Payment reform is the glue holding Arkansas' ambitious healthcare reform efforts together, according to top leaders in the state. Some legislative hurdles remain.
Gov. Mike Beebe
This is the third and final part of series on healthcare payment reform in Arkansas.
An ambitious plan to build the country's first public-private, universal payer, value-based healthcare delivery system is playing out in Arkansas and the preliminary results look promising.
"One of the reasons we have been successful with the legislature is we tackled cost containment first before we expanded insurance," Arkansas Surgeon General Joseph Thompson MD said in a phone interview earlier this month. "We didn't have any votes to spare."
Arkansas' payment reform push started several years before the cliff-hanger votes over the past year that expanded Medicaid to more adults through the state's new public exchange.
"Delivery system costs were going to force the state to do something dramatic [with Medicaid]," the surgeon general said, adding that the existing fee-for-service program faced insolvency unless there were deep cuts to provider payments or patient benefits. "Our private sector carriers were having the same issue."
Payment Reform Naysayers 'Better Wake Up'
Gov. Mike Beebe's administration began designing the Arkansas Payment Improvement Initiative in 2011 and started launching reforms in 2012. The essential elements of the initiative are two-fold:
A gainsharing/cost-penalty payment system for physicians with as many as 150 "episodes" of care for conditions ranging from upper respiratory infections to clogged coronary arteries
Patient-centered medical homes that bear financial responsibility for the healthcare needs of a population
Arkansas has 15 episodes either established or launching this summer.
By setting standards for care alongside the cost thresholds, Arkansas' payment system is intended to make value a driving force in the state's delivery of healthcare services. Physicians who provide services above the cost threshold have to pay money back. "It's not just about lowering cost," Thompson said. "The idea is to improve quality first, then achieve efficiency to lower cost."
Joseph Thompson, MD
Arkansas Surgeon General
PCMHs help physicians coordinate care, marshal resources, and provide the best value to their patients, said Steve Spaulding, VP of enterprise networks at Arkansas Blue Cross Blue Shield, the state's largest private healthcare insurer. "When they refer to somebody, they can be sure they're referring to the best value in the system," he said of the doctors who lead medical homes.
PCMH: Shouldn't Patients Have Their Say?
Not surprisingly in the home of college football's Razorbacks, Thompson calls medical home leaders "quarterbacks."
"We're wrapping a team around a lead physician," the pediatrician said, adding that a doctor working in a medical home practice could have as many as 5,000 patients. "The team helps carry the load. It helps their efficiency. It helps their effectiveness."
Medical homes will be crucial in helping physicians treat thousands of previously uninsured Arkansas residents, said David Wroten, Executive VP of the Arkansas Medical Society.
"The Payment Improvement Initiative, particularly the primary care medical homes, is hopefully how we will be able to handle this increased access to medical care," he said of the half million previously uninsured Arkansas residents who now have the option to obtain healthcare coverage through Medicaid or the state's new public exchange, Arkansas Health Connector.
"The system you have out there right now, you add 250,000 people to it and you're going to have a bottleneck. That's why the state is pushing so hard to get those medical homes up and running."
Early Results Promising
"We're starting to see improvement in quality and efficiency of services that is generating savings," Thompson said. "We have some clinics that are knocking the ball out of the park."
The Arkansas Center for Health Improvement, which Thompson leads as director, recently began analyzing payment data from the first episodes of care launched in October 2012, he said. Data for upper respiratory episodes from October 2012 to September 2013 shows more physicians had to pay back than gained a share of cost savings, the surgeon general said.
Gainsharing for treatment of upper respiratory infections during that period was about $60,000 and cost-penalties were about $92,000. "We've had remarkably little provider pushback to date," he said.
Thompson says the new payment system features rational incentives and simplicity for physicians because Medicaid and commercial payers are playing by the same rules. "What we're not doing is putting a new management system on top of a provider's delivery system. We are highlighting for the provider the inefficiencies in the system."
Andy Allison, Arkansas' Medicaid director, says the new payment system is already bearing fruit. "What we've achieved in the last two or three years is, in my view, without precedent. We've heard multiple stories of providers who didn't believe the numbers… Once you start paying that way and showing providers what actually is going on, the providers are very willing to make a change. History tells us payment drives change."
Allison says the Payment Improvement Initiative is pushing for system-wide change and driving to include all healthcare payers operating in the state. "Experiments don't work because they're experiments. Providers don't change their business model on a whim."
Physicians, who have been among the most skeptical Arkansas healthcare reform stakeholders, are cautiously optimistic about the Payment Improvement Initiative. "They're busy, they're seeing 40 or 50 patients a day, and they're just seeing how this works," Wroten said. "We need to look beyond the data at this point and find out what really is going on."
Like Thompson, he has not heard complaints from doctors. "We did not get any calls from physicians who were in a position to pay money back to the state," Wroten said.
Robert "Bo" Ryall, president of the Arkansas Hospital Association, believes the new payment system is on the right track. "The pace of it has been good," he said in a phone interview. "Medicaid spending is down to flat. So we know this is working to some degree."
'A Huge Impact'
In Arkansas, there is widespread agreement that building a public-private, universal payer, value-based healthcare delivery system would have a host of benefits for many states.
"It's a huge impact," Ryall said. "You're talking about having a healthy workforce. It's also important for the health of hospitals… Having a more insured population helps the health of hospitals."
The healthcare reforms Arkansas has embraced are relieving financial pressure on providers, many of whom previously faced budget-busting uncompensated care as well as shrinking Medicaid and Medicare reimbursement rates, Gov. Beebe said in a phone interview. "You can't stay in business if you're giving away 25 percent of your services for free," he said.
Spaulding said Medicaid expansion through the Arkansas Health Connection's "private option" has had a palpable effect on many people who have never had health insurance before. "Regardless of how you feel about it politically, it was expanded and there are thousands of people who are benefiting from it," he said, adding several of the newly insured have suffered with untreated chronic diseases for years. "The fact is, what has been done in Arkansas, it's created an opportunity for the overall health of the state of Arkansas to improve."
Medicaid expansion will be a financial bargain for the state even after the federal government tapers its support for the expansion program from 100 percent to 90 percent after 2020, Wroten said. "The economic benefit we will get from insuring all those people will more than offset the cost. In order to have a medical practice, you have to have enough patients with insurance or who can otherwise pay for care."
Arkansas officials face several remaining barriers in their quest to transform the state's healthcare system, including annual legislative votes on Medicaid expansion that require 75 percent majorities and convincing Medicare to join the state's new payment system.
"We need Medicare to join completely," Thompson said. "We're losing some of the fidelity of the signal to our providers."
The surgeon general said the top two candidates seeking to succeed Beebe, who is ineligible to run for re-election due to term limits, have "both signaled willingness to continue" the Payment Improvement Initiative, but he noted healthcare "is usually not the first choice" for any new governor.
"We're not at the home stretch yet," he said. "It still could go wrong."
A Pittsburgh-based Blue Cross Blue Shield carrier views private health insurance exchanges as a golden opportunity in the group market.
Highmark Inc. is banking on customer-driven private health insurance exchanges as a key growth area for group coverage over the next four to five years.
"We're looking aggressively to move groups to private exchanges," Bill Brown, manager of digital distribution at the Pennsylvania-based insurer, said in a phone interview on Wednesday. "We flipped from a defensive to an aggressive strategy. We've done a lot of demos for national accounts."
Highmark, the fourth-largest Blue Cross and Blue Shield-affiliate in the country, provides health insurance policies to more than 5 million people in Delaware, Pennsylvania, and West Virginia. It launched private exchanges for group coverage in January 2011, with "full scale" operations in place by January 2012. Analysts predict that percentage of consumers using HIX will grow from 1 to 3 percent now to as high as 40 percent in 2018.
"We are so early in the evolution of these exchanges, [that] to have growth that quickly shows how powerful this technology is," Brown says.
"More Depth with the Group'
Highmark is working to establish defined-contribution private exchanges that are consumer-driven and offers "many types of products." Beyond medical coverage Highmark's private exchanges offer dental, vision, and other types of consumer policies.
Brown says private exchanges appeal to small- and medium-sized businesses that have relatively high revenue and well-compensated employees. "The private exchange gets more depth with the group… low-revenue companies may not have the funding to do defined contribution."
Low-revenue companies and small business employees who have never had health insurance are often better served pursuing coverage options on the new public exchanges, Brown said.
Under the federal Patient Protection and Affordable Care Act, individuals and businesses may purchase health insurance policies on public exchanges in all 50 states. With the open enrollment period for 2014 now closed, federal officials say more than 8 million people have signed up. The Small Business Health Options Program public exchanges for group coverage are launching at a slower pace, with growth expected to accelerate in 2015.
"We do have a few groups that have already purchased through the SHOP," Brown says of Highmark's participation in the public exchange for group coverage. "There are different groups that will have more opportunities in the SHOP than a private exchange."
The ability to offer a large suite of insurance products is a major selling point for defined contribution plans on private exchanges. "We're getting a group or member to select from the umbrella of Highmark products," Brown says. "There's a benefit to Highmark to put all its products up and sell them as one. … It's a great opportunity for Highmark to grow our subsidiary business."
Private exchanges offer several advantages to employers and employees, Brown contends. On the employer side, he cites a 450-employee business that reaped huge administrative cost-saving gains from purchasing health coverage on one of Highmark's private exchanges. "They did all their enrollment on paper. They moved to our platform to move themselves to an online platform. It's saving them hours and hours of work every month."
For employees at small businesses, workers can choose a product tailored to their needs, Brown says. "For the most part, in the 100-and-under sized company, they had never had the opportunity to buy products that are what their families need," he said. "With private exchanges, you have employees picking policies that are right for their families and the stage of their lives."
Keys to Success
For insurers seeking to launch private exchanges for group coverage, Brown says the keys to success include careful market assessments and picking the best IT partner possible. "We wanted to make sure we hit the right markets at the right time."
Highmark looked for markets where the company could offer employers opportunities to manage costs, Brown said, "giving the small-group employer another option to dropping their employees on the public exchange market."
Medium- to large-sized employers present opportunities for both Highmark and its group coverage clients, who can realize significant human resources cost savings. With the private exchange handling administrative functions that were often previously sited in multiple locations, "you're really consolidating a lot," Brown says. "They love the administration aspect of it."
Highmark executives also chose carefully when they picked Seattle, WA-based Array Health as the company's IT partner for private exchanges.
"We were looking for someone who had the same vision as Highmark," Brown says. "They are really customer-focused. After the sale, we have very deep touch-points with our consumers… They wanted to make sure everything after enrollment was nailed down. That's why we chose them."
Array Health CEO Jonathan Rickert said Tuesday that he co-founded the company in 2006, when "Romneycare," the Massachusetts healthcare reform law enacted in 2006 by then-Governor Mitt Romney, sparked the imagination of healthcare executives across the country. "The original vision of the business was to offer employees an array of choices," Rickert says. "We wanted to ultimately personalize and humanize the experience of purchasing insurance."
Rickert says Array Health began licensing the company's private exchange IT platform in 2011. "The ACA happened, and we started getting approached by large carriers." Array Health views a private exchange's online presence like an iceberg. "The marketplace is like the tip of the iceberg, then there's the 90 percent under water," Rickert says.
The "90 percent under water" includes billing, customer service, data integration, and "a beautiful front-end shopping experience. You've got to pick the right partner and you have to set it up correctly."
"We loved their back-end technology," Brown says of Highmark's choice to partner with Array Health. "On the front end, we wanted something that was really simple… We do have a call center that supports the website. But we don't get a lot of use of our call center."
As the clock winds down on the Obama administration's final term, CMS Principal Deputy Administrator Jonathan Blum joins what is becoming a steady stream of top federal officials leaving for new career opportunities.
Jonathan Blum
Principal Deputy Administrator of CMS
In its third high-level departure this spring, HHS has announced the resignation of Jonathan Blum, principal deputy administrator at the Centers for Medicare & Medicaid Services.
Blum, a former Office of Management and Budget program analyst, was the White House's first political appointee at CMS, serving as director of the Center for Medicare from 2009 to 2013. As principal deputy administrator over the past year, he concentrated on payment reform and cost reduction efforts across the agency.
In a memo to CMS employees Tuesday morning, CMS Administrator Marilyn Tavenner said Blum "has decided to leave CMS to pursue new opportunities." His last day on the job will be May 16.
Blum's departure follows the April 11 resignation of HHS Secretary Kathleen Sebelius, the administration official most closely associated with reforms under the Patient Protection and Affordable Care Act. Gary Cohen, director of the Center for Consumer Information and Insurance Oversight at CMS, announced his resignation last month. Cohen had led the troubled launch of the new public health insurance exchanges.
A Champion of ACOs
Blum has led several Medicare reform initiatives linked to the PPACA, including development of accountable care organization rules, quality framework implementation for Medicare Advantage plans, and helping to craft value-based payment strategies.
"Under Jon's leadership, the Medicare program has served as one of our primary drivers to shift our health care system to reward quality, care improvement, and value," Tavenner wrote. "Medicare per-capita cost growth has remained at the lowest sustained period under Jon's tenure, while quality of care has increased and new benefits have been added to the program."
CMS came under fire this spring over proposed cuts to Medicare Advantage plans that the agency pegged at 1.9 percent but insurers forecast at 5.9 percent. Republicans in Congress accused CMS of pilfering Medicare to pay for Obamacare.
In a conference call with reporters on April 7, Blum defended the final CMS calculation of anticipated 2015 MA payment rates, which the agency has set at a 0.4 percent gain. "CMS has a very good track record," he said. "We've been pretty spot-on over the past four years on predicting the markets."
Exodus in Motion
In email exchanges Wednesday, a pair of analysts noted that the departures at HHS present both opportunities and risks.
Nicholas Manetto, director at DC-based FaegreBD Consulting and a former congressional press secretary, said the exits of Blum, Cohen, and Sebelius present more risk than potential for gain.
"Like in most situations, too much change at once can be destabilizing and presents a certain amount of risk, particularly given the complexity of ACA implementation and related issues," he said.
"While there can also be some opportunity in new blood, new approaches and new thinking, I think the risks could be significant, particularly given the number of challenges that still very much exist and lay ahead with the ACA."
Kevin Coleman, head of research and data at Sunnyvale, CA-based HealthPocket Inc., said the timing of the HHS departures could be good for the Obama administration's political standing and efforts to drive healthcare reform.
"By waiting to depart after the administration's [public exchange] enrollment goals have been met and exceeded, Sebelius and Blum have prevented their departures from being cast as key leadership abandoning a very troubled inaugural enrollment period," Coleman said.
Opportunity
The departures present the White House with several opportunities, Coleman added. "These recent HHS departures represent an opportunity for the administration to increase implementation process transparency for the public as well as improve its management of supporting technology and service vendors," he said.
"The new secretary of HHS can review those vendor management practices that culminated in the federal exchange roll-out problems and monitor the management of the new exchange vendor to confirm mistakes are not repeated as various aspects of the exchange software system are modified. With respect to transparency improvements, HHS can provide ongoing updates regarding the testing status of exchange functionality, load performance, and data security prior to the commencement of the next Open Enrollment Period."
Manetto cautioned that observers should not read too much into the HHS turnover.
"Transitions of this kind at this point in time in any administration are certainly not uncommon," he said. "Blum and Sebelius in particular were in their very demanding positions for quite lengthy periods of time, so it is not surprising to me that they are looking to transition, and I would think we will only see more changes of this kind as the administration moves into its final two years."
Other high-ranking administration officials who have resigned this year include Customs and Border Protection Commissioner David Aguilar, Small Business Administration chief Karen Mills, and White House Counsel Kathryn Ruemmler.
With a head start on most of the country, Arkansas is pioneering a series of system-wide payment reforms designed to create a value-based healthcare delivery system.
When you think of fiscally progressive, trend-setting states, Arkansas probably is not the first to come to mind.
But the home of the Razorbacks is on the cutting edge of healthcare reform efforts nationwide, with the state building the country's first public-private, universal-payer, value-based healthcare delivery system.
In 2012, state officials launched the Arkansas Payment Improvement Initiative, a gain-sharing/cost-penalty payment system for healthcare providers. The first payers to enter into the new system were the state's Medicaid program and the dominant commercial-insurer duo, Arkansas Blue Cross Blue Shield and Humana.
"Medicaid almost has to lead the way," Andy Allison, the state's Medicaid director, told me earlier this month. "Medicaid typically adopts the policy changes first, then the private payers adopt later."
Arkansas' universal payer system is so innovative, that federal officials are studying whether Congress would have to pass a new law for Medicare to fully participate, Joseph Thompson, MD, the state's surgeon general, told me earlier this month. "We have stimulated debate in the federal Department of Health and Human Services," he said. "They may be concerned they don't have statutory authority."
Thompson told me that a universal payment system can be a powerful driver of change in any state's healthcare reform efforts, such as setting consistent incentives for providers to attain quality and cost containment goals. "We have all of our public and private payers pulling in the same direction," he said. "We are looking at a total system transformation."
I have been politically aware since Jimmy Carter was elected president and a member of the workforce nearly as long. The level of cooperation and conciliation that is on display in Arkansas appears unprecedented.
The political maneuvering to establish and maintain a key element of the state's healthcare reforms, Medicaid expansion, has been an epic struggle.
After Election Day in 2012, Democratic Gov. Mike Beebe faced a huge obstacle in his quest to expand Medicaid to provide coverage for half of the state's uninsured residents – as many as 250,000 adults. Republicans had taken control of both houses in the Arkansas legislature for the first time since Reconstruction. The GOP caucus opposed Medicaid expansion. And 75 percent majority votes were required in the House and Senate to change the state's Medicaid program.
"There were two general groups of Republicans, all of whom don't like the ACA, don't like Obamacare," Beebe told me last week. "Some are honestly opposed, some are afraid of elections."
The political impasse was broken last spring, when a group of business-friendly Republican senators led a drive to expand Medicaid through private insurance policies purchased on the state's new public exchange, Arkansas Health Connector.
The "private option" for Medicaid expansion has since become a rallying cry for expansion advocates in nearly two dozen states where Republican lawmakers have been blocking expansion of the program. Last month, New Hampshire became the latest state to adopt Medicare expansion, again with Republican senators taking up the private option banner.
State Sen. Jonathan Dismang, who helped lead the GOP effort to enact private option Medicaid expansion in Arkansas, told me last week that The Natural State has shown the country how to make the difficult compromises necessary to advance healthcare reform. "We would like to transform Medicaid. We have something that can be replicated in other states," he said. "I feel good about what we've done."
I feel good about it, too. Arkansas is showing the country that it is possible to tear down the political and economic barriers to healing what ails US healthcare.
To fix its "deeply flawed" website, the Maryland Health Benefit Exchange is turning to Access Health CT. Now CT officials are mulling offering similar services to other state exchanges—for a fee.
Joshua Sharfstein
Secretary of the Maryland Department of Health and Mental Hygiene
Officials at the Maryland Health Benefit Exchange have been grappling with a problem-plagued website and are planning to retool their existing platform with software code from the Access Health CT, theConnecticut health insurance exchange.
"Our goal is to have the Connecticut upgrade complete and fully installed before the [next] open enrollment in the fall," Joshua Sharfstein, secretary of the Maryland Department of Health and Mental Hygiene, said Friday. He called the Connecticut exchange's website "well-designed and successful."
"Our main focus has been on the technology," Sharfstein said of top Maryland officials associated with the state's exchange, which surpassed its 260,000 resident target for 2014 enrollment.
In a memo to the Maryland exchange's board of directors dated March 31, state officials including Sharfstein recommend using the Connecticut exchange's website code with "only minor retrofitting for branding, notices, interfaces (including with carriers and with the Medicaid system), and to accommodate Maryland-specific rules."
Sharfstein, state IT Secretary Isabel FitzGerald and Carolyn Quattrocki, acting director of the Maryland Health Benefit Exchange, note in the memo that the state's existing HIX website "has improved dramatically since December." But acknowledge that a rebuild is necessary: "Despite these efforts to improve the system, it remains deeply flawed."
Adopting the Connecticut code is a superior solution to the two other options Maryland officials considered, they wrote. Using the federal government's exchange website code "does not adequately support our business model or Medicaid," the Maryland officials wrote. And "remediating the existing architecture" was deemed too expensive and "would take over 12 months and cost more than $66 million."
'New Revenue Stream' The website code the Connecticut exchange is being provided to Maryland at no charge because Access Health CT is a quasi-public agency that is not yet authorized to charge for HIX-related goods and services. Jason Madrak, chief marketing officer at Access Health CT, said last week in a phone interview that handing over the website code is the least ambitious of three lines of HIX business his colleagues are considering to offer other states.
"Code is code," he said of the gratis deal with Maryland, one of the first major upgrade agreements between public exchanges since they were launched under the Patient Protection and Affordable Care Act last fall.
"There is some expertise that is valuable, and we would be open to providing that to them," Madrak added of assistance to the Maryland exchange. "Now that they have the code, the ball is in their court."
Madrak called providing the code an example of "exchange-in-a-box" HIX services. Under that scenario, there would be "little involvement on our part." In contrast, a full suite of HIX administration services would require hands-on involvement. A third option would be a level of services somewhere in between.
"We are actively trying to turn this into a business operation," he said, adding Access Health CT officials want to offer "valuable services to other exchanges to literally generate a new revenue stream."
Madrak said there would be some "administrative issues to work through" before the Connecticut exchange could start charging for HIX services. A key issue is deciding on a form of payment, Madrak said. A couple of options under consideration are a consultancy fee and monthly "member" fee.
Access Health CT, which is widely viewed as one of the strongest public exchanges in the country, has a strategic edge over most of the other exchanges, Madrak said. "We are able to take more of a leadership position because we were stable in our enrollment period, and now we can be forward thinking."
As they look to the future, Connecticut officials see an opportunity to play a large part in a regional HIX mix. "The country probably doesn't need 50 individual exchanges," Madrak said.
In a display of unprecedented cooperation and compromise, Arkansas is on the verge of creating the country's first public-private, universal payer, value-based healthcare delivery system.
Imagine you are the Democratic governor of a rural state that has struggled for decades to help provide healthcare services for all of its citizens.
This is the second part of a multi-part series on healthcare payment reform in Arkansas. Read Part I.
Out of your state's 2.9 million residents, a half million people lack health coverage.
With 100 percent financial support from the federal government, you can expand the state's Medicaid program and offer health insurance to 250,000 residents. Medicaid expansion would build on a high-risk gamble you had recently taken to create a value-based medical payment system across the state. It also would help address a $300 million Medicaid gap in the state's budget.
But almost every Republican in the state legislature views Medicaid as hopelessly broken. And you need 75 percent majorities in the GOP-controlled House and Senate to change the state's Medicaid program.
Now you know how Arkansas Gov. Mike Beebe felt heading into the legislature's key votes on Medicaid expansion in April 2013.
"The real issue was the 75 percent vote. That was the key to this whole problem," Beebe said in phone interview Tuesday, noting he had a powerful ally in his bid to expand Medicaid as part of a grand strategy to transform the financing of healthcare in Arkansas. "The logic dictates that you do it."
Medicaid expansion has become one of the fiercest fronts in the political battle over the federal Patient Protection and Affordable Care Act, with about half of the states having adopted Medicaid expansion. Many chose the relatively straightforward route through growth of existing Medicaid programs.
But Arkansas is among several states that have decided to expand Medicaid through a "private option," using the 100 percent federal expansion financing to fund private insurance policies for the poor purchased through the state's PPACA exchange, Arkansas Health Connector.
"Medicaid is the driving force here," says David Wroten, Executive VP of the Arkansas Medical Society. Two players dominate the modest commercial payer market: Arkansas Blue Cross Blue Shield at No. 1 and Humana a distant second. "The real results are confined to the Medicaid program and Blue Cross Blue Shield," he says.
'You're Hurting Your Own People'
Beebe has championed education, economic development and tax relief since becoming governor in 2007, and he is reluctant to take on the mantle of healthcare reform. "Education and economic development are still my primary focuses," he says. "They make all the other problems easier to solve."
But the former hospital board member said no public official, especially the state's chief executive, could ignore the need to enact system-wide healthcare reforms as the Medicaid funding gap raised alarm in 2011. "You've got to be a counter puncher sometimes," he says. "You can't ignore problems even if they weren't your chosen focus."
"The old fee-for-service model was broken," Beebe said. "I wanted to see where we could go to get away from fee-for-service."
Finding a way to get Medicare expansion through the legislature became a top priority. The governor said he has told leaders of other states "they are crazy to their face" for bucking Medicare expansion. "You're going to pay for it whether you take it or not," he says of the cost of providing medical care to the poor, particularly for hospitals as the federal government scales back Disproportionate Share Hospital payments for uncompensated care.
"These states that are just saying 'no' are paying for the rest of us and not getting anything in return at the expense of their people and their hospitals… You're hurting your own people."
In Arkansas, Republicans embraced an innovative approach to Medicaid expansion that broke The Natural State's political gridlock on the issue. "The approach we took is appealing to some of them," the governor said of Republican lawmakers, singling out a "pragmatic and business-friendly" GOP faction in the Arkansas legislature. "There's an ideological appeal to doing it with private insurance."
State Sen. Jonathan Dismang, (R-Beebe), says Republicans who joined with Democrats to approve private option Medicaid expansion felt compelled to act because of the Medicaid budget gap. "We felt we had to do something. Largely, it was out of necessity," he said.
Dismang says he and many of his Republican colleagues view private option Medicaid expansion as a way to fix the program. "We felt we had to something very substantial. Membership was not going to be satisfied with tweaks here and there."
Many conservative members of the Republican caucus worried about the long-term prospects of Medicaid expansion, including the program's ability to evolve with the changing healthcare landscape and the federal government's commitment to paying for expansion.
"I can understand the concerns from the other side, the concerns about sustainability," Dismang said of Republican lawmakers who opposed Medicaid expansion. But the benefits of using private insurance through the exchanges to fix Medicaid could hold promise nationwide, he noted.
"We are decreasing our existing (fee-for-service) Medicaid rolls. These (newly covered) individuals are going to have private insurance cards. They're going to have skin in the game," he says. "From my perspective, we had a broken system. … We were hundreds of millions short. We attacked traditional Medicaid and made some reforms there."
Medicaid Struggle Far From Over
In addition to enticing Republican lawmakers with the private option, the state's Medicaid expansion pact requires the program to clear the 75 percent legislative hurdle every year. In February, renewal of Medicaid expansion barely passed in the Senate, 27–8. Last month, four rounds of balloting were necessary in the House to gain passage, with a razor-thin 76–24 final vote.
And monumental work remains to control Medicaid costs, Wroten said. Physicians represent a fraction of Medicaid spending in Arkansas, with payments to individual doctors who are not hospital employees accounting for as little as 2 percent of the state's total Medicaid budget, according to the medical society leader. "We're small players in this," he said.
"Eventually, we need to do payment reform for the entire Medicaid program," Wroten says. "We all joined this effort with the expectation that this would be a system-wide change… We can cut the physician budget in half and not make a dent in the Medicaid budget."
Promising Start
Beebe, who is ineligible to run for re-election in the fall due to term limits, says anecdotal evidence and early results from Arkansas' healthcare reform efforts are positive. He cites the experience one obstetrician has had with the state's new medical payment system, which allows high-value physicians to share in cost savings but makes high-cost physicians pay some reimbursement money back.
"He was going to lose money on every baby and he was a fine doctor," the governor said. "As a matter of routine, his staff was sending every placenta to a pathologist, which was totally unnecessary and expensive. A little bit of self-examination can totally change your overall costs."
Many Arkansas leaders deserve credit for the House and Senate votes last April that cleared the way for Medicaid expansion, Beebe says, as well as for other vital reforms such as the value-based medical payment system and improved care coordination through primary care medical homes.
"We've really got to give a lot of credit to a lot of people," he says of state officials and members of the coalition who have been pushing Arkansas' healthcare reform efforts forward, including Wroten, Surgeon General Joseph Thompson, Arkansas Hospital Association President Robert "Bo" Ryall, state Medicaid Director Andy Allison, state Department of Human Services Director John Selig, and "Republican and Democratic legislators who got this done."
Medicare's release of physician payment data holds great potential for the industry's shift toward value-based payments. While medical associations are opposed to pay transparency, one physician explains why he supports it.
"When it comes to privacy and accountability, people always demand the former for themselves and the latter for everyone else." – novelist and futurist, David Brin
Transparency is a prominent panel in the patchwork quilt of federally driven healthcare reform efforts across the country. In particular, transparency in billing for medical services is widely viewed as a critical component in establishing a value-based US healthcare system.
The logic is compelling: Informed patients will seek out physicians who provide high-quality medical services at the lowest cost, informed physicians will use data to improve the efficiency of their practices, and informed health plans will apply pressure to healthcare providers who fall short of providing value to their patients.
But last week, the American Medical Association, Medical Group Management Association, and other physician groups blasted federal officials over the release of Medicare physician payment data that had been kept secret under a court injunction since 1979. The justification for keeping the data secret included this dire warning—payment confusion would spread throughout the land and careers would be unjustly destroyed.
AMA President Ardis Dee Hoven, in a statement released by her organization, made clear why she's opposed to the Medicare data dump, "releasing the data without context will likely lead to inaccuracies, misinterpretations, false conclusions, and other unintended consequences."
Secrecy is at Odds with Reform
Few black-and-white statements can be made about reforming the delivery of healthcare in the United States. The issues are complicated and US healthcare is a sprawling industry that directly impacts more than 300 million people.
But when I was reporting last week's release of the Medicare physician payment data, California-based cardiologist Earl Ferguson, MD, PhD, shared a clear-cut truth with me: "This is just one step," he said. "We need to have a lot more transparency in government and health plans. We can't keep everything secret if we're going to reform the system."
Nowadays, doctors are a grumpy lot. No one likes being placed under tighter scrutiny or seeing their business' costs outpacing revenue, which is what makes Ferguson's perspective so precious.
Soon after I joined the HealthLeaders staff in January, the California cardiologist was among my first physician interviews. He had recently published a book on US healthcare reform and his passion is palpable. Ferguson is not only fighting to reform the country's healthcare delivery system, he is committed to saving a noble profession.
'Find Out What's Rational'
When we talked last week, I could tell the good doctor was hesitant to break ranks with the AMA over the release of the Medicare physician payment data. But for Ferguson and a growing legion of physicians who are willing to enter the political fray to fight for what they feel is right, conscience trumps self-interest.
"We really need to start looking at this data," he told me. "We need to get all these people together and find out what's rational, rather than having bureaucrats and others making decisions for us."
The Medicare physician payment data released last week provides claims information for 880,000 physicians. The data includes the types of procedures doctors perform and the volume of services. "[This type of] information will be invaluable to people," Jennifer Schneider MD, vice president of analytics at San Francisco-based Castlight Health, told me last week.
Although she dislikes the term "Big Data," Schneider says the Medicare physician payment information's full transparency potential will be realized when researchers combine it with other databases.
"The release of this information and the overlay of other information becomes really powerful," she told me, noting that the Medicare data could be combined with commercial payer claims to create a more complete financial picture of a physician's practice.
As the courts and lawmakers tackle releasing more information about physicians, health plans and other healthcare system stakeholders, I hope they are guided by Ferguson's undeniable truth: "We can't keep everything secret if we're going to reform the system."
A federally backed drive to create a value-based healthcare delivery system in partnership with providers and payers is under way nationwide. Three years ago, an unprecedented financial crisis prompted Arkansas "to bet the farm" on a similar value-based healthcare model.
This is first of a multi-part series on healthcare payment reform in Arkansas. Read Part II.
Soon after the federal Patient Protection and Affordable Care Act became law in 2010, the Arkansas, consistently ranked near the bottom in many US health statistics, faced a healthcare system financial calamity.
Years of skyrocketing costs had pushed the sustainability of the state's healthcare system to the brink and baby boomers had swollen the Medicaid program's rolls. When lawmakers opened the 2011 legislative session in Little Rock, they gazed into the maw of a 2012 Medicaid program gap estimated at more than $300 million. Some estimates were as high as $400 million.
The state's political, healthcare, and business leadership faced a Herculean challenge. "We were hitting a cliff and we had to take dramatic measures," says Arkansas Surgeon General Joseph Thompson, MD.
"The financial picture for the state was coming into focus," says Andy Allison, Arkansas' Medicaid director, adding "the wave of disability" enrollment in Medicaid programs hits before the age of 65. "We have been receiving the baby boom in disability enrollments through the Medicaid program for several years… The program faced a real question of sustainability."
1 in 4 Uninsured
Arkansas has also faced a chronic healthcare coverage problem.
When Arkansas launched its new public health insurance exchange in the fall under the PPACA, about one quarter of the state's adult population below the age of 65 had no health insurance, Thompson says.
Of those half million Arkansans, about 250,000 were eligible to obtain insurance through the state's "private option" expansion of Medicaid and about 250,000 were eligible to obtain insurance through the new exchange with federal tax credit subsidies.
State reforms launched two years before the PPACA exchanges are now accelerating alongside federal reform initiatives. "We've been able to bring all the payers together," Thompson says of Arkansas' new public-private healthcare payment system, which includes Medicaid and the state's top private insurers.
The Natural State is building a robust electronic health records infrastructure, and is among the first in the country to move to Stage 2 of the federal Meaningful Use program.
PCMH
On the provider side, Arkansas has adopted the medical home model for team-based care. As is the case in most rural states, medical resources are scarce in Arkansas. One county is served by a single doctor.
But medical homes, which are linked to payers and other providers through EHR, can provide coordinated care at an affordable cost. With a widespread population and relatively modest medical infrastructure compared to more urban states, Arkansas officials decided the medical home model would be superior to accountable care organizations. "We've chosen to empower the local physician and put him in the driver's seat," he says.
"We are looking at a total system transformation," the pediatrician adds. "From our internal perspective, we're betting the farm on this."
Payment Reform Plays Key Role
The roots of Arkansas' push for a "patient-centered" healthcare system reach back to 1998, with the forming of the Arkansas Center for Health Improvement. On its website, ACHI bills itself as "a nonpartisan, independent health policy center dedicated to improving the health of Arkansans." Thompson, who joined the ACHI staff 15 years ago, serves as the organization's director.
The heart of the state's healthcare reform efforts is the Arkansas Payment Improvement Initiative, which was launched in 2012 and is expected to be fully in place by 2017. The payment initiative has "two complementary strategies" to use multi-payer market muscle to promote adoption of reforms among healthcare providers:
Population-based healthcare services provided through medical homes and other "delivery models that bear responsibility for the complete needs of a population."
Episode-based care with "team-based management of services provided to a patient frequently spanning multiple encounters with the delivery system, such as hip replacement."
The PCMH-based payment model is a key component of Arkansas' drive to create a value-based healthcare delivery system. It provides financial incentives for providers to excel in care coordination, quality and cost containment, according to ACHI: "Providers share in the savings or excess costs of an episode depending on their performance for each episode."
Payer's Perspective
The multi-payer payment system Arkansas has established pushes customary boundaries of healthcare insurance industry cooperation.
With the Medicaid shortfall looming in 2011, Democratic Governor Mike Beebe gave Arkansas' commercial health insurers a choice, "pay better as opposed to paying more," says Steve Spaulding, VP of enterprise networks at Arkansas Blue Cross Blue Shield.
When executives from the state's top commercial insurers—Arkansas BCBS, Humana, and QualChoice—sat down with state Medicaid officials, "we had more in common than we thought we did," Spaulding says. "We were both focused on creating more affordable healthcare."
Now Arkansas BCBS, Humana, and QualChoice are building a value-based payment system in a multi-payer format that includes the Medicaid program. One of the last hurdles for the payment reform initiative is to get Medicare on board.
"There's no other region that coordinates as well as Arkansas payers," says Alicia Berkemeyer, director of enterprise networks at Arkansas BCBS, "We're all in line for the same goal. At least once per week, all the payers get together… We've become friends. We check on each other at Christmas."
Spaulding says Arkansas is showing the nation, particularly rural states, a new way to deliver healthcare. "The time has passed for there to be adversarial relationships in healthcare delivery," he says. "If we can't do better, then shame on all of us."
This is Part I of a multi-part series on healthcare payment reform in Arkansas. Part II will explore how payment reform was implemented.
Despite an official prediction that MA health plan payment rates will be essentially unchanged in 2015, Cigna, Aetna, and Humana expect payments to fall next year.
The federal Centers for Medicare & Medicaid Services announced Monday that Medicare Advantage health plan payment rates in 2015 would increase an average of 0.4 percent. But insurers are forecasting a three percent cut in 2015 MA payments.
"While Cigna continues to review and assess the full impact of CMS's 2015 rate changes, it's clear that the full 2015 impact will include a reduction in payments, " a Cigna spokeswoman said in an email Thursday.
"Our estimated impact to the industry is consistent with analysts' reports that the Medicare Advantage program is facing an average three percent cut from 2014 to 2015, when factoring in CMS changes with ACA and other industry fees set to take effect in 2015. "
In February, CMS proposed to cut MA payment rates at least 1.9 percent. An analysis conducted on behalf of America's Health Insurance Plans pegged the proposed cut higher, at 5.9 percent.
Cigna says CMS responded to pressure from AHIP, seniors, lawmakers and healthcare providers who opposed cuts to MA payments, but the agency should have gone farther.
"We are pleased that CMS listened to the concerns raised by seniors who rely on this program as well as the multitude of providers that spoke about the resources the Medicare Advantage program provides to this vulnerable population. Both seniors and providers made their viewpoint clear to Congress and other stakeholder organizations about the harm the proposed cuts would have had on beneficiaries who rely on Medicare Advantage plans for their health benefits and coverage, " the Cigna representative said.
"While the recently announced final changes are slightly more favorable than the initially proposed draft rates, the Medicare Advantage program is still facing cuts in 2015 on top of the significant impact seniors already bore as a result of CMS's six percent cuts in 2014. "
Aetna officials also urged CMS to avoid any potential cuts to MA health plan payments in 2015.
"CMS's final rates announcement recognizes the great value that approximately 15.9 million seniors receive from their Medicare Advantage plans, which yield satisfaction rates of 90 percent, " a spokeswoman said in an email Thursday.
"Despite CMS's actions [since February], Medicare Advantage plans will still face rate decreases for 2015. Aetna continues to evaluate the impact to our Medicare Advantage and Part D products but is committed to taking steps to ensure that our plans continue to provide beneficiaries with the great value and service they have come to expect. "
In a filing Tuesday with the federal Security Exchange Commission, Humana reported that the adjustments CMS had made since February shaved less than 1 percent off the company's previous estimate of a 2015 MA payment rate cut: "Based on a preliminary review of the Final Rate Notice, Humana expects a Medicare Advantage funding decline from CMS for 2015 of approximately 3 percent versus the previously expected funding decline of 3.5 to 4.0 percent. "
Tuesday's Humana SEC filing also provides a pair of key milestones for insurers in the 2015 MA timeline:
Bid designs for carriers' MA policy offerings are due at CMS by June 2.
Humana plans to share 2015 operating margin, earnings and membership expectations during the fourth quarter of 2014 after CMS makes 2015 benefit designs for the entire sector available.
The federal Centers for Medicare & Medicaid Services released a potential treasure trove of 2012 Medicare physician claim information. The release, which makes the data public for the first time since 1979, is "a huge step to making the Medicare system more transparent," CMS says.
Early Wednesday morning, the federal Centers for Medicare & Medicaid Services released a potential treasure trove of 2012 Medicare physician claim information.
Hours later on a conference call with media, CMS officials presented a spirited defense for making the data public for the first time since 1979, when a US District Court issued an injunction that blocked its release due to privacy concerns. The injunction was lifted last May.
"CMS has taken another huge step to making the Medicare system more transparent," Principal Deputy Administrator Jonathan said. "For too long, this information was not made public."
He started with the contention that "the public has a right to know this information," which includes Medicare payment and utilization data for about 880,000 physicians nationwide. The total of the Medicare payments to physicians tallied in the 2012 data is about $77 billion.
Another factor Blum cited was wide variance in doctor payment data from state to state and within state borders. The release of the claims data will help stakeholders, patients, and the public "better understand the variation," he said. "We know there is waste in the system. We know there is fraud in the system."
Blum expressed hope that stakeholders, the press, and members of the general public would use the data in ways that will help contain healthcare costs and promote quality. "We are asking for the public's help," he said.
'We're Definitely Concerned'
The American Medical Association, which was a plaintiff in the federal court case that prompted the 1979 injunction, raised a slew of red flags Wednesday, unveiling a guide to help anyone mining the newly released Medicare claims data for insightful information.
In a statement issued simultaneously with CMS's release of the physician pay information, AMA President Ardis Dee Hoven, MD said her group was "disappointed that CMS did not include reasonable safeguards that would help the public understand the limitations of this data."
"We believe that the broad data dump today by CMS has significant shortcomings regarding the accuracy and value of the medical services rendered by physicians," Hoven said. "Releasing the data without context will likely lead to inaccuracies, misinterpretations, false conclusions, and other unintended consequences."
"Thoughtful observers concluded long ago that payments or costs were not the only metric to evaluate medical care. Quality, value and outcomes are critical yardsticks for patients. The information released by CMS will not allow patients or payers to draw meaningful conclusions about the value or quality of care."
Allison Brennan, senior advocacy advisor at the Medical Group Management Association, says that her group shares the AMA's concerns over unintended consequences flowing from release of the Medicare claims data.
"If people are drawing conclusions from this data… it's only representative of a portion of a physician's patient population," she said in a phone interview Wednesday. Brennan noted the physician claims data does not include millions of patients in Medicare Advantage health plans, Medicaid programs, or people who have healthcare coverage through commercial payers. "You have no way of knowing."
MGMA fears some doctors could suffer unfair harm to their reputations from the data release. "We're definitely concerned," she said.
Finding Common Ground
Earl Ferguson MD, PhD, a Ridgecrest, CA-based cardiologist and healthcare reform advocate, says CMS and physicians need to work together to release as much healthcare delivery information as possible.
"It's the right thing to do. The more information we have to make informed decisions the better," he said in a phone interview Wednesday. "There are probably a lot of physicians out there who don't want to see this information 'out there.' But I think it's necessary for the reforms to move forward."
Ferguson is also Medical Director of National Rural ACO, a firm that helps organizations change payment models. He acknowledges that some people will inevitably draw unfounded conclusions from the Medicare claims data. He believes, however, that the benefits of advancing transparency are significant and vital to creating a value-based healthcare delivery system.
"This is just one step," he says. "We need to have a lot more transparency in government and health plans. We can't keep everything secret if we're going to reform the system."
Ferguson has published a book about healthcare reform and says more cooperation and accountability will be decisive for transparency and other reform initiatives.
"You need to look at the data," he says. "We need to get all these people together and find out what is rational, rather than having bureaucrats and others making decisions for us… Things have been dictated to physicians and patients. We have to hold everybody accountable for doing what is correct and right. I don't see that happening enough."
