a physician surplus and predicted a shortage of 85,000 physicians by 2020. Since then, medical schools have been substantially increasing class sizes, but Congress has not removed a cap on the number of Medicare-funded graduate medical education positions for physicians that has been in place since 1997.

“Current evidence suggests that the United States is headed toward an aggregate shortage of physicians,” the Association of American Medical Colleges declared in 2009. “Given the extended time required to increase U.S. medical school capacity, and to educate and train physicians, the nation must begin now to increase medical school and GME capacity to meet the needs of the nation in 2015 and beyond.”

7. Accountable health organizations. While entrepreneurial physicians continued to spin off from hospitals throughout the decade, Dr. Wolter, the former MedPAC commissioner, says an opposing trend also emerged. Many young physicians were eagerly becoming employees. Accountable health organizations such as Mayo Clinic, the Cleveland Clinic and Geisinger Health System thrived by closely aligning hospitals and doctors to make care more efficient and effective.

Mr. Rowan at Catholic Health Initiatives says accountable health organizations seemed to be taking a lesson from the ASC playbook. Incentivizing physicians can make healthcare more efficient. But he adds that the trend is not easy for hospitals. “Many hospitals have no expertise in running practices,” Mr. Rowan says. “We’re hospital people, not group management people.” Hospitals used to hire doctors merely to generate business. Now, he says, “hospitals want doctors to take financial responsibility for outcomes.”

8. Recession. “The decade will be known for the financial turmoil that came at the end,” says Mr. Clarke of HFMA. In March 2009, Thomson Reuters reported that the median profit margin of U.S. hospitals has fallen to zero percent. Hospitals tightened their belts and many of them ended the decade solidly in the black. But the numbers of non-paying patients are still high and many leaders like Clarke believe we are entering an era of having to do more with less.

NPR Segment Features ASCs

National Public Radio aired a segment featuring ASCs on its financial analysis program Marketplace on Jan. 12, which discussed how the ASC industry is viewed from various perspectives, according to the ASC Association.

The segment features an interview with ASC Association President Kathy Bryant and an ASC Association member from The Surgery Center at Brinton Lake in Glen Mills, Pa., as well as the perspective of the industry from hospital leaders.

To review a transcript of the segment or listen to a recorded broadcast, click here.

Mobile technology should enhance work of human providers

MODERN LIFE is a blur of motion and activity, with people constantly communicating on the run. Traditionally slow to change its ways, healthcare is far from the cutting edge of mobile technology, but it’s making strides to close the gap.

“The opportunity for mobile technology to change the way we deliver healthcare is enormous, but the current state of affairs leaves a lot to be desired,” says Joseph C. Kvedar, MD, Director of the Boston-based Center for Connected Health. The Center, a division of Partners HealthCare, seeks to apply consumer-ready technologies, such as cell phones or digital cameras, to enhance the patient-physician relationship. “On the bright side, the time to make it happen is now, for two reasons: Payment reform is taking shape, and employers are fed up. Payment reform affects physician behavior, and employers affect employee behavior. When those two forces are aligned, big things can happen.”

For healthcare executives, the key is to not get caught up in the technology itself, but to view it as a means of improving human performance in—and satisfaction with—the healthcare experience. In other words, mobile technology should enhance the work of human providers, rather than seek to replace them.

“Mobile devices that can document and view vital signs, ECG strips, pain scores, medication data, lab results and nurses assessments, can give a bigger picture of what is going on so the physician can make the right decision quickly,” says Veronica Carr, nursing information coordinator with Shands Healthcare, a not-for-profit system affiliated with the University of Florida.

Best of all, mobile technology is exactly that: mobile. Savvy healthcare veterans don’t limit its role to a healthcare facility, but extend it out into the community to ensure its impact is felt by as many people as possible.

REMIND ME AGAIN

The first hurdle to using mobile devices in a community outreach program is finding technologies that the target population has access to and is willing to use. Studies have shown that more than half of all U.S. physicians own some type of smart phone, but they aren’t common in the general population.

“While it would be great if a doctor could remotely see your blood pressure or blood glucose readings on your BlackBerry, there just aren’t enough of those devices in use yet,” Dr. Kvedar says. “That’s why we look for the ‘lowest common denominator’ technologies. We do a lot with text messaging, because almost everyone with a mobile phone can send and receive them. It reaches a broad audience but still can deliver a powerful message.”

The center has two major text-message-based initiatives underway, each of which targets a highly vulnerable population. The first sends texts to remind pregnant teens to come in for their prenatal visits, and the other sends texts to substance abusers who are enrolled in addiction programs as a reminder to come in for their visits.

But even though 70% to 80% of the people in those two groups have mobile phones with text messaging capability, getting the reminder to them is only half of the battle. The other half is getting them to act on it, and who the message comes from is almost as important as the message itself, Dr. Kvedar says.

“It makes a big difference when the reminder comes from the patient’s own healthcare provider, as opposed to a vendor or even a health plan,” he says. “If you want your acceptance rate to go up, have a doctor or nurse recommend the service directly.”

FREE FLOW OF INFORMATION

Since the earliest days of organized healthcare, the basic layout of a hospital has revolved around a central nurses’ station, which acts as a communications hub for the entire floor. In years past, nurses shuttled information from the nurses’ station to patient rooms. Today, nurses and other clinicians are just as mobile as their predecessors, but in a completely different way. They aren’t moving patients’ information; they’re moving the actual patients from one room to another, and they need access to information everywhere.

“Patients today are very mobile, even within the walls of a hospital, so the nurses and clinicians who treat them need to be able to move as well,” says Edward Cuellar, CIO of San Antonio, Texas-based Methodist Healthcare, the city’s largest care provider with eight hospitals among its two dozen facilities. “Wireless communication plays an integral role in getting information to clinicians at the right time and in the right place, helping to speed clinical decision-making and deliver exceptional patient care throughout the continuum of care.”

Cuellar should know a thing or two about mobile technology. Earlier this year, Methodist entered into an agreement with two third-party vendors to develop a converged wireless system for six hospital sites. The deployment, which will provide voice and data services across an area spanning nearly 2 million square feet, includes an integrated wireless platform that will run on more than 800 wireless phones carried by physicians, nurses, administrators and staff.

Shands also has undertaken a project to keep patient data accessible to clinicians throughout its facilities, deploying an electronic charting program for nurses via laptop computers on mobile carts. Technology that people won’t use has little value, so while it was important to get multiple opinions during the planning stages of the project, it’s equally important to select a standard quickly to facilitate consistency and increase adoption, according to Erik Stielow, Shands’ manager of technical projects.

“Getting the buy-in of the end users is essential to a successful rollout,” he says, “but it’s also important to standardize relatively soon on a vendor for your hardware. Not everyone will be happy with available options or features but in the long run, end users are most satisfied when there is a consistent device experience and a high standard of up-time.”

Having multiple vendors and multiple platforms increases the need for end user training and limits IT’s ability to respond to hardware downtime, he says.

THE HUMAN EXPERIENCE

More than any other industry, the focus must remain on the human experience, whether a provider’s or patient’s. There is no room for “technology for technology’s sake.”

“In healthcare, you are faced daily with the human element,” Stielow says. “You see the frustration and the ache in people when they are sick, and their joy and jubilation during the birth of a child or the news that they are healed. We must never forget that we are here to serve our community, and all that we do as a business must support that goal.”

And that goes for getting a technology project approved and funded, according to Cuellar. When dealing with various decision makers, check the technical jargon at the door and focus on the practical results.

“Even as a CIO, if someone comes to me and wants to talk about this great new healthcare technology, I don’t want to hear about bits and bytes,” he says. “It should start with people, and that means workflow. The focus of technology should always come back to enhancing and improving the delivery of care.”

Legal Issues for 2010

The ambulatory surgery center industry (ASC) confronted both challenges and change in 2009. However, with numerous ASC developments underway and an economic recovery on the horizon, the ASC industry is poised to perform well in 2010. This article addresses the key business and critical healthcare regulatory developments of this past year and their potential impact on the ASC industry for 2010.

Sale to ASC Management Companies and Health Systems

A significant business issue confronted in 2009 by the ASC industry was the decline in transactions involving a sale of a significant equity interest in an ASC to an ASC management company or health system. This decline was likely precipitated at least in part by a few historical ASC management companies that slowed down their acquisition strategies due to the tightened credit market.

In addition, the terms and pricing associated with a sale of a significant equity stake in an ASC clearly changed. For the past few years, many ASC management companies and health systems were willing to acquire a controlling equity interest in an ASC for a 7-plus purchase price multiple. Most purchase price multiples have dropped into the 5-6 range.

The purchase price formula is typically calculated as follows: (i) the ASC’s earnings before interest, taxes, depreciation and amortization (EBITDA) for the prior twelve months; multiplied by (ii) the purchase price multiple (e.g., 5-6 range); less (iii) the ASC’s long-term liabilities; multiplied by (iv) the ownership percentage being purchased. For example,. assume an ASC with $800,000 in EBITDA and no long-term debt desires to sell a 51 percent interest to an ASC management company, then the purchase price could range from $2 million to $2.5 million (e.g., [($800,000 x 5 to 6) – $0] x 51 percent).

Some new well-funded corporate buyers have also emerged in 2009. Additionally, hospitals continue to have an appetite for ASC acquisitions. As a result, a slight uptick in these transactions can be anticipated for 2010. While purchase price multiples will likely hover in the 5-6 range, ASC companies have also introduced more creative strategies to make deals more attractive to selling physicians, including the use of earn-outs and staged transactions. These strategies warrant careful attention as they can introduce new healthcare regulatory and other legal issues into the mix.

Hospital/Physician Alignment Options and Changes to the Stark Law

Hospitals and health systems will likely continue to leverage their higher reimbursement rates and community branding as a means to attract ASCs to them over other corporate investors. Historically, some hospitals pursued an “under arrangement” transaction strategy with physicians in an ASC setting.

While the terms of an “under-arrangement” transaction can vary considerably, it typically involves a physician-owned company leasing the space, equipment and/or staff to the hospital — perhaps on a turn-key basis. The hospital bills Medicare and other payors for the services and pays the physician-owned entity a fixed fee, variable fee or hybrid fixed/variable fee.

However, Stark law changes that became effective as of Oct. 1, 2009 forced hospitals and physicians to restructure or unwind such arrangements. In particular, the scope of the Stark law was expanded to apply not only to the entity billing for a “designated health service” (i.e., the hospital) but also the entity that is performing the designated health service (i.e., the physician-owned entity). In addition, the Stark law no longer permits a physician owned entity to lease space or equipment on a per-click, percentage of revenue or other similar fee structure.

In what appears to be an emerging trend across the country, a number of health systems are also considering (or for many — reconsidering) a broad spectrum of hospital/physician alignment and integration options including physician practice acquisitions, use of the foundation model, and entering into professional service and employment arrangements with surgeons and other proceduralists. These strategies may be driven at least in part by the changes to the Stark law as well as the mutual desire of hospitals and physicians to collaborate in the provision of healthcare services in a more meaningful and long-term manner.

Migration of Procedures From Hospitals Into the ASC

At the individual ASC level, in spite of a slight decrease in demand, many ASCs have grown their profits. The revenue growth may be due in part to the movement into the ASC of procedures historically required to be performed in the hospital setting, such as vascular access and certain orthopedic procedures.

The emergence of these procedures new to the ASC setting has been primarily driven by advances in medical technology as well as the expanded list of Medicare ASC covered procedures under the revised ASC payment system. Adopted by the Centers for Medicare and Medicaid Services in 2007, the revised ASC payment system allows an ASC facility fee to be paid for any surgical procedure performed at an ASC, except those surgical procedures that CMS determines are either not safe when furnished in an ASC or in which the expected duration of services would exceed 24 hours following admission.

The addition of these procedures to an ASC can have an immediate positive impact on an ASC’s bottom-line. As a result, many ASCs are examining the viability of adding these procedures to their ASC by attracting the appropriate physician specialists and sub-specialists and properly equipping the facility for such procedures.

Physician Re-Syndications

Physician re-syndications (i.e., sale of equity interests to physicians) remain very active for a number of reasons. First, ASC companies and physician owners of ASCs often desire to solidify physician utilizers’ relationships to their ASC by having them purchase equity interests. Second, a number of ASCs are reselling equity that was repurchased from prior physician investors who are no longer utilizing the facility.

Many ASCs, however, are struggling with how to make the buy-in price to physicians more attractive. The purchase price must be consistent with fair market value to minimize anti-kickback law issues. The purchase price formula for a physician’s purchase of a minority interest is the same as the formula used by an ASC management company, except that a 2-4 purchase price multiple is typically used in lieu of the 5-7 multiple. The buy-in, however, can still be quite significant. For example, assume the same ASC, as previously mentioned, desires to sell to a 5 percent equity interest to a physician, then the purchase price could range from $80,000 to $160,000 (i.e., [($800,000 x 2 to 4) - $0] x 5 percent) Allowing the ASC or its owners to loan monies to the physician to buy-in, including through an advance of future ASC distributions, could raise regulatory concerns. Accordingly, an ASC may consider alternative strategies to make the purchase price more affordable. These strategies may include the use of a dividend recapitalization or preferred distribution (which are treated as a liability in the formula described above thereby reducing the purchase price).

Alternatively, an ASC could undergo a tax-free restructuring so that the ASC is owned through a physician group practice. Group practice ownership of an ASC may allow an ASC to depart from a fair market value buy-in price.

Physician Buy-Backs

Many ASCs continue to be confronted with physician partnership and “deadweight” issues. A recently filed lawsuit, DeBartolo v. HealthSouth Corp. brings to the forefront the issue of non-productive physician owners in ASCs. The lawsuit was filed by a surgeon investor in an ASC whose shares were repurchased because of his failure to perform at least one-third of his procedures at the ASC.

The case is significant because it addresses the critical issue of whether the repurchase of a physician’s equity interest for failing to utilize the ASC would violate the anti-kickback law. On the one hand, the federal anti-kickback law ASC safe harbor mandates that a physician must perform at least one-third of his procedures at the multi-specialty facility in which he has an ownership interest. However, regulatory concerns could also arise if an ASC’s redemption of a non-productive physician is intended to penalize the physician for not selecting this particular facility for the procedure.

Nevertheless, many ASCs have incorporated compliance with the one-third test requirement into their governing documents. If a physician owner fails to perform at least one-third of his or her ASC procedures at the ASC in which he or she is an owner, then the ASC’s governing document may provide that such physician’s ownership interest in the ASC can be repurchased by the ASC or its other owners.

In an early ruling in DeBartolo, the federal court dismissed the lawsuit indicating it should be addressed under state law. While too early to determine, this initial ruling suggests that physician buy-back issues may simply raise state contract law claims. It is therefore critical that an ASC’s governing document incorporates the latest terms and mechanisms for dealing with physician equity buy-backs in a manner that takes into account the latest regulatory and other legal guidance.

Conclusion

There is no denying that this past year was a bit sluggish for the ASC industry, particularly in the transactional front, as it faced its own set of challenges including dealing with aggressive payor “out-of-network” billing strategies and the potential impact of health system reform. However, most ASCs escaped generally unscathed from the economic woes of this past year.

As 2010 gets underway, there are a number of favorable indicators for the ASC industry. Newly emerging buyers with capital are in search of ASC acquisition opportunities. Hospitals remain interested in pursuing collaborative strategies with physicians, particularly in the ASC and other outpatient sectors. And, ASCs are adopting a number of revenue enhancement strategies including through performing procedures not historically performed in the ASC setting, physician re-syndications and by adding ancillary revenue streams (e.g., anesthesia). As a result, the ASC industry is poised to have a strong year in 2010.

AAAHC Surveyor Gayle Lowe Discusses Industry Emphasis on Patient Safety Initiatives, New Prevention Programs

Gayle Lowe, an AAAHC surveyor, discusses patient safety initiatives and increased efforts on the part of healthcare providers to implement practices and policies that further increase patient safety.

Q: Several healthcare accreditors, including AAAHC, revised their patient safety criteria for accreditation for 2010. Do you think this reflects an increased emphasis on patient safety by the industry overall?

Gayle Lowe: Healthcare has always had an emphasis on patient safety. However, healthcare has been in the forefront of the news in 2009 through political agendas as well as many discrepancies in the way patient safety has been compromised. There certainly have been many opportunities for improvement identified in our healthcare systems that have reached the public’s notice such as flu prevention, procedural safety, medication safety and infection control. 

Q: What are some things AAAHC has done to further emphasize patient safety in its accrediting processes?

GL: AAAHC identified that in order to clarify and delineate patient safety issues in 2010, a chapter of the AAAHC’s Handbook for standards has been dedicated and focused on patient safety and infection control. Even though these issues have always been addressed by AAAHC, the emphasis on newly identified best practices and evidence-based procedures have been incorporated into the standards.

Q: What are some initiatives or processes that you have observed within ASCs that can further improve patient safety within facilities?

GL: One of the more impressive changes seen in centers is the improvements in education for staff, patients and leadership, with an emphasis on basic processes for infection control, such as handwashing. Infection control programs in the centers have been established, reevaluated and improved to ensure the program is designed to prevent, control and investigate infections and communicable diseases.

Having infection control programs is a condition for participation in the Medicare program. Medicare goes on to require, as does AAAHC, that infection control must include prevention aspects and that the centers have implemented nationally-recognized infection control guidelines.

Q: How has requiring ASC to implement nationally-recognized control and prevention guidelines affected ASCs?

GL: The centers have had to reevaluate what they have been doing and now must ensure that their processes meet nationally recognized guidelines. They must have a designated infection control professional (ICP) to assume the leadership of the program. This person should have the training in infection control and qualifications to organize, implement and monitor the program. The ICP must be delegated or appointed by the facility’s governing body to ensure they have the overall responsibility of the program. Benefits of these programs are evident in safe outcomes for patients, staff and visitor.

The first drawback you hear from centers is, of course, the time element for implementation and continuation for monitoring a successful program. I have tried to encourage centers to work “smarter” by looking for best practices of implementation and monitoring by sharing information with successful infection control programs.

Learn more about AAAHC at www.aaahc.org.

Cost Controls Head PricewaterhouseCoopers’ List of Top Issues for 2010

Efforts to reduce healthcare costs are at the top of a new list of the biggest issues for the health industry in 2010 from PricewaterhouseCoopers’ Health Research Institute, according to a release from PricewaterhouseCoopers.

Here is the list.

1. Redoubled efforts to cut costs. Hospitals, physicians and other providers will look for savings in operations and supply chains, renegotiating purchasing agreements and contracts with vendors on items such as medical devices and pharmaceuticals.
2. First effects of health reform. Healthcare organizations will spend 2010 absorbing the potential first wave of regulatory changes, such as insurance market and payment reforms, new agencies and grant programs and pressures on reimbursement and pricing.
3. New federal rewards and penalties. Physicians who act quickly to take advantage of government incentives to adopt electronic medical records and e-prescribing will reap rewards from government programs and those who do not will face potential penalties later.
4. Greater focus on fraud and billing errors. The Obama administration has boosted its fraud and abuse budget for 2010 by 50 percent, hoping to lop $1.6 billion off the cost of health reform. And CMS’ Recovery Audit Contractor (RAC) will be getting into full swing, rooting out Medicare overpayments and demanding restitution.
5. Rise of healthcare technology. The 2009 stimulus package provides huge funding increases for broadband and healthcare IT. Beginning in 2010, the convergence of healthcare with technology and telecommunications companies will change regulatory rules, how providers compete and the way healthcare is delivered.
6. Pharma collaborates with providers. Pharmaceutical and life science companies will shift focus to promoting prevention and patient outcomes. They will address education, clinical effectiveness, product safety, wellness and compliance.
7. Physicians align with health systems. The number of hospitals with employed physicians has nearly doubled since 1994 and the trend will continue as physicians seek greater stability and electronic connectivity. New models such as accountable care organizations will force providers to re-evaluate relationships, operations, contracting with payors and funding models.
8. Emergence of alternative care delivery models. Alternative models of care outside physicians’ offices and hospitals will blossom, such as work-site and retail health clinics, home health services and use of e-mail and telemedicine.
9. Emphasis on readiness for public health outbreaks. The H1N1 virus is forcing healthcare organizations to re-evaluate readiness for a major public health outbreak, such as reassesses vaccine supplies, communication, bed capacity and sick leave policies.
10. Community leaders take up prevention and wellness. Aided by increased federal funding, community leaders will work with providers and employers to develop evidence-based clinical measures and prevention and wellness strategies to deal with chronic diseases.

Read PricewaterhouseCoopers’ release on trends for 2010.

The height of health IT

Even health insurance giant WellPoint—with more than 35 million members and arguably enough reach to change the system with sheer volume alone—is taking few chances on the future of healthcare delivery. Like most plans, it’s testing new programs with cautious optimism, while aiming for large-scale implementation.

Charles Kennedy, MD, WellPoint’s vice president for health information technology, has a vital role in the plan’s innovation because few initiatives these days can be accomplished without the backbone of health IT.

Specifically, WellPoint’s emerging Individual Health Record—a simultaneously patient-facing and physician-facing electronic record—is “almost an air traffic control system to manage disease,” according to Dr. Kennedy. It’s probably one of the most promising efforts to control costs among members with chronic conditions. Pulling claims and clinical data through complex algorithms to arrive at a functional health summary differentiates the Individual Health Record from the typical EMR system.

“If you’re a hospital or institution, you have a variety of clinical data sources that have information on the patients that you see,” he says. “If you haven’t deployed an interface engine or some way of pulling those various clinical data sources together, you’re late to the party, and you need to do that ASAP.”

With more than 20 years of experience comprised of clinical practice and health IT implementation, Dr. Kennedy began his career in internal medicine. When he was a resident at Highland General Hospital in Oakland, Calif., he noticed how the patients’ needs far outstripped the hospital’s resources, and that experience solidified his vision of where medical care and information should meet.

“We tried to treat each patient regardless of who they were or their ability to pay,” he says. “It had the unfortunate side effect that we never thought about cost. We only thought about what was right for a patient. But that created a system where people are actually being hurt because they can’t afford care. I began to realize that the very laudable and applaudable approach of not caring about cost—only the patient—is right, but that doesn’t mean you can become cost unconscious. Cost unconsciousness has its own set of bad outcomes. That’s what’s led me into thinking we need to be more efficient. We need health IT.”

Earlier this year, Dr. Kennedy was named by the Government Accountability Office as a member of the new Health Information Policy Committee, which was established by the American Recovery and Reinvestment Act. Serving a three-year term, he and other committee members are creating policy framework for the development and adoption of a nationwide health IT infrastructure, including standards for the exchange of patient information. The committee will also make recommendations for handing out the $38 billion in health IT funding earmarked in the reinvestment act.

WHAT ARE SOME OF THE HEALTH INFORMATION POLICY COMMITTEE’S GOALS?

A:We’re trying to make sure the Obama health reform strategy becomes real. What people don’t realize is the number of things the industry and the government agree on. For instance, the government invested $1.1 billion in comparative effectiveness research.

The stimulus bill has $38 billion in it for health IT, and we’re trying to help the government develop policies to spend that money wisely. Our function is to say, ‘How do we take this incredible resource that Congress and the President have given us, and how do we turn it into an investment that creates healthcare value for the whole country?’ It’s a massive undertaking.

Our first objective was to ensure that the money from the stimulus package paid out over five years created value. We asked ourselves where we wanted to be five years from now, and then we worked backwards from there.

Deploying computers is not the goal. Having physicians and patients use computers to create better care at a lower cost is the goal. To do that, we have to set the bar high for the care system. Not only must you use the computer, you must use it in a meaningful way for better care. These are the ‘meaningful use’ criteria that we’ve published.

If we distribute a substantial number of computers, and physicians don’t use them, we won’t be successful. We didn’t want to focus on technical measures. We created the meaningful use criteria, and every single one is clinical.

We want physicians to achieve a clinical result, and we want information technology and the money in the stimulus package to be a contributor to that improved clinical result. For instance, one of the criteria is to avoid 1 million heart attacks and strokes by 2015. Another is to make cardiac disease no longer the leading cause of death in the United States. Those are stretch goals. That is not something simple and trivial.

It would have been much easier to say, ‘Our goal is to make sure 90% of physicians have computers.’ But we consciously didn’t do that because we recognize that health IT is a tool and that other changes need to happen.

HOW WILL THE INDUSTRY ACTUALLY ACHIEVE MEANINGFUL USE AND OTHER MILESTONES?

A:The law is actually quite specific in defining what a qualified system is, and we have a subcommittee that’s identifying the actual entity—such as the Certification Commission for Healthcare Information Technology (CCHIT)—that will assess systems as to whether they qualify or not. The bigger challenge is data integration.

Everyone recognizes that healthcare is horribly fragmented, that there are silos of care. We know that there’s massive inefficiencies, and there are significant quality concerns because information is not shared as people move across silos.

The challenge with data integration is that we really haven’t figured out how to do it correctly. If you’re an integrated delivery system and you buy one EMR, that’s fine, and that works. But 70% of physicians practice in a community setting, solo and small group practice. You have this tremendous problem that all of these systems are different. They call things by different names, and they even capture different sets of data.

WELLPOINT HAS CREATED THE INDIVIDUAL HEALTH RECORD SYSTEM THAT USES ALGORITHMS. HOW WILL THAT MAKE A DIFFERENCE?

A:Algorithms, also known as decision support, are going to be the key to getting value out of these systems. Let’s say the federal government funds a comparative-effectiveness study that identifies a new drug is great for certain people. In today’s world, we know it can take up to 17 years for that to be commonly found in a physician’s paper record. With this approach, you can create an algorithm as soon as physicians or specialty societies have decided on certain best practices. Now you’ve created an infrastructure to get that message to every doctor, but only when there’s an appropriate situation for that rule to be applied. That will take that 17 years down to 17 days. That’s a huge advance.

Let’s say we have noticed that there’s a lot of inappropriate use of PET scans. In today’s world, a doctor would have to call us for preauthorization every single time he orders a PET scan. In the future, the algorithms will be running, and they will only alert the doctor if there’s an issue with a PET scan. Today, they call 100% of the time, and we generally approve the scan more than 90% of the time. Algorithms will take hassles, administrative costs and bureaucratic burdens out of the system.

The right kind of health IT allows us to use new knowledge from our outcomes research subsidiary [HealthCore] and any gaps in a member’s care identified by our informatics company [Resolution Health] in much more effective ways. The right kind of health IT allows these advances to be applied real time at the point of care while the doctor is treating the patient or helping the patient at home.

IS WELLPOINT’S INDIVIDUAL HEALTH RECORD WORKING? HOW IS IT ANY BETTER THAN OTHER EMRS OR PHRS?

A:We’ve run a pilot in Dayton, Ohio. The idea was not just to create interoperability—don’t just allow System A to talk to System B. When you connect systems together, what you create is just a data dumpster. It’s like putting a jigsaw puzzle on a physician’s desk.

That information has to be organized to just the summarized information that the doctor needs…You don’t take all of the information out of these various systems, you only take the information necessary for the ongoing management of the patient.

Many EMR implementations have failed to show value. About 30% of the time, physicians will actually turn them off because they are incredibly time-intensive and will reduce a physician’s productivity. That will hit them in the pocketbook. We’ve looked for solutions that wouldn’t be so intensive from a physician’s data-entry perspective and would do more sorting of information and presentation of information.

Physicians are not data generators. They’re data consumers. Their orders create significant amounts of data, but the physicians themselves usually just scribble a relatively brief note. The problem with many EMRs is they will require physicians to become data-entry clerks.

In Dayton, Ohio, we have a very significant market share. We’re Anthem Blue Cross Blue Shield of Ohio, and we also have a strong partnership with Kettering Hospital Network.

Kettering had already installed an application integration solution, so even though they had 120 different clinical sources, many of those clinical sources could be accessed through infrastructure they had already built. That made it easy for us to collect all of the clinical data out of their systems. We built feeds to the application from Anthem’s claims systems. We were able to get this application up and running in a little over three months, which is incredibly rapid. We made it available to the patient in the form of a PHR and to the doctor in the form of a CCHIT-certified EMR with e-prescribing.

When we looked at who was using the tool, we found that patients who had a higher illness burden actually made preferential use of the tool. For many of the tools we’ve deployed, the ‘worried well’ have been the type of people who used it, not the people with the chronic disease that we really need to reach.

We noticed the people who used the tool and had the higher illness burden, their cost increase year over year was actually less than the people who didn’t use the tool, even though those people who didn’t use the tool were healthier.

We built algorithms in the system that exactly correlated with various HEDIS measures and every time the doctor or the patient logged on, they could see their exact compliance. By giving the patients and the doctor the same information in a simple red light, yellow light, green light format with algorithms enabled us to see quality improvement scores of anywhere from 10% to almost 40%.

WHAT’S THE BUSINESS CASE FOR A HEALTH PLAN TO CREATE A SYSTEM LIKE THAT?

A: Our strategy is maximizing healthcare value, and healthcare information technology is really a tool to get you there. But it has to be the right kind of health information technology. It has to influence doctor’s decisions, and you have to present sufficient clinical data—not mountains of data but the key things the doctor needs to know so that you can influence his decision to do something that’s consistent with the evidence base, or to prescribe a drug that will cost the patient less but has the same likelihood of creating a good patient outcome.

If you look at why healthcare spending is out of control, it’s chronic disease, not health plan profits and not health plan administrative costs. We are seeing an explosion of chronic disease in this country, and chronic disease is managed largely by the patient at home. They’re managing their diabetes 99% of the time at their home, not in the physician’s office. If you don’t make your health IT solutions patient-centric and if they don’t address chronic disease, I don’t think that you’re going to get the kind of value that you want.

HOW ARE THE PHYSICIANS EMBRACING THE INDIVIDUAL HEALTH RECORD?

A:We have 300 physicians using the system now. We’re planning for a broader rollout to the greater Dayton area in 2010 to virtually all primary care physicians.

What we’re focusing on is chronic disease management, and there’s not huge debate about many of the things that need to be done to take care of these patients. That’s not the problem. The problem is actually getting it done. The physicians in general have been positive and are beginning to see how their lives could be easier.

We also added all of our pay-for-performance rules. We pay physicians more if they practice medicine consistent with the evidence base, and we took the existing measures and turned them into algorithms in the system. As long as the physician follows all the alerts, he can be sure that he’s going to maximize his pay for performance incentive. That’s convenient for the doctors because what they usually have to do is identify the patients who haven’t had certain interventions and then reach out and call them.

We’re just starting to incorporate our utilization management rules. If we can begin to move those algorithms to the point of care, then physicians might not have to call except for when there’s a real reason to discuss something, which might be 5% of the time.

DETERMINING THE EFFECTIVENESS OF TREATMENTS IN ORDER TO BUILD THE ALGORITHMS IS AN EXPENSIVE PROCESS. HOW CAN IT BE DONE?

A:This is the beauty of health information technology…if you bring it together in a repository that’s reflective of the patient’s clinical condition and how they’re being managed, you can begin to do database-driven studies rather than very expensive prospective clinical trials where you’re enrolling patients and following them over time. You can begin to do database driven studies that are a fraction of the cost. No, they’re not the gold standard, which will always be a randomized perspective-controlled clinical trial, but there’s a lot of information we’re going to be able to glean out of database-driven studies that are more observational and more retrospective.

BE A VISIONARY. WHAT DO YOU SEE AS THE POTENTIAL FOR HEALTH IT?

A: I hope that every time a patient needs information when they’re home or need to take care of their chronic disease or want to stay well, that they have that information at their fingertips, it’s actionable, and they don’t even have to think about it. If we can make it that easy—and there is a path to get there—we could actually fix the healthcare system.

Charles Kennedy, MD, has held strategic health IT positions with a variety of organizations. He also served as the medical director of a California health center in addition to other clinical service. He earned an MBA from Stanford University, an MD from the University of California at Los Angeles, and a bachelor’s degree in genetics from the University of California at Berkeley.
” Physicians are not data generators. They’re data consumers.”

Justice Department to Provide Guidance to Providers on Clinical Integration to Withstand Antitrust Laws

A representative of the U.S. Department of Justice said he department will work with hospitals and other providers to create models of clinical integration that do not violate antitrust laws, according to a report by AHA News Now.

In a letter to the Senate Judiciary Antitrust Subcommittee, Assistant Attorney General Ronald Weich said the department plans to begin a formal guidance review process with all affected parties in February.

Mr. Weich said the department “remains committed to providing clear guidance to health care providers and others in the health care industry to help them identify and understand any antitrust issues as they explore new ways to collaborate to increase efficiency and benefit consumers through lower cost, higher quality care.”

Meanwhile, the Federal Trade Commission has created a definition of clinical integration among independent physician practices, which stipulates that:

“all physicians who participate in the arrangement participate in active and ongoing programs of the arrangement to evaluate and modify the practice patterns of, and create a high degree of interdependence and cooperation among, these physicians, in order to control costs and ensure the quality of services provided through the arrangement”; and

“any agreement concerning price or other terms or conditions of dealing entered into by or within the arrangement is reasonably necessary to obtain significant efficiencies through the joint arrangement.”

Read AHA News Now’s report on clinical integration.

Access MediQuip Releases ‘Partners in Focus’ Provider Portal

Access MediQuip, a leading provider of outsourced implantable medical device management solutions to the healthcare industry, has released a new version of its ‘Partners in Focus’ online portal, which will be available to its 1,800 provider customers in January, according to an Access MediQuip news release.

The online portal is a management tool which allows providers to electronically track the status of referrals, authorizations and device orders. The portal features streamlined design and offers new features for improved case management and electronic reporting, according to the release.

This portal also offers real time data retrieval, search options, filtering and data exporting capability.

“To meet the growing needs of our customers, we must continuously deliver innovative solutions to help them operate more efficiently,” Eric Pezzi, Access MediQuip’s executive vice president of operations, said in the release. “We designed ‘Partners in Focus’ to support our provider customers with robust, easy-to-use tools which provide clear reporting and tracking capabilities that complement our implantable device management services. These services benefit payers by providing increased control over costs and allow their physicians and members expanded access to implantable device technology.”

Learn more about Access MediQuip.

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