PNHP

Achieving ACO goals, without the ACO

Achieving ACO goals, without the ACO

How Intermountain Trimmed Health Care Costs Through Robust Quality Improvement Efforts

By Brent C. James and Lucy A. Savitz
Health Affairs, May 19, 2011

Since 1988 Intermountain Healthcare has applied to health care delivery the insights of W. Edwards Deming’s process management theory, which says that the best way to reduce costs is to improve quality.

Intermountain Healthcare is an integrated delivery system based in Utah and Idaho. Its network of twenty-three hospitals and 160 clinics provides more than half of all health care delivered in the region. Intermountain’s hospitals range from critical-access facilities in rural areas to large, urban teaching hospitals. Although Intermountain has an employed physician group and a health insurance plan, the majority of its care is performed by independent, community-based physicians and is paid for by government and commercial payers.

In 1986 an Intermountain team launched an effort to measure practice variation, focusing on the details of care in specific, common treatments.

What Intermountain Learned

First, most hospital admissions for a specific treatment had similar characteristics. Even for coronary bypass surgery, more than 80 percent of the patients showed similar severity and complexity of disease on admission, had no major complications, and achieved good clinical outcomes. The team did not find a single instance in which any one physician’s patients demonstrated higher levels of severity or complexity (“my patients are sicker”) than the patients of other physicians in the study.

In contrast, there was massive variation in physicians’ practices. Although use rates of particular treatment elements were consistent for individual physicians, they varied greatly across physicians. For instance, when the team examined individual treatment elements used for patients who were similar at hospital admission and achieved a good final outcome, it found that the highest physician-use rates were 1.6–5.6 times greater than the lowest rates. For each treatment, the hospital’s cost per case, not counting payments to physicians, showed about a twofold variation.

Despite deliberately choosing some of Intermountain’s highest-volume treatments and focusing on high-volume physicians, the study lacked sufficient statistical power to rank physicians accurately. It did not find any physician who was consistently a high or low utilizer across all of the elements tracked. Best patient care did not reside in any one physician. Every physician had something to learn, but also something to teach.

Finally, although the study could not accurately identify which physicians were providing optimal care, Intermountain could legitimately ask why physicians’ use rates were so different and what constituted best care.

Process Management

Accordingly, the findings forced Intermountain to focus on the processes of care delivery that underlie particular treatments, rather than on the clinicians who executed those processes—the “measurement for improvement” approach discussed (in the full article). As the inquiry continued, the system was eventually able to document significant declines in physician variation. Physicians led almost all of the changes themselves. Declines in variation were associated with large declines in costs, while clinical outcomes remained at their original high levels. For example, Intermountain’s average internal cost for performing a total hip replacement fell from more than $12,000 in 1987 to about $8,000 per case in 1989.

The Intermountain clinical quality, financial utilization, and hospital efficiency analyses led the system to process management theory. Quality improvement is the science of process management. W. Edwards Deming, the father of quality improvement, argued that every process always produces parallel physical, cost, and service outcomes. In medicine, clinical outcomes correspond to Deming’s physical outcomes. Cost outcomes represent the resources expended to create the clinical outcome, and service outcomes describe the interactions between a care provider and a patient as the process takes place.

Deming carried his analysis one step further, demonstrating that most process changes that produce better physical outcomes also cause costs to fall, and that in most cases, the best way to reduce cost is to improve quality. Deming’s insights gave Intermountain the tools it needed to take broad advantage of the quality-cost relationship in clinical and administrative services.

Full article – free download for the next two weeks only:
http://content.healthaffairs.org/content/early/2011/05/17/hlthaff.2011.0358.full

W. Edwards Deming (Wikipedia):
http://en.wikipedia.org/wiki/W._Edwards_Deming

Comment: 

By Don McCanne, MD

This is what the accountable care organization (ACO) concept is all about. Intermountain Healthcare has confirmed W. Edwards Deming’s principle that “the best way to reduce cost is to improve quality.” Although ACOs have stumbled coming out of the gate (see qotd May 17 at pnhp.org), Intermountian has shown that we can achieve higher quality at lower cost without a cumbersome bureaucratic ACO construct.

Of particular importance is that the focus was placed on the processes of care delivery rather than on the clinicians who executed those processes. This opened up great possibilities for reform without the physicians feeling as if they were tiptoeing through a minefield of punishment and reward. The goal was purely better quality care for patients, and the savings to the system ensued almost automatically.

The full Health Affairs article can be downloaded for free during the next two weeks. I would strongly recommend doing so. It would also be worth your time to review W. Edwards Deming’s concepts, including his fourteen key principles, available at the Wikipedia link above. Both of these resources can help to readjust our mindset to meet the challenges of health care reform that still lie ahead.

What does this have to do with single payer? An automated financing system for health care would allow us to set aside our concerns about payment while we concentrate on quality processes for our patients. Everybody comes out ahead.

For-profit hospice industry raises worries

UPI, May 19, 2011

BLOOMINGTON, Ind. (UPI) — End-of-life hospice care is being dominated by investor-owned chains that cherry-pick patients and cut labor costs to maximize profits, U.S. researchers say.

Dr. Robert Stone, an emergency medicine physician in Bloomington, Ind., and Joshua Perry of Indiana University say end-of-life hospice care was once the province of charitable organizations, but 52 percent of hospices are now part of the for-profit sector.

For-profit hospice industry grew by 128 percent from 2001 to 2008, while the non-profit sector grew by only 1 percent. During the same period, government-sponsored hospices increased by 25 percent.

“Research shows that for-profit hospices, and especially publicly traded chain providers, generate higher revenues than their non-profit counterparts,” Stone says in a statement. “They do this in part, studies show, by selectively recruiting longer-term patients, most of whom do not have cancer, thereby gaming the Medicare payment system.”

Medicare currently pays hospice providers a fixed per diem payment throughout a patient’s stay, regardless of whether services are provided on any given day, Stone says.

“Hospice patients’ use of services are greatest on the first day, when services are set up, and in the last few days of life,” Stone says. “Hospices that recruit longer-term patients will be overpaid and will drain funds that should be going to patient care. Typically, the for-profit companies also pay lower salaries and benefits to a less-skilled staff, and employ fewer registered nurses. This raises quality concerns.”

The study is published in the Journal of Law, Medicine and Ethics.

http://www.upi.com/Health_News/2011/05/19/For-profit-hospice-industry-raises-worries/UPI-78121305782622/

Rapid growth of for-profit hospices raises ethical concerns, study says

McKnight’s Long-Term Care News & Assisted Living, May 19, 2011

The success of the for-profit hospice industry has caused concern among ethicists who say that the goal of profitability interferes with their ability to provide quality end-of-life care, according to new research.

The for-profit hospice industry grew by 128% between 2001 and 2008, while nonprofits expanded only 1% and government-sponsored hospices jumped 25%, according to research published in the summer issue of the Journal of Law, Medicine and Ethics. Not surprisingly, for-profit hospices generate higher revenue than their nonprofit competitors. Investigators say they do this by selectively recruiting long-term patients who don’t have cancer, thus gaming the Medicare payment system. The study co-author, Robert Stone, M.D., says that other studies have shown that when for-profit hospices select longer-term patients, this results in overpayment, which, in turn, drains funds from the hospice program.

“Typically, the for-profit companies also pay lower salaries and benefits to a less-skilled staff, and employ fewer registered nurses. This raises quality concerns,” Stone said.

Stone and his co-author, Joshua Perry, J.D., M.T.S., contend that these practices put non-profit hospices’ financial survival at risk. The study also highlights questionable marketing practices used by for-profit hospices. One tactic involves sending representatives into nursing homes and giving residents branded gifts. Another is paying nursing home employees for future hospice referrals.

http://www.mcknights.com/rapid-growth-of-for-profit-hospices-raises-ethical-concerns-study-says/article/203160/

For-Profit Hospice Providers Skyrocket in Last Decade

By Emily Mullin
Dorlund Health, June 9, 2011

In the past decade, the for-profit hospice industry has grown at an astounding rate – from 2001 to 2008 the for-profit sector ballooned by 128 percent, according to a study released in the May issue of the Journal of Law, Medicine and Ethics.
 
In contrast, in those same years, the nonprofit hospice industry grew by only 1 percent and government-owned hospice grew by 25 percent.
 
The authors of the study, called “In the Business of Dying: Questioning the Commercialization of Hospice,” critique the rise in for-profit hospice care, a sector in end-of-life healthcare that focuses on improving the quality of life for people who face life-limiting illnesses.
 
Hospice, which traces its origins to 1960s London, started out in the United States as a fraction of the healthcare industry. In 1978, there were fewer than 60 hospice providers in the country, according to the study. But by 1981, that number grew to more than 400. In 2008, there were 3,300 hospice providers in the United States.
 
Currently, 52 percent of all hospices in the United States are for-profit while 35 percent are nonprofit entities and 13 percent are owned by the government.
 
This shifting landscape of the hospice industry could be troubling as the delivery of hospice services becomes increasingly commercialized, say authors Joshua E. Perry and Robert C. Stone, both faculty members at Indiana University.
 
Perry and Stone argue that the Medicare payment structure for hospice care, which reimburses hospices at the same per-diem rate regardless of the patient’s illness, is an incentive for for-profit hospices to select patients with illnesses that will allow them to stay in a hospice longer than patients with terminal illnesses like cancer.
 
“The concern is that some new hospice providers, which are predominantly for-profit, may be pursuing a business model based on maximizing length of stay and thus profitability,” a 2009 Medicare Payment Advisory Commission (MedPAC) to Congress said.
 
Perry and Stone say that adjusting the Medicare payment structure could help alleviate this. They suggest changing the payment structure so that hospices would be paid more per day for higher costs associated with the entrance of a patient into hospice and for higher costs at the end of a patient’s life with relatively lower costs in the middle.
 
While evidence indicates that for-profit facilities generate higher revenues than nonprofit ones, the study’s authors say that there is still not enough research to indicate whether for-profit hospices actually provider worse care than their nonprofit and government counterparts.
 
Brenda Mitchell, CEO of the nonprofit Crater Community Hospice, which serves central Virginia, said she has noticed a trend in the past several years of more for-profit hospices springing up.
 
“Really what has happened over the years is that the community not-for-profit hospitals have been sold to bigger for-profit hospitals, and some of those hospitals once they were sold got rid of their hospice services,” Mitchell says.
 
Plus, the recession and economic downturn have made it increasingly difficult for nonprofit hospices to stay afloat.
 
“You need profit regardless of whether you’re a for-profit hospice or nonprofit,” Mitchell says. “At this point in time, if you were going to start a nonprofit then you’ve got to have a lot of money up-front to make sure you’re going to be able to keep the doors open before you build up your business.”
 
Crater Community Hospice is the only nonprofit in Richmond and the surrounding area, but the facility still competes with other for-profit hospices, according to Mitchell.
 
“It’s hard to say that your tax status has anything to do with the quality of care that you’re providing,” she says.
 
Theresa Forster agrees. Forster, vice president for hospice policy and programs for the Washington, D.C.-based National Association for Home Care and Hospice, says it’s unfair to generalize about the values of a healthcare provider based on the financial structure of the organization.
 
“It is also important to keep in mind that the rise of the for-profit entity on the hospice ‘scene’ has occurred at the same time that hospice has gained greater public understanding, acceptance and popularity,” Forster says.
 
The National Hospice and Palliative Care Organization responded to a February article about for-profit hospices in the Journal of the American Medical Association by saying the article didn’t provide any correlation between the profit status of a hospice program and the quality of care provided.
 
In contrast, the Family Evaluation of Hospice Care, a quarterly survey conducted by the organization, has found that there is no difference in family caregivers’ evaluation of the quality of care based on a hospice program’s profit status.

http://www.dorlandhealth.com/adult_and_senior/trends/For-Profit-Hospice-Providers-Skyrocket-in-Last-Decade_1824.html

Concerns raised about increase in for-profit hospice care

By Stephanie Bouchard, Associate Editor
Healthcare Finance News, May 26, 2011

INDIANAPOLIS – In less than a decade, for-profit hospices have proliferated at an astounding rate, and that may be cause for concern, say the authors of “In the Business of Dying: Questioning the Commercialization of Hospice,” a study released earlier this month in the Journal of Law, Medicine and Ethics.

For-profit hospices grew 128 percent from 2001 to 2008, while nonprofits grew by 1 percent and government-owned hospices grew by 25 percent, the authors noted in the study.

While no one can explain why for-profits have grown by leaps and bounds, various arguments include aggressive marketing strategies and “cherry picking” patients on the part of for-profits.

“What we do know exists is that the for-profit facilities have figured a way to make healthy profits in this area,” said Joshua Perry, one of the study’s authors. “I guess that’s what was prompting some of the questions that my colleague and I raise in the article. How are they doing this? It turns out that in part they’re doing it because they are very selective about the types of patients that they treat. So there’s clearly a strategy whereby they’re going to target the patients that are least costly to care for.”

A study referred to in “In the Business of Dying,” which was released by the Journal of the American Medical Association last winter, reported that for-profit hospices seem to have a higher proportion of patients that are cheaper to treat than nonprofits – for example, patients who stay longer in hospice care.

Medicare’s payment structure reimburses hospices at the same per-day rate regardless of the patient’s illness – which, say the authors of “In the Business of Dying,” causes a perverse incentive for hospices to select patients whose illnesses will allow them to remain in hospice longer, such as dementia patients, over those with more acute illnesses, such as cancer patients.

“If you can recruit an Alzheimer’s patient, there may not be an awful lot of day-to-day expense, and yet the per diem is the exact same for that care as it would be if you’re a hospice taking all comers and you have a cancer patient that requires a lot more palliative care and end-of-life care,” Perry said. He noted that there has been no evidence of for-profit hospices denying patients admission based on their terminal illness.

“When they talk about cherry picking – which is a serious issue and that’s illegal – no hospice should be able to stay in business if they’re performing illegal practices of any sort,” said Jon Radulovic, vice president of communications for the National Hospice and Palliative Care Organization, an nonprofit member group representing hospice and palliative care programs and professionals, including both for-profit and nonprofit hospices.

Radulovic said he believes the rise in for-profit hospices has more to do with the roots of hospice, which began as a volunteer-based movement outside mainstream medicine and focused on end-of-life care for cancer patients. Because nonprofits have established decades-long relationships with those in the cancer community, he theorized, for-profits were forced to create a business model seeking non-cancer patients.

He also thinks nonprofits who are dedicated to the original vision of hospice may have a hard time facing the challenges of a maturing hospice marketplace.

“There’s competition in markets that never had competition before,” he said. “I think it means a lot of providers, regardless of their tax structure, those long-term providers who have been in their communities, have to market in a more aggressive way, and I think for a lot of those the marketing is sort of the ‘M’ word. It’s something that just – it’s not dignified. It doesn’t honor this sacred journey that we go on.”

While Perry said he believes changes to the Medicare reimbursement structure would even out the playing field between for-profits and nonprofits by eliminating the perverse incentives, Radulovic cautions against being hasty on the reimbursement issue.

“There is a need to look at reimbursement, absolutely,” he said, “but not until we are sure we have the data (to support that sort of change). Just changing it for change’s sake would ultimately end up turning into a barrier to reaching people who are in need of care.”

“Our concern is that if there’s too much of a focus on just the profit status question,” he noted, “you’re missing the opportunity to home in on those areas where we really do need to improve.”

http://www.healthcarefinancenews.com/news/concerns-raised-about-increase-profit-hospice-care

National health care debate can be summed up by bill introduced in California

By YESENIA AMARO – McClatchy Newspapers
The Bellingham (Wash.) Herald, May 17, 2011

MERCED, Calif. — The national debate over health care can be summed up in a bill on the table in Sacramento.

Supporters of state Senate Bill 810 say the legislation would be the only way to provide medical coverage for every resident of California.

Opponents deride the measure as “socialized medicine.”

The California Universal Healthcare Act was introduced by Democratic state Sen. Mark Leno. The bill would initiate a single-payer universal health care reform for the state of California, Leno said. “What that means in short is Medicare for all,” he explained.

Supporter Keith Ensminger, a Merced resident and owner of Kramber Translation, said the largest benefit of the legislation would probably be that it would include everyone. “Everybody would have insurance, regardless of their income and regardless of their position in life,” he said.

There are other positive effects from the bill, Ensminger said. It would lower the cost of insurance for most people, everybody would be covered with an insurance plan and it would allow people to have their medical condition treated early rather than waiting.

In addition, it would prevent medical bankruptcies, he said.

Dr. Bill Skeen, executive director of California’s chapter of Physicians for a National Health Program, said the organization supports the legislation because it’s the only way of providing coverage for everyone and controlling the high costs of the health care system. The organization advocates for a universal, comprehensive single-payer national health program. “I think it would be a win-win situation for almost everyone,” he said.

Providers would also see gains from the single-payer system, Skeen said.

“One of them is with a single-payer, there would be a simplified electronic billing system,” he said. That would help providers cut costs by not needing as many medical records clerks.

However, part of the bill that could be criticized is that everyone would be a part of the same plan, Enseminger said.

Organizations such as the California Chamber of Commerce and the Child and Family Protection Association strongly oppose the bill.

The CFPA calls it socialized medicine. “SB810 would destroy our choices in health care and force us to pay for and exclusively use a government-controlled socialistic health care system – regardless of what the courts or Congress do with the Obamacare,” the organization said on its website.

Marti Fisher, a policy advocate with the California Chamber of Commerce, wasn’t available for comment. In a letter she sent to members of the state Senate Health Committee on behalf of the chamber, she said the chamber opposes the bill because “it creates a new government-run, multibillion-dollar socialized health care system that would conflict with recently enacted federal health care reform and built from a yet to be specified premium structure.”

However, Leno said the bill wouldn’t conflict with federal health care law. In 2017, the federal law would let states apply for federal waivers, which would allow California to use federal dollars on health care in the state for a single-payer system, he said.

The idea is that states would provide broader coverage without increasing the federal deficit. Leno said the single-payer system in California would cover everyone, while the federal law would leave about 3 million without coverage in the state. “The single-payer would cover everyone and will reduce the cost and the growth in health care costs,” he said.

In California, there are about 12 million people without coverage at any given time, he said.

In the letter to the state Senate committee, Fisher said the bill would “establish a premium commission to impose a premium for all employers, which is essentially a tax.”

The state would use the same money it now uses to pay for the single-payer system. However, Leno said the money would be spent more efficiently.

The legislation is a two-year bill, Leno said, and the hope is to have it on the governor’s desk in the summer of 2012.

Two similar bills were introduced in 2006 and in 2008. They were vetoed by Gov. Arnold Schwarzenegger.

http://www.bellinghamherald.com/2011/05/17/2018501/national-health-care-debate-can.html#ixzz1MiSLyJK5

Achieving ACO goals, without the ACO

How Intermountain Trimmed Health Care Costs Through Robust Quality Improvement Efforts

By Brent C. James and Lucy A. Savitz
Health Affairs, May 19, 2011

Since 1988 Intermountain Healthcare has applied to health care delivery the insights of W. Edwards Deming’s process management theory, which says that the best way to reduce costs is to improve quality.

Intermountain Healthcare is an integrated delivery system based in Utah and Idaho. Its network of twenty-three hospitals and 160 clinics provides more than half of all health care delivered in the region. Intermountain’s hospitals range from critical-access facilities in rural areas to large, urban teaching hospitals. Although Intermountain has an employed physician group and a health insurance plan, the majority of its care is performed by independent, community-based physicians and is paid for by government and commercial payers.

In 1986 an Intermountain team launched an effort to measure practice variation, focusing on the details of care in specific, common treatments.

What Intermountain Learned

First, most hospital admissions for a specific treatment had similar characteristics. Even for coronary bypass surgery, more than 80 percent of the patients showed similar severity and complexity of disease on admission, had no major complications, and achieved good clinical outcomes. The team did not find a single instance in which any one physician’s patients demonstrated higher levels of severity or complexity (“my patients are sicker”) than the patients of other physicians in the study.

In contrast, there was massive variation in physicians’ practices. Although use rates of particular treatment elements were consistent for individual physicians, they varied greatly across physicians. For instance, when the team examined individual treatment elements used for patients who were similar at hospital admission and achieved a good final outcome, it found that the highest physician-use rates were 1.6–5.6 times greater than the lowest rates. For each treatment, the hospital’s cost per case, not counting payments to physicians, showed about a twofold variation.

Despite deliberately choosing some of Intermountain’s highest-volume treatments and focusing on high-volume physicians, the study lacked sufficient statistical power to rank physicians accurately. It did not find any physician who was consistently a high or low utilizer across all of the elements tracked. Best patient care did not reside in any one physician. Every physician had something to learn, but also something to teach.

Finally, although the study could not accurately identify which physicians were providing optimal care, Intermountain could legitimately ask why physicians’ use rates were so different and what constituted best care.

Process Management

Accordingly, the findings forced Intermountain to focus on the processes of care delivery that underlie particular treatments, rather than on the clinicians who executed those processes—the “measurement for improvement” approach discussed (in the full article). As the inquiry continued, the system was eventually able to document significant declines in physician variation. Physicians led almost all of the changes themselves. Declines in variation were associated with large declines in costs, while clinical outcomes remained at their original high levels. For example, Intermountain’s average internal cost for performing a total hip replacement fell from more than $12,000 in 1987 to about $8,000 per case in 1989.

The Intermountain clinical quality, financial utilization, and hospital efficiency analyses led the system to process management theory. Quality improvement is the science of process management. W. Edwards Deming, the father of quality improvement, argued that every process always produces parallel physical, cost, and service outcomes. In medicine, clinical outcomes correspond to Deming’s physical outcomes. Cost outcomes represent the resources expended to create the clinical outcome, and service outcomes describe the interactions between a care provider and a patient as the process takes place.

Deming carried his analysis one step further, demonstrating that most process changes that produce better physical outcomes also cause costs to fall, and that in most cases, the best way to reduce cost is to improve quality. Deming’s insights gave Intermountain the tools it needed to take broad advantage of the quality-cost relationship in clinical and administrative services.

Full article – free download for the next two weeks only:
http://content.healthaffairs.org/content/early/2011/05/17/hlthaff.2011.0358.full

W. Edwards Deming (Wikipedia):
http://en.wikipedia.org/wiki/W._Edwards_Deming

This is what the accountable care organization (ACO) concept is all about. Intermountain Healthcare has confirmed W. Edwards Deming’s principle that “the best way to reduce cost is to improve quality.” Although ACOs have stumbled coming out of the gate (see qotd May 17 at pnhp.org), Intermountian has shown that we can achieve higher quality at lower cost without a cumbersome bureaucratic ACO construct.

Of particular importance is that the focus was placed on the processes of care delivery rather than on the clinicians who executed those processes. This opened up great possibilities for reform without the physicians feeling as if they were tiptoeing through a minefield of punishment and reward. The goal was purely better quality care for patients, and the savings to the system ensued almost automatically.

The full Health Affairs article can be downloaded for free during the next two weeks. I would strongly recommend doing so. It would also be worth your time to review W. Edwards Deming’s concepts, including his fourteen key principles, available at the Wikipedia link above. Both of these resources can help to readjust our mindset to meet the challenges of health care reform that still lie ahead.

What does this have to do with single payer? An automated financing system for health care would allow us to set aside our concerns about payment while we concentrate on quality processes for our patients. Everybody comes out ahead.

Rise of for-profit hospice industry raises troubling questions, new study says

Ethical and quality concerns grow as end-of-life hospice care, once the province of charitable organizations, is increasingly dominated by investor-owned chains that cherry-pick patients and cut labor costs in order to maximize profits

FOR IMMEDIATE RELEASE
May 18, 2011

Contact:
Robert Stone, M.D.
Mark Almberg, PNHP communications director, (312) 782-6006, mark@pnhp.org

A new survey of hospice care in the United States says that the rapidly growing role of for-profit companies in providing end-of-life care for terminally ill patients raises serious concerns about whose interests are being served under such a commercial arrangement: those of shareholders or those of dying patients and their loved ones.

“Under a corporate model of hospice care, there’s an inherent conflict of interest between a company’s drive to maximize profits and a patient’s need for the kind of holistic, multidisciplinary and compassionate care originally envisioned by the founders of the modern hospice movement,” said Dr. Robert Stone, an emergency medicine physician in Bloomington, Ind.

Stone, who serves as assistant medical director at a hospital hospice program at Indiana University, is co-author of “In the Business of Dying: Questioning the Commercialization of Hospice,” a newly published article in the Journal of Law, Medicine and Ethics. Joshua Perry, a professor of business law and ethics at Indiana University, is the lead author of the article.

Stone and Perry point out that the for-profit hospice industry grew by 128 percent from 2001 to 2008, while the nonprofit sector grew by only 1 percent and government-sponsored hospices increased by 25 percent. The for-profit sector now accounts for 52 percent of hospices.

“Research shows that for-profit hospices, and especially publicly traded chain providers, generate higher revenues than their nonprofit counterparts,” Stone said. “They do this in part, studies show, by selectively recruiting longer-term patients, most of whom do not have cancer, thereby gaming the Medicare payment system.” Medicare currently pays hospice providers a fixed per diem payment throughout a patient’s stay, regardless of whether services are provided on any given day, he said.

“Hospice patients’ use of services are greatest on the first day of hospice care, when services are being set up, and in the last few days of life, when round-the-clock nursing care may be required,” Stone said. “Hospices that recruit longer-term patients will be overpaid and will drain funds from the hospice program that should be going to patient care.”

Stone continued: “Typically, the for-profit companies also pay lower salaries and benefits to a less-skilled staff, and employ fewer registered nurses. This raises quality concerns.”

Such practices not only undermine the Samaritan traditions of the hospice movement, he said, but also put nonprofit hospices at a competitive disadvantage, threatening their financial survival. Nonprofits have been shown to provide a greater range of services than their for-profit counterparts, including continuous home care and bereavement services, he said.

Stone and Perry point to research documenting ethically questionable marketing practices used by for-profit hospice companies, including instances of company representatives going into nursing homes and offering free pens and coffee cups to staff and subsequently paying a commission to staff members who refer patients to them.

While more research on hospice quality needs to be done, Stone said, comparative studies of U.S. hospitals, dialysis centers and nursing homes have shown that nonprofit institutions, on average, provide a higher quality of care than do for-profits.

******

“In the Business of Dying: Questioning the Commercialization of Hospice,” Joshua E. Perry, J.D., M.T.S., and Robert C. Stone, M.D., Journal of Law, Medicine and Ethics, Summer 2011.

A copy of the manuscript of the study can be found here.

******

Physicians for a National Health Program (www.pnhp.org) is an 18,000-member organization advocating a nonprofit, single-payer national health insurance program for the United States. PNHP had no role in funding the study mentioned above. To speak with a physician/spokesperson in your area, visit www.pnhp.org/stateactions or call (312) 782-6006.

Market decisions negatively impact safety-net emergency departments

Factors Associated With Closures of Emergency Departments in the United States

By Renee Y. Hsia, MD, MSc; Arthur L. Kellermann, MD, MPH; Yu-Chu Shen, PhD
JAMA, May 18, 2011

Our nationwide analysis of ED closures between 1990 and 2007 identified several risk factors that suggest economic drivers are associated with ED closures. Hospital-specific characteristics related to higher risk of closure were safety-net status, for-profit ownership, and low profit margin. After controlling for demographic and market factors, safety-net hospitals are at higher risk of closing their EDs compared with non–safety-net hospitals, suggesting that safety-net hospital status reflects other pressures that, although less measurable, are associated with ED closure. For example, some EDs have difficulty maintaining a full on-call panel of specialty physicians because of unwillingness of specialists to cover emergency calls, especially for poorly insured patients.​ While this finding deserves more study, it signals that safety-net hospitals may require particular attention if emergency care access is to be sustained.

Hospitals in counties where a high proportion of residents live in poverty were more likely to close their EDs than hospitals in more economically secure communities. Factors such as crowding and the increasing challenges of providing high-quality care in the face of burgeoning demand could contribute to difficulty in recruiting and maintaining staff at all levels. These community-characteristic findings are especially compelling given that vulnerable populations, including those in minority groups and both uninsured and underinsured patients, use EDs for acute care at greater rates than other populations. As more of these patients lose access to primary care, an increasing number of EDs are meeting criteria as safety-net facilities, which suggests that more EDs may be at risk of closing in the future. ED closures can have substantial effects on vulnerable communities, causing a decline in care as hospitals serving poor and minority populations select to provide services based on profitability rather than community health needs.

Local market competition is strongly associated with the ability of an ED to remain open. The presence of other EDs within a 15-mile radius and highly competitive markets are both associated with increased risk of ED closures. Previous literature reported that emergency services in areas with poor payer mix are often money losers. Our study extends this finding, showing that market forces, beyond profit margin alone, are substantially related to the ability of an ED to remain open.

Our findings expand the evidence base by showing that economic factors related to ED closures are similar to those related to hospital closures and may be even stronger. All factors (except for the increased risk of hospitals serving a higher proportion of patients in poverty) identified in our study can be shown to be market-driven. Profit margin, for example, is influenced by a number of factors ranging from patient payer mix, reimbursement decisions from payers (and negotiated discounts between hospitals and payers), to competition. Market factors may also be the reason that many for-profit hospitals choose not to provide emergency services.

In some areas, the episodic closure of EDs may be of little consequence, particularly in competitive health care markets where nearby facilities can deliver the needed clinical care for patients who seek ED treatment. Some might assert that such “creative destruction” is a manifestation of a healthy marketplace. However, the market economics of US health care, particularly emergency care, are distorted by the fact that 51 million Americans lack health insurance, and another 48 million are covered by Medicaid and other forms of public insurance that reimburse well below cost. With health care reform, the numbers of individuals covered by Medicaid and other forms of public insurance are likely to increase substantially, with far-reaching implications if these patients cannot access timely and adequate care. In most of the US health care system, an effective business strategy is to minimize uncompensated costs by declining to treat these patients, but EDs cannot do so.

The economic challenge of operating an ED in the face of a federal obligation may explain, in part, why for-profit hospitals were twice as likely to close their EDs as facilities that are nonprofit or publicly owned. It may also explain why hospitals in the lowest quartile of profitability (essentially, negative profitability) and those in highly competitive markets were more likely to close their EDs. Yet even after controlling for these and other characteristics, we observed that safety-net hospitals were significantly more likely to close their EDs than hospitals that did not serve this role.

The closure of an ED can have profound repercussions for a community. Closures can adversely affect access to emergency care for everyone—insured and uninsured alike. Hospital closures significantly affect access to care not only by increasing the distance to the nearest hospital but also by increasing the patient load at neighboring hospitals. ED crowding degrades quality of care, not only by prolonging patient waiting times and increasing the rate of patients who leave without being seen, but also in terms of outcomes, including increased rates of morbidity and mortality. Because Medicaid, SCHIP, and uninsured patients are highly reliant on hospital EDs for acute care, ED closure can displace tens of thousands of uninsured and low-income patients to other EDs, worsening crowding and potentially setting the stage for additional closures.

Our findings underscore that market-based approaches to health care do not ensure that care will be equitably distributed. In fact, the opposite may be true. As long as tens of millions of Americans are uninsured, and tens of millions more pay well below their cost of care, the push for “results-driven competition” will not correct system-level disparities that markets cannot—and should not—be expected to resolve.

In summary, this study demonstrated that from 1990 to 2009, the number of hospital EDs in nonrural areas declined by 27%, with for-profit ownership, location in a competitive market, safety-net status, and low profit margin associated with increased risk of ED closure.

http://jama.ama-assn.org/content/305/19/1978.short

Comment: 

By Don McCanne, MD

We have a crisis with closures of our emergency departments. With our current dysfunctional mechanisms of financing health care – mechanisms that are perpetuated by the Affordable Care Act – market considerations rather than medical need are driving these decisions. The more vulnerable populations suffer the most.

Many of the affluent individuals who have had great influence over the reform efforts may not care that safety-net emergency departments are shutting down, but they should. They could become victims of major traffic accidents and taken through rush hour traffic to their preferred for-profit emergency departments. If they had to ride past padlocked safety-net emergency departments to the other side of town, they could DIE no matter how much money they had or how good their private insurance is.

A well designed single payer system includes regional planning and separate budgeting of capital improvements. Decisions on the location and funding of Emergency Departments are made based on community need rather than on market considerations.

Maybe most of the rich don’t care about the rest of us, but you would think that, at least, they would care about themselves and their families.

Market decisions negatively impact safety-net emergency departments

Factors Associated With Closures of Emergency Departments in the United States

By Renee Y. Hsia, MD, MSc; Arthur L. Kellermann, MD, MPH; Yu-Chu Shen, PhD
JAMA, May 18, 2011

Our nationwide analysis of ED closures between 1990 and 2007 identified several risk factors that suggest economic drivers are associated with ED closures. Hospital-specific characteristics related to higher risk of closure were safety-net status, for-profit ownership, and low profit margin. After controlling for demographic and market factors, safety-net hospitals are at higher risk of closing their EDs compared with non–safety-net hospitals, suggesting that safety-net hospital status reflects other pressures that, although less measurable, are associated with ED closure. For example, some EDs have difficulty maintaining a full on-call panel of specialty physicians because of unwillingness of specialists to cover emergency calls, especially for poorly insured patients.​ While this finding deserves more study, it signals that safety-net hospitals may require particular attention if emergency care access is to be sustained.

Hospitals in counties where a high proportion of residents live in poverty were more likely to close their EDs than hospitals in more economically secure communities. Factors such as crowding and the increasing challenges of providing high-quality care in the face of burgeoning demand could contribute to difficulty in recruiting and maintaining staff at all levels. These community-characteristic findings are especially compelling given that vulnerable populations, including those in minority groups and both uninsured and underinsured patients, use EDs for acute care at greater rates than other populations. As more of these patients lose access to primary care, an increasing number of EDs are meeting criteria as safety-net facilities, which suggests that more EDs may be at risk of closing in the future. ED closures can have substantial effects on vulnerable communities, causing a decline in care as hospitals serving poor and minority populations select to provide services based on profitability rather than community health needs.

Local market competition is strongly associated with the ability of an ED to remain open. The presence of other EDs within a 15-mile radius and highly competitive markets are both associated with increased risk of ED closures. Previous literature reported that emergency services in areas with poor payer mix are often money losers. Our study extends this finding, showing that market forces, beyond profit margin alone, are substantially related to the ability of an ED to remain open.

Our findings expand the evidence base by showing that economic factors related to ED closures are similar to those related to hospital closures and may be even stronger. All factors (except for the increased risk of hospitals serving a higher proportion of patients in poverty) identified in our study can be shown to be market-driven. Profit margin, for example, is influenced by a number of factors ranging from patient payer mix, reimbursement decisions from payers (and negotiated discounts between hospitals and payers), to competition. Market factors may also be the reason that many for-profit hospitals choose not to provide emergency services.

In some areas, the episodic closure of EDs may be of little consequence, particularly in competitive health care markets where nearby facilities can deliver the needed clinical care for patients who seek ED treatment. Some might assert that such “creative destruction” is a manifestation of a healthy marketplace. However, the market economics of US health care, particularly emergency care, are distorted by the fact that 51 million Americans lack health insurance, and another 48 million are covered by Medicaid and other forms of public insurance that reimburse well below cost. With health care reform, the numbers of individuals covered by Medicaid and other forms of public insurance are likely to increase substantially, with far-reaching implications if these patients cannot access timely and adequate care. In most of the US health care system, an effective business strategy is to minimize uncompensated costs by declining to treat these patients, but EDs cannot do so.

The economic challenge of operating an ED in the face of a federal obligation may explain, in part, why for-profit hospitals were twice as likely to close their EDs as facilities that are nonprofit or publicly owned. It may also explain why hospitals in the lowest quartile of profitability (essentially, negative profitability) and those in highly competitive markets were more likely to close their EDs. Yet even after controlling for these and other characteristics, we observed that safety-net hospitals were significantly more likely to close their EDs than hospitals that did not serve this role.

The closure of an ED can have profound repercussions for a community. Closures can adversely affect access to emergency care for everyone—insured and uninsured alike. Hospital closures significantly affect access to care not only by increasing the distance to the nearest hospital but also by increasing the patient load at neighboring hospitals. ED crowding degrades quality of care, not only by prolonging patient waiting times and increasing the rate of patients who leave without being seen, but also in terms of outcomes, including increased rates of morbidity and mortality. Because Medicaid, SCHIP, and uninsured patients are highly reliant on hospital EDs for acute care, ED closure can displace tens of thousands of uninsured and low-income patients to other EDs, worsening crowding and potentially setting the stage for additional closures.

Our findings underscore that market-based approaches to health care do not ensure that care will be equitably distributed. In fact, the opposite may be true. As long as tens of millions of Americans are uninsured, and tens of millions more pay well below their cost of care, the push for “results-driven competition” will not correct system-level disparities that markets cannot—and should not—be expected to resolve.

In summary, this study demonstrated that from 1990 to 2009, the number of hospital EDs in nonrural areas declined by 27%, with for-profit ownership, location in a competitive market, safety-net status, and low profit margin associated with increased risk of ED closure.

http://jama.ama-assn.org/content/305/19/1978.short

We have a crisis with closures of our emergency departments. With our current dysfunctional mechanisms of financing health care – mechanisms that are perpetuated by the Affordable Care Act – market considerations rather than medical need are driving these decisions. The more vulnerable populations suffer the most.

Many of the affluent individuals who have had great influence over the reform efforts may not care that safety-net emergency departments are shutting down, but they should. They could become victims of major traffic accidents and taken through rush hour traffic to their preferred for-profit emergency departments. If they had to ride past padlocked safety-net emergency departments to the other side of town, they could DIE no matter how much money they had or how good their private insurance is.

A well designed single payer system includes regional planning and separate budgeting of capital improvements. Decisions on the location and funding of Emergency Departments are made based on community need rather than on market considerations.

Maybe most of the rich don’t care about the rest of us, but you would think that, at least, they would care about themselves and their families.

David Cameron's adviser says health reform is a chance to make big profits

Kitchen cabinet aide says charging improves service and NHS should be shown 'no mercy' in drive for reform

By Daniel Boffey and Toby Helm
The Guardian, Saturday 14 May 2011

A senior adviser to David Cameron says the NHS could be improved by charging patients and will be transformed into a “state insurance provider, not a state deliverer” of care.

Mark Britnell, who was appointed to a “kitchen cabinet” advising the prime minister on reforming the NHS, told a conference of executives from the private sector that future reforms would show “no mercy” to the NHS and offer a “big opportunity” to the for-profit sector.

The revelations come on the eve of an important speech by the prime minister on the future of the NHS, during which he is expected to try to allay widespread fears that the reforms proposed in health secretary Andrew Lansley’s health and social care bill would lead to privatisation.

It has been suggested that Cameron may even announce an extension to the “pause” in the progress of the bill until after the party conference season, amid growing tensions on the issue within the coalition government.

Nick Clegg, has insisted that the Liberal Democrats will not support any reforms that allow the “profit motive to drive a coach and horses through the NHS”. Backbench Tory MPs, however, have called for the government to stick to the reforms and open the provision of services to the private sector. Britnell’s comments will inevitably raise the temperature of the debate.

Britnell, a former director of commissioning for the NHS, who is now head of health at the accountancy giant KPMG, was invited to join a group of senior health policy experts, described by the respected Health Service Journal as a “kitchen cabinet”, in Downing Street earlier this month. The group, which includes former NHS executives and the former Department of Health permanent secretary Lord Crisp, was assembled by Cameron’s new special adviser on health, Paul Bate.

In unguarded comments at a conference in New York organised by the private equity company Apax, Britnell claimed that the next two years in the UK would provide a “big opportunity” for the for-profit sector, and that the NHS would ultimately end up as a financier of care similar to an insurance company rather than a provider of hospitals and staff.

According to a glossy brochure summarising the conference held last October, Britnell told his audience: “GPs will have to aggregate purchasing power and there will be a big opportunity for those companies that can facilitate this process … In future, the NHS will be a state insurance provider, not a state deliverer.” He added: “The NHS will be shown no mercy and the best time to take advantage of this will be in the next couple of years.”

Writing in the Health Service Journal, Britnell also suggested that the NHS would be better served by breaking with the mantra that all services should be free at the point of delivery by allowing co-payment, where patients share the costs of care and drugs.

“It appears that countries that have a mixed blend of public and private provision, co-payment and social insurance are possibly more capable of providing resilient healthcare systems.”

The shadow health secretary, John Healey, said: “This revelation comes direct from Cameron’s inner circle and gives the game away on the government’s NHS plans. It confirms the Tories’ true purpose is to set up a free-market NHS and open up all parts of the health service to private companies.”

In a move that will pile more pressure on Lansley, the Department of Health last week released the latest Mori poll on satisfaction levels with the NHS. It shows that 66% of people questioned believed the NHS was the best health service in the world, while 37% of the public expected services to deteriorate following the reforms. However, nearly three-quarters said that they knew “not very much” or “nothing at all” about changes that the government plans to make.

Sir Michael Scholar, chairman of the UK Statistics Authority, demanded a rethink of the halt on funding for the General Lifestyle Survey, which is run by the Office for National Statistics. Scholar said: “If government is planning a major reform of the NHS, people will want to know if it is worse afterwards or not. These statistics are very important in reaching a rational view.”

Labour sources said that the only explanation for the cuts in funding was that the government expected a hostile reaction to the reforms that do proceed and ministers were “planning how best to keep that from view”.

Downing Street tried to distance itself from Britnell. A No 10 spokesman said: “We will never privatise the NHS. We remain committed to the principle of an NHS funded from general taxation and based on need not ability to pay. Mark Britnell is not the prime minister’s health adviser. We are listening to the views of experts, patients and staff on how to improve our plans to strengthen the NHS.”

http://www.guardian.co.uk/politics/2011/may/14/david-cameron-adviser-health-reform

ACOs, ACA, and integrated health systems

Letter to Donald Berwick, M.D., Administrator, CMS

American Medical Group Association
May 11, 2011

Re: Medicare Shared Savings Program:  Accountable Care Organizations

We write today, however, to express our serious concerns over the direction of the Proposed Rule. On its face, it is overly prescriptive, operationally burdensome, and the incentives are too difficult to achieve to make this voluntary program attractive. As you know, most policy experts believe multi-specialty medical groups are best poised to become ACOs in the short term. However, in a survey of AMGA members, 93 percent said they would not enroll as an ACO under the current regulatory framework.  
 
Our membership’s concerns were many and focused on issues such as the risk sharing requirement, static risk adjustment, retrospective attribution, quality measurement requirements, the Minimum Savings requirements and others. Without substantial changes in the Final Rule, we fear that very few providers will enroll as ACOs and that CMS and the provider community will miss the best opportunity to inject value and accountability into the delivery system. 

http://thehill.com/images/stories/blogs/healthwatch/amga.pdf

And…

Letter to Donald Berwick, M.D., Administrator, CMS

Billings Clinic
The Everett Clinic
Park Nicollet
Geisinger Clinic
Dartmouth-Hitchcock Health
Univ. of Michigan Med. School
Marshfield Clinic
St. John’s Clinic
Novant Medical Group
Middlesex Health System

May 12, 2011

On behalf of the multi-specialty groups participating in the Physician Group Practice (PGP) Demonstration Program, we are writing to you today regarding Section 3022 of the Affordable Care Act’s notice of proposed rule-making (NPRM) for the Medicare Shared Savings Program/Accountable Care Organizations (ACOs).

However, as presently proposed, we ALL have serious reservations about the economics and the complexity of the Medicare Shared Savings Program/ACO NPRM. All of our organizations are planning to individually respond with our own respective concerns, but broadly, the “Shared Savings” model/NPRM has the following aspects that are problematic: 
 
* There is downside risk during the initial 3-year term, unlike the recently concluded PGP Demonstration project. Such downside risk is compounded by significant investment cost on the part of the ACO.
* Savings are measured net of 2% threshold for the one-sided risk model. Additionally, the Minimum Savings Rate (MSR) is set at high levels for ACOs with lower enrollment. 
* Limits placed on accounting for beneficiary acuity level that is documented and appropriate will dilute true savings realized by the ACO, and is a disincentive for management of patients with complex care needs.  
* There are a large number of quality measures, especially new quality metrics in several domains, that go into effect starting year one. As an example, on average, it costs about $30,000 just to program a single new quality metric. This NPRM has more than 60 new ones, which equates to nearly $2,000,000 for each organization. The excellent results produced by the PGP demonstration are evidence of the benefits of a careful expansion of quality measures.
* Retrospective attribution places limits on the ACO’s ability to bend the cost curve. It impedes optimal patient engagement, timely program planning and course correction, and compounds underlying issues of claims lag and financial settlement. 
* The logistics associated with Medicare beneficiaries’ opt-out of the ACO program is simply not practical. We believe this would lead to beneficiary and physician confusion on the terms of engagement.

As currently proposed, ACOs have a greater potential for incurring losses under either track, than for generating savings. This risk-reward imbalance makes it difficult, if not impossible, for internal decision-makers to accept the financial design.

http://thehill.com/images/stories/blogs/healthwatch/unhappyacos.pdf

And…

ACO start-up costs higher than estimated, AHA study says

By Rich Daly
ModernHealthcare.com, May 14, 2011

Accountable care organizations will likely face start-up and first-year costs six to 14 times higher than HHS has estimated, according to a study released by the American Hospital Association.

The study, which was based on an analysis of previous research, concluded that the various elements required to successfully manage the care of a specific population will cost between $11.6 million and $26.1 million—depending on the size of the hospital or hospital system involved in the ACO—and far more than the $1.8 million estimated by the CMS in its proposed rule.

The cost findings are based on 23 different capabilities that ACOs will need to develop across four categories: network development and management; care coordination, quality improvement and utilization management; clinical information systems; and data analytics.

http://www.modernhealthcare.com/article/20110514/NEWS/305149999/

Comment: 

By Don McCanne, MD

The accountable care organizations (ACOs) called for in the Accountable Care Act (ACA) don’t seem to be getting off to a good start. Most medical groups do not intend to participate, the hospitals have found that they are too expensive, and the distinguished participants in the Group Practice Demonstration Program all have serious reservations about the proposed rules for ACOs under the ACA. What is going on here?

The goal seems to be to establish integrated health care delivery systems with varying design characteristics based on local needs and logistical considerations. Size and complexity would vary greatly. Such systems should provide a primary care base for entry into the system and for coordination of services. Specialty care should be integrated within the system, providing appropriate access and interaction with primary care. Information technology systems should enable access to clinical records while providing tools that reduce error and duplication of services, while assisting with clinical decisions. Basically, we want health care professionals and hospitals working together to provide more efficient, higher quality care for everyone.

That is the concept behind ACOs. Integrated systems would be rewarded based on quality and efficiency (i.e., lower costs). Because of political considerations, Congress decided that they should apply the ACO concept exclusively to Medicare, while letting the private insurers supervise their own quality and cost programs.

The simplistic solution was to establish the Medicare Shared Savings Program. Reduced costs would be built in by rewarding the ACO systems with a portion of the funds that they saved, and ensuring quality by making the rewards dependent on meeting certain quality measures. The problem with this became evident when it came time to write the rules. Not only were the systems required to enable this very expensive, the rules would create what bureaucracies are so adept at creating – a bureaucratic quagmire. The letter from the participants in the Group Practice Demonstration Program list some of these aspects that proved to be problematic.

Bundling of payments has been another approach, but only certain clinical presentations conform well to bundling. So it would not be an answer to the majority of clinical problems. Also bundling removes risk from the common financing pool and splits it up amongst the provid
ers of health care. Luck or lack thereof plays too great of a role to ask the providers to place bets on it merely by agreeing to accept patients with conditions subject to bundling.

Much of the difficulty has stemmed from the new, widely touted principle that we should no longer pay for volume but instead we should pay for quality and efficiency, but both quality and efficiency have proven to be very difficult to define. The default has been a few parameters of each which in no way can represent the broader spectrum of quality and efficiency.

Health care is a lot of work. No matter what else, the delivery system will have to be paid primarily on volume, but we need to get the volume right. Much attention has been paid to excess volume being driven by the rewards of fee-for-service care. In fact, the largest volume increase has been in imaging services, yet most physicians who order the procedures are not compensated for these services. The Dartmouth variations do remain of concern and further attention in defining these is certainly warranted.

The greater problem with volume has been demonstrated to be underutilization of services. According to a RAND study, most patients receive only about half of the care that they should have. The emphasis on reducing the volume of care has been somewhat misguided since there is a greater need to increase the volume, though we need to get the pricing right when we do that. The SGR dilemma must be addressed, but the basis for it will not go away.

The bottom line? Integrated health systems that are designed for optimal patient service are an admirable goal, but integrated health systems designed predominantly as a business model are not. ACOs designed to comply with the Medicare Shared Savings Program are an abstract concept that will never fly, as today’s quotes indicate. On the other hand, ACOs designed as a business model – the so-called commercial ACOs – are just another label for the intrusive managed care organizations that most of us have been trying to get away from.

The goals of higher quality at reasonable costs would best be achieved by humanitarian integrated health systems financed not by a dysfunctional, fragmented system of private and public plans, but rather by a publicly-financed and publicly-administered universal risk pool – an improved Medicare for everyone.

The ACO misstep is more of a problem of well intentioned but misdirected policy application. The now-tarnished ACO label should be dropped as we move forward with mutual efforts to improve the quality and efficiency of our health care delivery system so it works well for all of us.

Vermont approves universal health program

The measure adopted by the Legislature and supported by the governor would establish a single-payer-type plan, although some private insurers would stay.

By Doug Trapp
Amednews, May 16, 2011

Vermont Gov. Peter Shumlin has pledged to sign a bill that paves the way for the state to launch a health system approaching a single-payer model later in the decade and to create a state health insurance exchange within the next several years.

The measure creates a powerful five-member Green Mountain Care Board, members of which will determine the benefits and craft a funding plan for Green Mountain Care, a state universal health plan. The board would have wide authority over state health spending and health system reform. The bill requires the governor to nominate Green Mountain board members by Oct. 1 and the Vermont Senate to confirm them.

The measure will set up a health insurance exchange in which Vermonters will shop for private health plans and enroll in public coverage. The exchange is to begin enrolling residents in November 2013 and be fully operational by January 2014. The bill calls for at least two private health insurance plans to participate in the exchange.

The Democratic-controlled Vermont Legislature approved the bill along party lines, with the state Senate voting 21-9 to pass it on May 3 and the House adopting it on May 5 with a 94-49 vote. Shumlin scheduled a bill-signing ceremony for May 26.

He had pledged to enact a single-payer health system during his Jan. 6 inaugural address. “Let Vermont be the first state in the nation to treat health care as a right and not a privilege.”

Reaction to the bill

Many health care stakeholders are taking a wait-and-see approach to Green Mountain Care, which might not be implemented fully until 2017 — or ever, if it is projected to cost as much or more than the state’s existing health system, said Vermont Rep. Mark Larson, the bill’s sponsor. But Larson is optimistic that the plan will produce the necessary savings to proceed.

The measure’s lack of specificity created anxiety among health insurers, businesses and others in the state, said Leigh Tofferi, director of government, public and community relations for Blue Cross Blue Shield of Vermont, the state’s largest health plan. The nonprofit insurer supports the state’s efforts on payment and delivery system reforms and the creation of the insurance exchange, which could produce savings for the system.

But the measure does not lay out the financing plan and minimum benefits for Green Mountain Care, nor does it establish what would happen to existing health insurance and coverage. Those decisions are up to the Green Mountain Care Board. “We will weigh in on those other issues as they become more specific next year and the year after,” Tofferi said.

The measure requires the Green Mountain plan to pay enough to attract and retain high-quality health care professionals, said Vermont Sen. Kevin Mullin, the lone Republican to vote for the bill. He offered this and other changes that made it into the final bill, including a mandate that the plan’s funding be sustainable. Tofferi credited Mullin with improving the bill’s specificity.

The Vermont Medical Society did not take a position on the bill and has no policy on single-payer health care, said VMS Executive Vice President Paul Harrington. He expects the Legislature to adopt legislation related to the health reform bill in each of the next several years.

Larson predicted a similar outcome. “There’s much more work to be done in moving forward with the plan than not,” he said.

Not quite single-payer

The measure requires the Green Mountain Care Board to examine and attempt to limit the growth of state health care spending, begin pilot payment reforms, and continue to implement a previously enacted patient-centered medical home program.

The board would implement Green Mountain Care. All Vermonters would be eligible for the plan, which would cover hospital services and prescription drugs.

But Green Mountain Care cannot launch until three conditions are met. The Vermont Legislature must approve a board-proposed three-year budget for the plan — one that costs less than the state’s existing health system. The board also must define the plan’s benefits. Finally, Vermont needs the U.S. Health and Human Services Dept.’s permission to use health insurance exchange subsidies in the federal health reform law to support Green Mountain Care beginning in 2017. Waivers would be required to incorporate Medicaid, Medicare and other federal health funds.

Despite Shumlin’s statements on his inaugural promise, the bill does not meet the strict definition of a single-payer plan, in which the government is the sole third-party payer for health care. “But it is as close as we can get at the state level,” said bill sponsor Larson.

The measure would allow private health plans to continue in the state indefinitely. “You give up a significant part of the administrative savings by doing that,” said David Himmelstein, MD, founder of Physicians for a National Health Program. The organization, based in Chicago, advocates for a single-payer health system.

A true single-payer plan should have separate operating and capital budgets, Dr. Himmelstein said. It should require a single insurance fund to pay all claims, he said.

Self-insured businesses such as IBM — the state’s largest employer — could continue to offer private health coverage to employees. But businesses likely will be required to contribute to Green Mountain Care’s funding, possibly through a payroll tax.

Although the bill goes further toward single-payer than all other states and the national health reform law, it won’t solve Vermont’s health care problems, Dr. Himmelstein said. “Maybe it lays the foundation.”

Larson said no one else proposed a bill that could deliver the quality improvements and savings possible through his measure.

Mullin, the Republican senator, said he doesn’t care if the state enacts a single-payer or a multipayer system, as long as it works. “If they can prove that single-payer is going to work, God bless them,” he said.

ADDITIONAL INFORMATION: Step 1 to single-payer

Vermont lawmakers OK’d a bill that would pave the way for a single-payer-type health care system in the state. The measure approved by the Legislature has three major parts:

* Green Mountain Care Board, a five-member panel appointed by the governor with Senate confirmation. The board would design the state’s universal coverage plan, develop state health care budgets, and carry out health cost containment and payment reform.

* The Vermont Health Benefit Exchange, a state marketplace for health insurance as called for under the national health system reform law. The exchange would start operating by 2014 and could become the main source of health coverage in Vermont by 2017.

* Green Mountain Care, the state’s universal coverage plan, which could launch by 2017. The state would need federal approval to use federal health funds to help finance the plan. The state is expected to adopt payroll or income taxes to help pay for the plan.

http://www.ama-assn.org/amednews/2011/05/16/gvsa0516.htm

ACOs, ACA, and integrated health systems

Letter to Donald Berwick, M.D., Administrator, CMS

American Medical Group Association
May 11, 2011

Re: Medicare Shared Savings Program:  Accountable Care Organizations

We write today, however, to express our serious concerns over the direction of the Proposed Rule. On its face, it is overly prescriptive, operationally burdensome, and the incentives are too difficult to achieve to make this voluntary program attractive. As you know, most policy experts believe multi-specialty medical groups are best poised to become ACOs in the short term. However, in a survey of AMGA members, 93 percent said they would not enroll as an ACO under the current regulatory framework.

Our membership’s concerns were many and focused on issues such as the risk sharing requirement, static risk adjustment, retrospective attribution, quality measurement requirements, the Minimum Savings requirements and others. Without substantial changes in the Final Rule, we fear that very few providers will enroll as ACOs and that CMS and the provider community will miss the best opportunity to inject value and accountability into the delivery system.

http://thehill.com/images/stories/blogs/healthwatch/amga.pdf

And…

Letter to Donald Berwick, M.D., Administrator, CMS

Billings Clinic
The Everett Clinic
Park Nicollet
Geisinger Clinic
Dartmouth-Hitchcock Health
Univ. of Michigan Med. School
Marshfield Clinic
St. John’s Clinic
Novant Medical Group
Middlesex Health System

May 12, 2011

On behalf of the multi-specialty groups participating in the Physician Group Practice (PGP) Demonstration Program, we are writing to you today regarding Section 3022 of the Affordable Care Act’s notice of proposed rule-making (NPRM) for the Medicare Shared Savings Program/Accountable Care Organizations (ACOs).

However, as presently proposed, we ALL have serious reservations about the economics and the complexity of the Medicare Shared Savings Program/ACO NPRM. All of our organizations are planning to individually respond with our own respective concerns, but broadly, the “Shared Savings” model/NPRM has the following aspects that are problematic:

* There is downside risk during the initial 3-year term, unlike the recently concluded PGP Demonstration project. Such downside risk is compounded by significant investment cost on the part of the ACO.
* Savings are measured net of 2% threshold for the one-sided risk model. Additionally, the Minimum Savings Rate (MSR) is set at high levels for ACOs with lower enrollment.
* Limits placed on accounting for beneficiary acuity level that is documented and appropriate will dilute true savings realized by the ACO, and is a disincentive for management of patients with complex care needs.
* There are a large number of quality measures, especially new quality metrics in several domains, that go into effect starting year one. As an example, on average, it costs about $30,000 just to program a single new quality metric. This NPRM has more than 60 new ones, which equates to nearly $2,000,000 for each organization. The excellent results produced by the PGP demonstration are evidence of the benefits of a careful expansion of quality measures.
* Retrospective attribution places limits on the ACO’s ability to bend the cost curve. It impedes optimal patient engagement, timely program planning and course correction, and compounds underlying issues of claims lag and financial settlement.
* The logistics associated with Medicare beneficiaries’ opt-out of the ACO program is simply not practical. We believe this would lead to beneficiary and physician confusion on the terms of engagement.

As currently proposed, ACOs have a greater potential for incurring losses under either track, than for generating savings. This risk-reward imbalance makes it difficult, if not impossible, for internal decision-makers to accept the financial design.

http://thehill.com/images/stories/blogs/healthwatch/unhappyacos.pdf

And…

ACO start-up costs higher than estimated, AHA study says

By Rich Daly
ModernHealthcare.com, May 14, 2011

Accountable care organizations will likely face start-up and first-year costs six to 14 times higher than HHS has estimated, according to a study released by the American Hospital Association.

The study, which was based on an analysis of previous research, concluded that the various elements required to successfully manage the care of a specific population will cost between $11.6 million and $26.1 million—depending on the size of the hospital or hospital system involved in the ACO—and far more than the $1.8 million estimated by the CMS in its proposed rule.

The cost findings are based on 23 different capabilities that ACOs will need to develop across four categories: network development and management; care coordination, quality improvement and utilization management; clinical information systems; and data analytics.

http://www.modernhealthcare.com/article/20110514/NEWS/305149999/

The accountable care organizations (ACOs) called for in the Accountable Care Act (ACA) don’t seem to be getting off to a good start. Most medical groups do not intend to participate, the hospitals have found that they are too expensive, and the distinguished participants in the Group Practice Demonstration Program all have serious reservations about the proposed rules for ACOs under the ACA. What is going on here?

The goal seems to be to establish integrated health care delivery systems with varying design characteristics based on local needs and logistical considerations. Size and complexity would vary greatly. Such systems should provide a primary care base for entry into the system and for coordination of services. Specialty care should be integrated within the system, providing appropriate access and interaction with primary care. Information technology systems should enable access to clinical records while providing tools that reduce error and duplication of services, while assisting with clinical decisions. Basically, we want health care professionals and hospitals working together to provide more efficient, higher quality care for everyone.

That is the concept behind ACOs. Integrated systems would be rewarded based on quality and efficiency (i.e., lower costs). Because of political considerations, Congress decided that they should apply the ACO concept exclusively to Medicare, while letting the private insurers supervise their own quality and cost programs.

The simplistic solution was to establish the Medicare Shared Savings Program. Reduced costs would be built in by rewarding the ACO systems with a portion of the funds that they saved, and ensuring quality by making the rewards dependent on meeting certain quality measures. The problem with this became evident when it came time to write the rules. Not only were the systems required to enable this very expensive, the rules would create what bureaucracies are so adept at creating – a bureaucratic quagmire. The letter from the participants in the Group Practice Demonstration Program list some of these aspects that proved to be problematic.

Bundling of payments has been another approach, but only certain clinical presentations conform well to bundling. So it would not be an answer to the majority of clinical problems. Also bundling removes risk from the common financing pool and splits it up amongst the providers of health care. Luck or lack thereof plays too great of a role to ask the providers to place bets on it merely by agreeing to accept patients with conditions subject to bundling.

Much of the difficulty has stemmed from the new, widely touted principle that we should no longer pay for volume but instead we should pay for quality and efficiency, but both quality and efficiency have proven to be very difficult to define. The default has been a few parameters of each which in no way can represent the broader spectrum of quality and efficiency.

Health care is a lot of work. No matter what else, the delivery system will have to be paid primarily on volume, but we need to get the volume right. Much attention has been paid to excess volume being driven by the rewards of fee-for-service care. In fact, the largest volume increase has been in imaging services, yet most physicians who order the procedures are not compensated for these services. The Dartmouth variations do remain of concern and further attention in defining these is certainly warranted.

The greater problem with volume has been demonstrated to be underutilization of services. According to a RAND study, most patients receive only about half of the care that they should have. The emphasis on reducing the volume of care has been somewhat misguided since there is a greater need to increase the volume, though we need to get the pricing right when we do that. The SGR dilemma must be addressed, but the basis for it will not go away.

The bottom line? Integrated health systems that are designed for optimal patient service are an admirable goal, but integrated health systems designed predominantly as a business model are not. ACOs designed to comply with the Medicare Shared Savings Program are an abstract concept that will never fly, as today’s quotes indicate. On the other hand, ACOs designed as a business model – the so-called commercial ACOs – are just another label for the intrusive managed care organizations that most of us have been trying to get away from.

The goals of higher quality at reasonable costs would best be achieved by humanitarian integrated health systems financed not by a dysfunctional, fragmented system of private and public plans, but rather by a publicly-financed and publicly-administered universal risk pool – an improved Medicare for everyone.

The ACO misstep is more of a problem of well intentioned but misdirected policy application. The now-tarnished ACO label should be dropped as we move forward with mutual efforts to improve the quality and efficiency of our health care delivery system so it works well for all of us.

Vermont moves closer to becoming first US state to provide 'socialised medicine'

By Jeanne Lenzer
BMJ, May 10, 2011

Vermont is set to become the first US state to launch a single payer healthcare plan after a bill passed both houses of the state’s legislature.

The plan is expected to be signed by Governor Peter Shumlin, who in February originally proposed the idea that would abolish most insurance plans and would instead provide healthcare to all residents through public funding. In the United States this is known as a “single payer” scheme and is fiercely opposed by many conservative politicians as “socialised medicine.”

Some doctors in Vermont are unhappy about the proposed changes. In an online poll of roughly 600 doctors conducted by the state representative George Till, a doctor who specialises in obstetrics and gynaecology, 28 percent said that they will stop practising medicine in the state if the plan is enacted. However, the poll by Dr Till, who opposes the governor’s plan, has been criticised for not preventing multiple responses from the same person or responses from people who weren’t doctors.

The man responsible for designing Vermont’s plan, William Hsiao, professor of economics at the Harvard School of Public Health in Boston, told the BMJ that he and his colleagues evaluated healthcare schemes around the globe and found that “fee for service is the worst payment [mechanism] in the world, [as] it’s inflationary—and it’s the incentive structure embedded in our healthcare system.” Costs spiral out of control, he said, because doctors and hospitals are paid more for doing more.

An analysis by Dr Hsiao, published in the New England Journal of Medicine (2011;364:1188-1190; doi:10.1056/ NEJMp1100972), concluded that the new plan is necessary because one in five Vermont residents have either inadequate or no health insurance and rising healthcare costs threaten the solvency of small businesses and citizens.

Dr Hsiao told the BMJ, “The US is the only advanced nation other than South Africa that builds health insurance on a free market of multiple private insurers” and conditional on employment. “We need to decouple employment and health insurance,” he said. “If you live in Vermont, you will be eligible for health insurance.”

The Vermont plan, Dr Hsiao’s analysis shows, could lead to cost savings of 25 percent over 10 years. Savings would come from “administrative simplification,” introduction of a no-fault malpractice system, elimination of “perverse [financial] incentives,” and by “insulating major decisions about healthcare spending from politics.” This last reform is especially needed in the US, Dr Hsiao told the BMJ, because politicians, whose campaigns are often underwritten by large contributions from industry, often support schemes that increase profits for drug companies, hospitals, and specialist groups.

One example, he says, is the Medicare plan passed under the former president George W Bush that prohibits Medicare from competitive bidding on drugs.

As for fears that doctors will leave Vermont, Dr Hsiao told the Boston Globe that he doubts doctors will actually leave the state (7 Apr, “With health costs rising, Vermont moves toward a single-payer system,” www.boston.com/bostonglobe/editorial_ opinion/blogs/the_angle/2011/04/vermonts_single.html). If they do, he said, communities and medical centres will not have trouble recruiting replacements.

Dr Hsiao acknowledges that the legislation has been weakened from its original version, owing to “politics.” He told the BMJ that, among other changes, the legislature defeated the no-fault insurance plan, instead calling for “further study.”

Stephanie Woolhandler, professor of medicine at Harvard Medical School and co-founder of Physicians for a National Health Program, told the BMJ that the Vermont legislation “falls well short of the single payer reform needed to resolve the healthcare crisis,” in part because it allows a “continuing role for private insurance, negating many of the administrative savings attainable through a single payer reform.” The plan, she said, would “force many patients to face copayments that obstruct access to care,” and it allows the participation of “for-profit hospitals and other providers, which research has shown deliver inferior care at inflated prices.”

But despite its shortcomings, the plan “may be a useful step toward progressive health reform,” Dr Woolhandler said.

Cite this as: BMJ 2011;342:d2921