As Medicare officials mull new rules and a second round of participant recruitment for the Pioneer ACO program, healthcare providers are quick to point out how the gainsharing model can be improved.
It is far easier to get lost in an alphabet soup of acronyms than it is to find branding genius at a US federal agency.
But officials at the Centers for Medicare & Medicaid Services chose wisely when they picked "pioneer" as the key word for the moniker of their most ambitious gainsharing program. The Pioneer Accountable Care Organization model mirrors the pioneer experience of the 1800s wagon trains in the American West.
Just as the first wagon trains drew strong and ambitious settlers willing to accept the risks of traversing America's new frontier for the promise a brighter future, the CMS program was designed to draw healthcare providers willing to accept the gainsharing program's demands in exchange for potential financial reward.
"The Pioneer ACO Model is designed for healthcare organizations and providers that are already experienced in coordinating care for patients across care settings," the program's website states.
Launched in 2012 with 32 participants, Pioneer ACO is a relatively high-risk Medicare payment program because providers can gain or lose revenue based their ability to deliver value. "The Pioneer project is different because its ACOs are more advanced," says Ashley Thompson, vice president and deputy director of policy at the American Hospital Association.
Pioneer ACOs have faced daunting obstacles on the trail to value-based care delivery. Nine of the inaugural participants have dropped out of the program, with several joining the less-demanding Medicare Shared Savings Program. MSSP allows providers to share value-based gains with Medicare, but they bear no risk of having to share the cost of falling short.
Providers Seek Pioneer ACO Fixes
With several accountable care hurdles cleared, and many more to come, CMS officials and healthcare providers are pondering new Pioneer ACO rules to smooth the road ahead in 2015. Earlier this year, CMS invited comments on new Pioneer ACO rules and the prospects for a second round of participant recruitment. "CMS is asking for ways to grow the program," Thompson says.
While acknowledging "there's still a lot of interest at hospitals and health systems," the AHA official said CMS needs to make changes to Pioneer ACO before a second round of participant recruitment is launched. "There's not this cry out there for every hospital to participate in an ACO," she says. "Pioneer ACO is just not a robust program from our perspective."
A letter the AHA sent to CMS on April 17 urges the federal agency to make changes to Pioneer ACO. Both the AHA and Pioneer ACO participants are seeking changes to the program's gainsharing mechanism.
"The way the Pioneer ACO baseline is calculated, it rewards improvement, not overall quality," says Nyum Gandhi, a Chicago-based partner at Oliver Wyman. "Historically good performers are being penalized."
He says the baseline calculation is a "no-win situation" for CMS. "They're in the business of being the steward of billions of taxpayer dollars. I understand why they did it, but it has caused frustration among providers."
Reforming the Pioneer ACO gainsharing mechanism to make it more lucrative for providers will be necessary to draw more participants to the program, the AHA letter asserts. "The number one way to increase participation in ACO programs is to modify the shared savings determination to ensure that more ACOs are able to receive a bonus—and a larger bonus—so that they can continue to invest in the program," the letter says.
Officials at Newton, MA-based Atrius Health say they have asked CMS to change the gainsharing mechanism on fairness grounds.
"As CMS evaluates the program, we have made recommendations to improve the financial model," the Atrius Health officials said in a media statement. "The model does not [reward] ACOs that were already good stewards of the Medicare dollar prior to the launch of the program. Our first year benchmark was more challenging than other Pioneers in our market since as we already had a long history of providing coordinated and efficient care for these Medicare patients."
In addition to more lucrative gainsharing, the AHA and several Pioneer ACO participants are pushing CMS to improve the flow of data necessary to function effectively in the program. "Hospitals are not getting the data in a significant and timely manner," Thompson said.
Stuart Lockman, who serves as president of the Michigan Pioneer ACO, says receiving timely beneficiary data is essential to containing costs. "We would like to see CMS establish a system to better advise ACOs when their aligned beneficiaries visit out-of-network facilities," he says.
The Promised Land
Barbara Walters DO, who is leading the Pioneer ACO program at Dartmouth-Hitchcock Medical Center in New Hampshire, believes the 1800s wagon train analogy works well, to a point. While she agrees Pioneer ACO participants have been blazing a value-based trail, she says their destination remains far in the distance.
"The Promised Land is a little more difficult to see, as we don't have Moses, the angel Moroni or Allah with rules to guide us," Walters said. "But I would say that we would see an engaged patient population participating in a patient-centered model of healthcare, health and wellness, with all relevant data up-to-date and accessible."
The ideal the ACO model would be "supported by an innovative provider community that is fairly reimbursed in a manner that reflects the appropriate cost of care for the illness burden inherent in their population, rewards effective clinical outcomes, and enhances innovative care model designs across the continuum of care," Walters said.
There are billions of dollars of future revenue sitting on the value-based delivery system table. Payers and providers have to find a way to work together to seize the opportunities in front of them.
Healthcare payers and providers are facing an existential conundrum.
The effort to push US healthcare delivery to a value-based system has generated a host of opportunities for both sides to work more closely than ever. But after decades of adversarial interaction, the parties are struggling to communicate and barely trust one another.
I recently witnessed the communication breakdown in stark detail.
A month ago, on coincidentally back-to-back interviews, I spoke with a payer for about 30 minutes and a provider for about 30 minutes. It was stunning. They both read from the exact same script about their motivations and goals, but they expressed strong frustration over their respective payer or provider counterparts. And the interviews weren't even for the same story!
The breakdown in trust can even be quantified. A recent ReviveHealth survey gauged how providers view their payer partners. The results are not pretty: If providers had graded their trust in payers on the standard academic A to F scale, nearly every insurer in the country would have failed the trust test.
"It's much, much harder for people to work together when trust is an issue," Brandon Edwards, CEO of Nashville-based ReviveHealth, told me this week.
Beyond Dislike
He says business leaders who dislike each other cut deals all the time. But distrust is different. "Dislike is not uncommon. Lack of trust is far more difficult," Edwards said regarding the expansive history of mergers and acquisitions in US business. "If you don't trust somebody, how do trust that the contract that you signed will be honored?"
He compares the relationship between payers and providers to the partisan divide between Democrats and Republicans in Congress. "They will talk about the same problems, but because they have different views and increasingly don't trust each other, they can't talk with each other," Edwards said.
Talk is Not Cheap
Whether you're running a billion-dollar health system or a billion-dollar health plan, there are billions of dollars of future revenue sitting on the value-based delivery system table. Payers and providers have to find a way to work together to seize the opportunities in front of them.
Merger and acquisition opportunities between payers and providers are increasingly attractive, not least because of the tantalizing promise of big data. There are huge value gains to be realized when provider and payer databases are combined, including the creation of a critical mass of patient information that can support population-based health services and improving continuity of care.
Chicago-based Huron Consulting Group is one of the leading matchmakers in the healthcare industry. This week, Jeff Jones, managing director of Huron's healthcare practice, told me about the consultancy's approach to healthcare mega mergers involving payers and providers. Overcoming the trust barrier is often the key to building lasting partnerships, he said.
Strategy Comes First
Jones says the first step to bringing healthcare payers and providers together is relatively easy. "It starts with a thoughtful determination of what the payer or provider wants to do strategically. The challenge really centers on the trust between the payers and the providers given their historical relationship."
Market analysis and strategic planning are child's play compared to the hard work required to build trust between many payers and providers, Jones says. "To the degree trust is there, it's easy to work out the business developments. To the degree trust is absent, it gets very, very difficult. The approach we're taking to get to that level of trust is in a tiered or stepped process… In a planned way, you expand the scope of the relationship."
Jones says patience is a virtue when playing matchmaker between payers and providers. "It's not the fastest approach, but we think it's the most effective and sustainable approach," he says, adding personal relationships are just as important in healthcare mega mergers as they are in the relationship between doctor and patient.
"At the enterprise level, it's no different. We have to get this relationship piece right… If we can do that, we can make meaningful and sustained changes in the industry."
Bright Prospects for Law Firms
The opportunity for healthcare matchmaking is golden, Nicole Stone, director of Wolters Kluwer's Health Reform KnowlEDGE Center, told me this week. You could say payer/provider deals could spawn a specialized service line for law firms.
"This is a significant business opportunity for large law [firms] to expand their practices to include a specialization in insurer/provider and provider/provider mergers," she says.
"They handle the merger, deal with any antitrust issues, provide a business plan for increased revenue, quality and patient care; and on the back-end they provide legal support and consultative support to ensure these goals are met. Many large law firms have hired or are hiring project managers, which would be required for such a practice."
Removing the consumer pinch from narrow provider networks in individual insurance exchanges is a matter of striking a "delicate balance" between payers and the insured, suggests a Robert Wood Johnson Foundation report.
One of the main levers insurers have to keep premiums affordable in the individual health insurance exchange market—a narrow provider network—is a double-edged sword.
On one edge, crafting a selective network of healthcare providers based on their ability to deliver high-quality services at the lowest possible cost has helped insurers offer affordable HIX policies to consumers.
On the other, narrow networks can be disruptive and inconvenient for consumers, requiring them to switch doctors and drive long distances to receive in-network services that are not provided near their homes. This is not only an inconvenience for patients, but can be a barrier to treatment.
It's up to regulators to "strike a delicate balance" between insurers and their 8 million new customers in the individual exchanges spawned by the federal Patient Protection and Affordable Care Act, according to a Robert Wood Johnson Foundation report released last week.
The potential for a consumer backlash is being expressed in New Hampshire, which is a uniquely stark case study on the impact of narrow networks. Anthem Blue Cross Blue Shield is the only commercial insurer operating on The Granite State's new health insurance exchange, and the carrier excluded 10 of the 26 NH acute care hospitals from its HIX provider network.
One of the lead authors of the RWJF report says regulators and insurers need to work closely on several fronts to craft consumer-friendly narrow networks. "It's really a multi-pronged strategy," says Sabrina Corlette JD, a senior research fellow at Georgetown University Health Policy Institute's Center on Health Insurance Reforms.
The multi-pronged strategy includes setting minimum standards for network adequacy, building up transparency and healthcare "literacy" in the new exchanges, and keeping tabs on "how people are faring," she says.
Until the new exchanges mature and establish competitive markets in every state, Corlette says regulators will have a key role to play in ensuring narrow networks deliver the health insurance products they promise. In particular, she notes, the level of access to in-network medical specialists is a prime point of contention between HIX health plans and their new customers.
While it is prohibitively expensive to offer patients unlimited choices when selecting specialists, consumer-friendly narrow networks must provide a minimal level of access to a wide range of physicians, Corlette says.
In instances when a necessary specialist is not available inside a narrow network that is striving to be consumer friendly, the health plan should bear the risk, she says. "Providers need to be available outside the network at no cost to hold the consumers harmless."
Standards
The federal Centers for Medicare & Medicaid Services have set several quantitative standards for HIX provider network adequacy. Earlier this year, CMS officials strengthened the network standards for so-called essential providers such as hospitals that serve economically disadvantaged communities.
In 2014, insurers' HIX provider networks were required to include 20 percent of all essential providers in the network's geographical area. In 2015, the standard has been raised to 30 percent.
Transparency and healthcare education efforts are fundamentally important to enable consumers, some of whom have never had health insurance before, to navigate the new exchanges, Corlette says.
"There really wasn't clear, accurate consumer information this year," she says, "whether a plan is a PPO or HMO doesn't always tell you what kind of plan you are getting, or whether you are going to be in a narrow network or not."
To help make narrow networks consumer friendly, Corlette says consumers need to be equipped with the tools to play the role of informed economic agents on the exchanges: transparency that allows comparison of products and a solid grasp of basic healthcare concepts such as deductibles.
"Consumers were basically purchasing based on price, but there needs to be work to help consumers understand what they're buying," Corlette said of individuals who bought 2014 health insurance policies on the new public exchanges. "There are ways to convey this information to consumers that allows them to make apples-to-apples comparisons, and that's still a work in progress."
She said efforts to make the federal and state HIX websites more consumer-friendly include better labeling and popup windows that remind people to check whether their doctors are in-network.
David Schultz, president and founder of Albany, NY-based Media Logic, says establishing transparency needs to be a top consumer-oriented goal for the exchanges.
"The only way that consumers can make good, informed healthcare decisions is if there is transparency in terms of price, product and quality."
"How much does it cost? What are they getting for their money? How good is it? In the case of a health insurance plan, the provider network is a critical piece of the product design and will have a major impact on the overall value," Schultz says.
He argues that health plan consumers bear a high risk when transparency is absent. "The biggest way in which a narrow network can be disadvantageous to a consumer is if they don't know what they're getting before they sign-up."
Creating informed consumers will soften the sting of narrow networks on the front end. But, at least for now, oversight is necessary on the back end to create consumer-friendly narrow networks, Corlette says.
With the PPACA requiring people to purchase health insurance, insurers bear a legal and ethical obligation to the new exchange customers, she says. "When you are requiring people to buy a product, that product has to deliver for the consumer."
On a broader point about narrow networks, Corlette said the health plan cost containment technique is drawing intense interest beyond the HIX world. "At least in the individual market, the narrow networks are spreading inside and outside the exchanges," she said. "There's not many levers left for payers to keep premiums low."
CMS may release as soon as this summer new rules for Medicare's gainsharing programs and a decision on whether to launch a second round of Pioneer ACO participant recruitment.
The Pioneer Accountable Care Organization Model program, one of the most ambitious federal value-based healthcare delivery initiatives, is at a crossroads.
Since launching in 2012 with 32 inaugural participants, the program has dwindled to 23 pioneers. The first year of gainsharing data shows more pain than gain for early Pioneer ACO participants.
Now federal officials appear poised to inject some energy into the initiative, with new rules in the works designed to optimize the program and a second round of participant recruitment on the horizon.
The Pioneer ACO program is one of two gainsharing Medicare payment models; the other is the Medicare Shared Savings Program. From the healthcare provider perspective, the former is a higher risk proposition than the latter.
In the Pioneer ACO program, providers can gain revenue for delivering value, but they lose revenue if they fall short of the program's accountable care standards. The level of gainsharing for MSSP participants is relatively low, but there is no risk of losing revenue through the program.
"Pioneer doesn't have a one-sided gainshare approach. You have up and downside risk," says Nyum Gandhi, a partner at Oliver Wyman Group based in Chicago. "Most of the commercial models and even MSSP are upside only. That's why people view MSSP as a learning opportunity. There's low risk."
He says the relatively high-risk nature of the Pioneer ACO program was a major reason that several of the organizations dropped out. "The majority dropped into MSSP, which has a little less upside and no downside," he says.
The Pioneer ACO program is best suited for hospitals, health systems, and physician organizations that have laid the groundwork for the switch from fee-for-service healthcare delivery to a value-based approach, Gahndi says.
His Pioneer ACO clients have a positive long-term view of the program. "The first year is for them to learn. They're not really looking for a lot of shared savings in the first year."
They probably wouldn't have found it. Last summer, the federal Centers for Medicare & Medicaid Services released early data on the gainsharing results from the Pioneer ACO program showing that 13 out of the 32 pioneer ACOs produced shared savings with CMS in 2012, generating a gross savings of $87.6 million.
Providers Not Impressed
In an April 17 letter sent to CMS on proposed rule changes to Medicare's gainsharing programs, the American Hospital Association urged the federal agency to sweeten the deals by "[ensuring] that more ACOs are able to receive a bonus – and a larger bonus – so that they can continue to invest in the program," the AHA letter states.
Ashley Thompson, vice president and deputy director of policy at the AHA, says the Pioneer ACO and MSSP programs are promising, but need to be revised if they are going to "survive and thrive into the future."
"We see ACOs as a path to move forward," Thompson says. "There's a lot of experimentation out there. The Pioneer ACO is one of those of experiments. I don't know whether it has the scope to become the leading or dominant model. It's too early to tell."
A CMS spokesperson says the agency is committed to building up its accountable care initiatives: "The Affordable Care Act offers new ways to identify and test new models of care that realign payment incentives that increase the quality of care for patients and also keep costs in check. We intend to continue testing accountable care organizations to give doctors, hospitals and other healthcare providers new ways to manage to deliver care within federal health programs in innovative and cost-effective ways."
CMS declined to provide a timeline for the release of new rules for Medicare's gainsharing programs. Gandhi and others expect that the new rules and a decision on whether to launch a second round of Pioneer ACO participant recruitment will likely come no later than this summer.
They cite pressure on the agency to make changes in the program well ahead of the beginning of the next program year on Jan. 1, 2015.
Participant Perspectives
Whether they have realized gainsharing revenue yet or not, several active Pioneer ACO participants are bullish on the program and looking forward to 2015.
Officials at Newton, MA-based Atrius Health said they lost a little revenue in the program in 2012 and gained a little revenue in 2013, but both results were not considered statistically significant. "For 2014, we expect to have more statistically significant savings," the officials said in a statement.
Atrius said participating in the Pioneer ACO program has generated benefits for the organization beyond gainsharing. "The first two years of the Pioneer ACO program engaged our clinicians and staff in better care for our patients and brought us in closer alignment. We have already seen coordinated care improvements and a decrease in our utilization trends," they said.
Lebanon, NH-based Dartmouth-Hitchcock Medical Center officials said they were able to generate gainsharing revenue in their first year of participation in the Pioneer ACO program, and they are optimistic about the future.
"We were able to achieve positive results in our rate of growth as our expenditures were less than our comparison group, and we were able to report on all quality metrics as required by Medicare," officials said in a statement. "Overall, we are satisfied with our participation and plan to continue participating in 2015."
A community hospital on the edge of Appalachia is becoming a leader in diabetes management and prevention. It's found a way to shorten patients' length of stay, boost prevention efforts, and help train endocrinology specialists.
Jay H. Shubrook, DO, FACOFP, FAAFP
The fight against diabetes is being fought hard in places as far flung as school lunch rooms and large academic medical centers. But there's one place that's in the vanguard: a community hospital in Athens, OH.
OhioHealth O'Bleness Hospital, a 132-bed acute care facility is on the front lines of the battle against diabetes, a killer that claims thousands of American lives every year.
It's facing a diabetes epidemic, says Jay H. Shubrook, DO, FACOFP, FAAFP. Shubrook is director of the clinical division of The Diabetes Institute at the Ohio University Heritage College of Osteopathic Medicine, and he serves in leadership positions at O'Bleness Hospital including director of diabetes services.
The southeastern Ohio community around the hospital is economically disadvantaged and in poor health. The incidence of diabetes in the area is 40 percent, which is more than four times the national average, according to the American Diabetes Association.
"They get diagnosed early and have complications early," says Shubrook.
The Athens rate even exceeds the projection for the US population in 2050. It's expected that about one third of the adult US population will have the illness by then.
Inpatient Management
Shubrook identifies several chronic disease management initiatives at O'Bleness Hospital that have led have improved clinical outcomes and cut treatment costs.
Efforts to improve the management of patients' glucose levels at the hospital, such as a standardized insulin protocol, have reduced the length of hospital stays, he says.
"We went to IV drips on the floor when only 10 percent of the other hospitals nationwide had done so. That was significant for a small community hospital," he says, noting that research he conducted on the impact of improved glucose-level management showed a shortening of hospital stays by 1.6 days.
O'Bleness evaluates the effectiveness of its glucose-level management efforts regularly, Shubrook says. "This year, we have found our hyperglycemia rates have gone up," he said. "We think this active reassessment of quality measures benefits our patients."
In fact, the inpatient glucose-control protocols Shubrook helped develop are now a standard recommended by the American College of Endocrinology.
Prevention Efforts
O'Blenness Hospital doesn't stop at trying to improve management of diabetes as a chronic illness. The hospital also provides diabetes education and patient support services through a navigator program for adult and child diabetes patients. It is boosting prevention efforts, which in turn improve quality of life and cut treatment costs, Shubrook says.
The navigator who works with young Type 1 diabetes patients in local schools has been a key player in launching early interventions before children experience serious complications, says the physician leader. "We have been able to reduce the number of hospitalizations, reduce the number of missed days of school, [and] reduce the number of parents' missed days of work," he says.
O'Bleness Hospital is also participating in a diabetes prevention program developed by the Centers for Disease Control and Prevention that could cut billions of dollars off the nation's annual spending on diabetes treatment, Shubrook says. Patients enrolled in the year-long program are screened for pre-diabetes conditions and commit themselves to lifestyle and behavior changes.
A national study conducted on YMCA members who participated in the CDC program found a 50 percent reduction in the rate of people with pre-diabetic conditions developing a full diabetes diagnosis.
At O'Bleness, 45 people with pre-diabetic conditions have participated in the prevention program, with none of them receiving a diabetes diagnosis so far. "It appears to be doing the right thing, two years into it," Shubrook says of the hospital's prevention program.
Specialist Training
O'Bleness is also co-sponsoring a year-long fellowship program with a West Virginia hospital to prepare primary care physicians to play an active role in managing their patients' diabetes. It is estimated that there are not enough endocrinology specialists in the United States to handle the inundation of diabetes cases nationwide.
One of the goals of the fellowship program is to spread the use of glucose monitor "downloading stations" at primary care physician offices. The technology provides primary care staff access to the full records of a home glucose monitor. "It really makes our visits more efficient," Shubrook says "All you have to do is have a computer in your office, and the software is free."
Shubrook says the O'Bleness diabetes care fellowship program can and should be replicated at hospitals across the country. "This is something we need to nationalize and have all over."
As change continues to reverberate throughout the healthcare industry, health insurers are well-positioned to influence greater cost efficiencies.
For millennia, divinity was the guiding force in medicine, through the healing hands of the local priest and shaman.
Then 2,500 years ago, the Greek physician Hippocrates helped launch the Scientific Revolution, which transformed Western medicine. A pledge "to do no harm" became the first patient-centered medical maxim and scientific diagnosis was elevated over the divine.
Now, at least in the United States, medical advances based on the laws of science appear to be butting up against the laws of economics.
With some medications costing $1,000 per pill and inpatient hospital bills often breaking the $100,000 mark, healthcare payers from Medicare to insurance companies to private citizens are finding ever-increasing medical costs unbearable.
"There are finite resources. Economics is the study of finite resources," David Friend, who holds a medical degree from the University of Connecticut and an MBA from The Wharton School at UPenn, told me recently.
"Healthcare is part of the finite resources the country has… Everything else is going to get crowded out. Something has to give if you can't raise taxes and roads and bridges are falling apart. The answer is to become more efficient."
Friend, who was recently namedleader of clinical strategy at BDO's Center for Healthcare Excellence and Innovation in New York, told me the growing influence of consumers is sealing the deal for a more cost-effective approach to the practice of medicine. "The population will demand more accountability," he says. "Most people are going to be paying out of their own pocket… That's going to force the discussion dramatically."
One consequence: Patients who can't pay will forego care. Under that scenario, everyone loses. So across the US healthcare industry, payers are exercising their power to prod cost efficiencies out of providers.
One area that's ripe for a cost-efficiency makeover is spinal surgeries. More specifically, as I've reported, public and private payers are seeking to rein in explosive growth in spine fusion surgery. Medicare officials claim that more reliance on conservative approaches to treat back pain such as physical therapy could save taxpayers millions of dollars on avoidable spine fusion procedures.
Joseph Gregory, an analyst at London-based GlobalData who has been researching the growth in spine fusion surgery over the past decade, told me payers are essential players in the push for less costly spine treatments. "The financial incentives really need to be in there to stop unnecessary procedures," he told me.
In many areas of the United States, the drive for cost containment and payment reform is reaching far beyond individual medical procedures. In some places, economics are fundamentally transforming the practice of medicine in a way that only science could before.
Primary care medical homes are a prime example of payment policies driving healthcare reform down to the physician level. Whether you are a salaried doctor at an insurance co-operative's medical home in suburban Maryland or a physician leading one of the new gain-sharing medical homes in Arkansas, cost is a bigger factor than ever in the mental calculus that physicians perform when treating patients.
Arkansas, which is set to release more first-in-the-nation gain-sharing data next month, is using medical homes as part of a payment-driven effort to recast physician practices throughout the state.
With Medicare waiting in the wings, most payers in the state are participating in the Arkansas Payment Improvement Initiative, which is built on medical homes and a gain-sharing program that is setting cost standards for "episodes of care" ranging from upper respiratory infection to congestive heart failure.
Last week, Arkansas Surgeon General Joseph Thompson MD told me that economic considerations are playing an appropriately crucial role in US healthcare reform initiatives.
The architect of the Arkansas Payment Improvement Initiative says the study of finite resources is among "the major influencers on the medical profession: data, which exposes causative agents for bad health; economics exposing the cost of both success and failure; and advancing science that empowers us with new tools for judicious use. These things will transform medicine."
And Arkansas physicians are generally supportive of the state's ambitious payment reform effort because they were invited to help design the new system, David Wroten, executive vice president of the Arkansas Medical Society, told me this week.
"We've included physicians in the ground floor of these programs," he says. "The Medicaid program sought out physician input early on… It's made a difference."
While acknowledging that economics are along for the healthcare reform ride, Wroten insists medicine is in the driver's seat. From the physicians' point of view, the top goal of healthcare reform efforts should be "changing the payment incentives to incentivize the right care," he says. "The end result is better patient care and lower costs."
Investments in outpatient facilities and health information technology systems are helping not-for-profit hospitals overcome revenue setbacks, says a Moody's report.
Not-for-profit hospitals that are investing in ways to deliver value to their patients are shoring up revenues and staving off competitors, according to a Moody Investors Service report released last week.
Value-oriented investments such as in outpatient facilities and fully integrated electronic health record systems are helping not-for-profit providers overcome recent revenue setbacks, including payment rate cuts, reduced inpatient service volume and competition from new entrants in the healthcare market, an author of the Moody's report says.
"A lot of it is about trying to minimize the losses and trying to capture where those volumes are going," says Brad Spielman, vice president and senior credit officer at Moody's. "A lot of this is by necessity… Hospitals are competing with each other and with new competitors."
Addressing the long-term trend of rising numbers of medical procedures being conducted on an outpatient basis, Spielman described explosive growth in hospital-affiliated outpatient facilities. "These outpatient facilities are looking a lot more sophisticated. They're looking a lot more like hospitals," he said. "We're seeing facilities in the hundreds of millions of dollars."
Convenience is a key factor for hospitals to consider as they face competition from new entrants to the healthcare market, Spielman says. "If I can get flu shots and blood pressure tests and have other types of services performed at my pharmacy, that's a more satisfactory office visit… than if I have to take a significant part of my day out for these procedures," he says. "It completely changes the model of healthcare delivery. It's not on the doctor's schedule; it's on the patient's schedule."
In New York, Memorial Sloan Kettering Cancer Center has been investing heavily in outpatient facilities. "They are doing everything but housing patients," Spielman said.
In partnership with The City University of New York, not-for-profit Sloan Kettering has launched an ambitious project in Manhattan to build a 1.15 million-square-foot building on East 74th Streetthat is slated to include a 750,000-square-foot outpatient cancer center. The purchase price of the land for the project was $215 million, according to city officials.
"Many hospital systems began preparing for this shift several years ago by investing in outpatient service centers and urgent care centers," the Moody's report says. "Several communities have seen a marked increase in the number of urgent care centers, large full-service outpatient centers and even stand-alone emergency departments."
Spielman says hospitals, particularly large NFP facilities and health systems, are under tremendous competitive pressure to upgrade their information technology systems.
"In order to be competitive in the future, they need to implement electronic health record systems," he says, adding that a range of benefits can flow from IT investment such as the lower costs of a paperless business environment and quality improvements for patients. "There's one record that follows you. The potential for quality improvement is substantial."
But hospitals need to beware of IT upgrade risks, Spielman says. "You don't actually see an immediate return on these investments," he said, noting it takes time to realize IT gains such as reduced administrative costs and better clinical outcomes.
Successful IT projects have a solid foundation in the culture and medical practices of a hospital, Spielman says. "[EHR] needs to be truly integrated into the way the organization does business…This goes down to the physician level. You have to have buy-in."
The Moody's report suggests that NFP health systems have no choice but to invest in a good-quality health IT system. It is, says the report, "a minimum requirement for organizational success, especially among larger systems."
A surge in spinal fusion procedures has brought mounting scrutiny on providers. Now payers appear poised to crack down on needless procedures by applying coverage pressure on physicians.
Annual US spine fusion surgeries have skyrocketed over the last decade, rising from about 260,000 in 2002 to about 460,000 in 2011, according to federal data. And recent media reports have raised alarms over the proliferation and overuse of spine fusion procedures.
Now CMS officials are cracking down and leading a backlash against unnecessary spine fusion procedures, according to Joseph Gregory, a surgical devices analyst at London-based GlobalData.
"The financial incentives really need to be in there to stop unnecessary procedures," says Gregory, who is the lead author on a spine fusion report GlobalData is set to release soon.
CMS has gotten involved because of "money going to procedures that shouldn't have been done in the first place," he says.
Spine Studies Fuel Millions in Revenue, and Controversy
To receive Medicare payment for spine fusion procedures, physicians are facing several requirements, such as providing imaging results to regulators and documenting three to six months of consecutive therapy before surgery is performed, Gregory said. "If they don't have the documentation, they basically won't be paid by the payer."
GlobalData, in a statement issued recently, forecasts that the coverage pressure from Medicare and other payers will cut into spine surgery growth over the next six years and that "these measures will tamper with the spinal fusion procedural growth rate and subsequently impact the overall market valuation over the coming years."
"While these procedures have experienced Compound Annual Growth Rates of close to 10 percent in the past, this rate is expected to be reduced to 5 percent throughout the forecast period until 2020."
NASS Recommendations
For its part, the North American Spine Society is advising members on best practices. Earlier this month, the group released insurance policy recommendations for 13 spine treatments, surgical procedures, and diagnostics, including lumbar fusion.
The NASS recommendations say lumbar fusion is an indicated treatment for nine conditions such as traumatic injuries. And three conditions—stenosis, disc-related lower back pain and disc herniation—can be treated with lumbar fusion, although some of those cases have contraindicating factors.
Targeting payers and their coverage rules will have a positive impact in helping to ensure spine surgeries are conducted when warranted, says Christopher Bono MD, a Boston-based orthopedic surgeon and second vice president of NASS.
"The NASS coverage recommendations do not directly address any relationships between industry and a surgeon. They do, however, address the indications for surgery," he said.
"If the NASS recommendations are followed, the rates of so-called unnecessary or contraindicated [procedures] should be dramatically lessened. The key determinant is what the spine community, via NASS, have deemed 'unnecessary.' This will likely be a subject of ongoing debate."
Debate about spinal fusion procedures has been simmering for years at the federal Centers for Medicare & Medicaid Services.
According to the Federal Register, the Medicare Coverage Advisory Committee, which makes recommendations to CMS on clinical issues, launched the effort to answer hard questions about spine fusion procedures in the summer of 2006.
At one meeting, the panel sought to review evidence including:
What are the most informative measures of clinical outcomes;
Indications;
Clinical outcomes for the different surgical techniques and components;
Complications;
Harms and adverse events;
Persistence of benefits and harms over time; and, general applicability to the Medicare population in routine practice
A notice on the CMS website shows the federal agency is well aware of the financial impact spine surgery is having on Medicare's bottom line.
Surgeries Will Continue
But Gregory identifies several factors he says will ensure continued growth in spine fusion procedures:
The relatively high number of conditions that have become indicated for spine fusion,
Advances in noninvasive spine surgery, and
Demographics
"Now it's expanded to about 14 conditions," he says. "There were very few when this first started."
Advances in surgical techniques and technology have made spine surgery more attractive than ever to back pain patients, Gregory said, adding the innovations include new medical devices and faster recovery times. "It's a good driver for patients that didn't consider it in the past," he says.
And demographics are a dominant factor, Gregory said: "The aging population is really having an effect. As the population ages, you're going to see a lot more cases of this."
Insurers operating on the public insurance exchanges for individuals will be filing proposed 2015 premium rates over the next month. Early data out of Washington State indicates that anxiety over double-digit rate increases may be unfounded.
In at least one state, 2015 health insurance premium increases on the new public exchanges for individuals will be below rate increases experienced in recent years.
Washington State released proposed premium rates last week. The average proposed rate increase for individual health insurance policies offered inside and outside the state's exchange, Washington Healthplanfinder, is 8.25 percent. The average proposed rate increase for the eight insurers operating on the exchange is 5.4 percent.
The proposed premium rate increase for the state's entire individual market is the lowest requested rate hike in seven years, according to the Washington State Office of the Insurance Commissioner. And there will be more insurers offering health plans through Washington Healthplanfinder next year, with at least three new carriers vying to offer policies on the exchange.
"I'm pleased to see the health insurers show an increased interest in the individual market and to see rates come in relatively low," Insurance Commissioner Mike Kreidler said in a media statement last week. "Consumers certainly deserve more choices, but we will scrutinize the proposed rate changes very carefully."
Interpreting Washington State Data The proposed 2015 premium rate changes from insurers operating through Washington Healthplanfinder are as follows:
Bridgespan Health Company: +1.7 percent
Community Health Plan of Washington: +8.4%
Coordinated Care Corporation: +11.2%
Group Health Cooperative: +11.2%
Kaiser Foundation Health Plan of the Northwest: +0.57%
LifeWise Health Plan of Washington: +8.9%
Molina Healthcare of Washington Inc.: -6.8%
Premera Blue Cross: +8.1%
Downward Pressure
Molina Healthcare of Washington is the only insurer operating on Washington Healthplanfinder that proposed a premium rate decrease for 2015. In Molina's premium rate filing with the insurance commissioner's office, the carrier said two factors were responsible for downward pressure on its rates: the expectation of a rosier exchange risk pool in 2015 and the slowing pace of medical inflation.
"Molina expects the overall acuity of the 2015 Marketplace risk pool to improve relative to the acuity Molina assumed for the 2014 Marketplace risk pool," the carrier states in its premium rate filing.
"The increase in penalties for not purchasing health insurance as well as more public familiarity with the Marketplace should lead to improvements in the acuity of the risk pool in 2015 compared to 2014."
Molina, which is a managed care organization that provides healthcare services for more than 400,000 Washington state residents eligible for Medicaid, Medicare, and Washington Healthplanfinder, says it anticipates a reduction in 2015 medical inflation based on its "Medicaid claims experience."
Upward Pressure Coordinated Care Corporation and Group Health Cooperative requested the largest 2015 premium rate increases on the Washington state exchange, with each seeking an 11.2 percent hike.
In its proposed premium rate filing, Coordinated Care cited several factors that are expected to create upward pressure on 2015 premium rates, including increased utilization of medical services, new taxes and fees on insurers set to go into effect in 2015, and changes in the reinsurance program for the individual exchanges.
"Both the fee charged and the expected benefits will be reduced from 2014 to 2015," Coordinated Care said of the reinsurance program changes.
National Premium Rate Expectations
From the national perspective, premium rate hikes in the public individual exchanges will likely be moderate in 2015, according to John Holahan, PhD, a fellow at the Urban Institute in Washington, DC.
"There will be more plans, not less, and more enrollees. As the numbers increase, the risk pool looks better," Holahan said, adding insurers have strong incentives to offer policies on the individual exchanges next year. "If you were attracted to it in 2014, there's even more reason to be attracted to it in 2015."
He also said fears that previously uninsured exchange beneficiaries would have high medical service utilization rates appear to be overblown. "Deductibles are fairly high, so you're not likely to see a spike in utilization."
Exchanges in states such as New Hampshire, Vermont, and West Virginia are at risk of double-digit premium rate increases due to a lack of competition, he said: "There are a number of markets that aren't particularly competitive that you worry about."
Cori Uccello, senior health fellow at the American Academy of Actuaries, said exchanges nationwide face underlying upward pressure on premium rates. "Every year, health spending goes up, with or without the Affordable Care Act. That's going to be factored in and put upward pressure on rates."
While inflation in medical service costs will affect all insurers operating on the exchanges, there are a host of state-specific market factors that will result in a wide variation of HIX rate increases nationwide, Uccello said. "Overall, rates are going to vary by state and by insurers in states. I really think there's going to be a lot of variation."
CMS officials say they are making changes to the HIX risk corridors program to account for "unexpected administrative costs and pricing uncertainties."
Federal officials have released market standards and regulations for the PPACA exchanges. The final 2015 rule, released last week, includes risk program adjustments crafted to ease upward pressure on premium rates, more robust collection of quality information from insurers, and tighter standards for "navigators" who help people pick the HIX health plan that best suits their needs.
In addition to those changes, the final rule requires health plans to make coverage decisions within 24 hours on essential prescription drugs that are not covered by the plan. It also provides flexibility to states in the administration of the Small Business Health Options Program, within which PPACA exchanges offer group insurance coverage to small employers.
"This rule will help to improve consumer protections, keep premiums affordable, and make additional information available to consumers in the future, such as quality ratings that will help them to better compare and choose plans," CMS officials said in a blog postFriday.
Accounting for HIX Risk
In a fact sheet accompanying the rule's release, CMS officials said they are making changes to the HIX risk corridors program to account for "unexpected administrative costs and pricing uncertainties." The risk corridor changes feature raising the ceiling on administrative costs by two percentage points and raising the floor on profits by two percent.
"Health plans can have more administrative costs and more profits in 2015," says Jenn Kowalski, a vice president at DC-based Avalere Health who leads the company's healthcare reform practice.
She says the final rule also sets new regulations for the exchanges' reinsurance fund. Under the PPACA, reinsurance fees are collected from all health plans to fund the HIX reinsurance fund, which helps health plans offering individual policies on the exchanges pay for costly patient cases. "That's a positive for the plans," Kowalski said.
Michelle Oxman, a health law analyst at Wolters Kluwer's Health Reform KnowlEDGE Center in Illinois, says CMS officials have signaled strong support for the HIX reinsurance program. "In the preamble [of the Final 2015 rule], the agency says that it intends to retain any excess collections to safeguard against shortfalls in future years and that if collections are not sufficient to make the required payments in one year, the amounts due to issuers will be paid from the next year's collections."
Quality Reporting
The final rule boosts quality reporting requirements for health plans. CMS plans to require publication of quality rating information on all PPACA exchange websites before the open enrollment period for the 2017 plan year.Metrics for gauging health plan enrollee satisfaction are among the quality measures to be added.
"It probably will look a lot like the Medicare Advantage stars system," Kowalski says of quality ratings for health plans offered on the exchanges. "It will be organized into domains of related measures, then the individual measures themselves."
Oxman says CMS will be collecting quality data from state and federally operated exchanges to "ensure consistency," but many details of the quality reporting effort have not been finalized. "The agency is still trying to figure out how 'granular' the reporting/rating should be," she says. "For example, should plans be sorted by metal level, as well as PPO vs. HMO?"
Navigator Standards
The HIX rules for 2015 include new regulations "to ensure that Navigators and other assisters are able to carry out their responsibilities to help consumers enroll in insurance coverage while meeting federal requirements for assister programs," CMS fact sheet says.
When the proposed Final 2015 rule for the exchanges was released in March, a CMS spokeswoman confirmed that the navigator regulations were aimed at states such as Missouri and Tennessee that had passed laws to restrict the activities of people assigned to assist HIX enrollees.
Oxman says the final rule strengthens the navigator program internally and externally: "Navigators and consumer assistance providers may be required to produce corrective action plans and pay civil money penalties if the Department of Health and Human Services finds they have violated federal requirements. The limits on states' power to regulate navigators are spelled out a bit more because of the turf war."
Exchange 'Growing Pains'
While CMS officials appear pleased with the evolution of the PPACA exchanges, the Medical Group Management Association raised a red flag on Tuesday.
MGMA conducted research in April to assess the impact PPACA exchanges have been having on group medical practices. The research includes responses from more than 700 medical groups that employ a total of 40,000 physicians.
"Physician group practices are expressing dissatisfaction with the complexity and lack of information associated with insurance products sold on ACA exchanges," MGMA President and CEO Susan Turney, MD, said Tuesday in a media statement.
In a phone interview Tuesday, MGMA Senior VP Anders Gilberg said "there are some definite growing pains" on the exchanges that are affecting physicians. In particular, he said, medical practices are struggling to get information from insurers operating on the exchanges and are facing problems linked to the so-called narrow networks that many insurance carriers established for exchange patients as a cost-containment measure.
Medical practices are being forced to allocate limited administrative resources in often fruitless efforts to contact insurers about health plan deductibles and insurance eligibility verification, he added. "It's critical for the providers to talk with patients about cost sharing," Anders said, explaining that many exchange participants have opted to purchase health plans with deductibles that result in high out-of-pocket expenses.
Anders said narrow networks have been a major source of frustration for MGMA members. "Even if you are in a network, the referrals you used to make are much harder. Our groups and physicians are not denying care, but they want their patients to get the most out of their insurance."
MGMA plans to conduct another survey of its members in the fall to see whether the growing pains on the exchanges are persistent or improving.
