Physician Payment Reform In A Post-SGR World: Challenges Remain

By John O’Shea
Health Affairs Blog, September 3, 2015

On April 16, 2015 President Barack Obama signed the Medicare Access and CHIP Reauthorization Act (MACRA) which, among other things, finally repeals the Sustainable Growth Rate (SGR) mechanism of updating fees to the Physician Fee Schedule (PFS).

The passage of MACRA, however, raises new questions about where the U.S. health care system is headed in the post-SGR world of payment and delivery reform.

Reasons For Caution

These policy changes and announcements follow widespread calls to move from the current volume-based fee-for-service (FFS) payment system to a value-based system that pays for patient outcomes rather than individual services. Value-based health care should be the goal of any health reform initiative. However, even with SGR out of the way, there are major challenges to achieving that goal, including the lack of an agreed-upon, patient-centered definition of value; a shortage of meaningful performance metrics; and a deficiency of accounting systems capable of reflecting the true cost of delivering care.

Policymakers and others involved in payment reform should also remain acutely aware that the multitude of reporting requirements associated with participation in APMs will add substantially to the already heavy administrative burden on physician practices.

Alternative Payment Models

The future course of payment reform currently centers on efforts to make fee-for-service increasingly less attractive than participation in an alternative payment model (APM). However, moving providers out of FFS assumes that they have a viable place to go. At this point, it is not clear that they do.

Value-based purchasing (VBP), the concept behind APMs includes a broad set of performance-based payment strategies that attempt to use financial incentives to influence provider performance.

MACRA provides for a significantly modified FFS payment system, the Merit-Based Incentive Payment System (MIPS), which is essentially a P4P program. In addition, the legislation encourages the development and implementation of APMs and offers incentives for providers to move into these models.

Although there are a number of individual examples of successful initiatives, the overall early results, as well as possible conceptual flaws, make the long term viability of these models uncertain.

Pay For Performance

Although P4P programs are among the oldest APMs, the success of these models is impeded by serious gaps in the current quality measurement system. According to a 2014 RAND report that looked at 49 studies examining the effect of P4P on process and intermediate outcome measures, the overall results of the studies were mixed, and any identified effects were relatively small.

A basic flaw in the design of existing P4P models is the reality that meaningful patient-centered outcome measures remain elusive.

Accountable Care Organizations

Accountable Care Organizations (ACOs) are health care organizations that tie provider reimbursements to quality and cost metrics related to the total care of an assigned population of patients.

Although ACOs are still relatively new, their ability to generate savings to share with participants is so far not encouraging, as shown by the early results among the most experienced providers in the Pioneer ACO program.

Even the most inefficient system has a finite amount of waste; although it may be relatively easy to address “low hanging fruit” early on, achieving sustained savings over time will prove increasingly difficult.

Bundled Payments

In the Bundled Payment model, a single payment is made for services delivered during an episode of care related to a medical condition or procedure.

Although the cost of each bundle may be reduced, without any control over the volume of bundles provided, overall spending may not go down. Bundled payments also need accurate risk adjustment to avoid both the underuse of appropriate care services as well as the tendency to “cherry pick” low-cost patients.

Patient-Centered Medical Homes

Although early limited evaluations and anecdotal experience with the Patient-Centered Medical Home model have suggested the promise of cost savings and higher patient and provider satisfaction, results from a large multipayer medical home pilot was associated with limited improvements in quality and no reduction in hospital usage, emergency department visits, ambulatory care services, or total costs over three years.

Impact On The Practice Of Medicine

By and large, physicians not only want to provide the best quality health care to their patients, they also want to know they are doing so. But physicians currently labor under an increasingly burdensome and often meaningless number of reporting requirements that take time away from patients and fail to help them improve the quality of their care.

According to a commentary in The New England Journal of Medicine in 2014, “the quality-measurement enterprise in U.S. health care is troubled.” Physicians, hospitals, and health plans view measurement as burdensome, expensive, inaccurate, and indifferent to the complexity of care delivery. The measures also fail to give patients the information they need to make good decisions.

The recent CMS report that 40 percent of Medicare providers will face 1.5 percent cuts for failing to submit data to the Physician Quality Reporting System underscores the fact that many providers, especially those who see few Medicare patients, likely view the cuts as a cost of business to avoid the administrative hassle.

Yet, in spite of these cautionary signs, public and private payers are tying larger amounts of provider payments to a growing number of largely meaningless measures, as if doubling down will somehow fix the problem.

Given the plethora of payment and delivery reform initiatives currently underway or in development, there is relatively little discussion about the long-term goal of payment reform or the impact of these initiatives on the practice of medicine. There are at least two areas of particular concern: the administrative burden on physicians, and the push toward greater consolidation.

Nearly half (46 percent) of doctors reported that they felt burnout in 2014, and a main reason cited was increasing administrative burden, including the multitude of reporting requirements. These findings cannot be dismissed, since burnout has been positively linked to increases in medical errors and has been cited as a reason why doctors leave practice.

Another consequence of both the administrative burden and financial risk of participation in APMs is likely to be an increase in the already considerable trend toward practice consolidation. This trend has been shown to increase health care spending without increasing quality or efficiency and runs counter to the goals of APMs. Many small, independent practices will lack the resources needed to comply with the myriad of reporting requirements involved in APM participation; they are also less likely to be able to absorb the potential losses in a model that involves down-side financial risk.

Moving Forward On Physician Payment Reform

The Administration’s aims regarding value-based payments and the expanded use of APMs come with very little detail on how they will be realized; thus, it is difficult to comment other than to say that given the current state of performance measurement and the early results from existing APMs, the timeline seems overly aggressive.

Although the pursuit of better value in health care is a laudable aim and should continue, setting goals and establishing timelines is not enough. Linking more and more physician income to meaningless quality measures or mandating participation in undeveloped APMs will do little more than add to the already considerable non-clinical burden that physicians face and may force many physicians to abandon private practice in favor of employment, thereby accelerating the current trend toward consolidation. Worse yet, physicians may choose to leave practice altogether.

John O’Shea, MD, is a practicing surgeon and Senior Fellow in the Center for Health Policy Studies at the Heritage Foundation in Washington, DC. He served as a senior health policy advisor to the U.S. House Committee on Energy and Commerce, where he helped draft the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) that replaced the Sustainable Growth Rate (SGR) formula for reimbursing physician services in the Medicare program.

http://healthaffairs.org/blog/2015/09/03/physician-payment-reform-in-a-post-sgr-world-challenges-remain/

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Comment:

By Don McCanne, MD

It is indeed a rare event when we can agree with a health policy fellow from the Heritage Foundation. John O’Shea has spelled out the deficiencies and potential harms of the current directions in physician payment reform.

The goal is to drive quality and control costs. Although Dr. O’Shea does not tell us how he would do that, it is likely that he would disagree with our approach. We would adopt a single payer national health program which, by design, increases quality while improving value in our health care spending.

Health Care Spending: Historical Trends and New Directions

By Alice Chen and Dana Goldman
NBER Working Paper 21501, National Bureau of Economic Research, August 2015

Over the last five decades, broad changes in the US health care system have dramatically influenced growth in health care expenditures. These structural changes have also influenced the trajectory of the health economics research.

From the Conclusion

Chandra & Skinner (2012) categorize technological progress in health care based on its impact on cost and health: (1) high-efficiency, low-cost innovations; (2) costly innovations with high efficiency for particular subgroups; and (3) costly innovations with uncertain efficiency. The first two lead to large improvements in life expectancy, but they are not to be blamed for the rise in health spending relative to other nations. It is the third category that has been uniquely abundant in the US.

There is question of whether efforts to control technology will induce a harmful reduction in innovation, with personalized medicine – currently showing great promise but also great expense – being a notable example. We clearly need a better understanding of what precisely constitutes innovation, how it diffuses, and whether it can be harnessed to slow spending growth in a way that is socially desirable. Given the successes of the past half century, this seems well within the realm of possibility.

http://www.nber.org/papers/w21501

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The Value And Limits Of Economic Evaluation In Policy Analysis

By Victoria Phillips
Health Affairs Blog, September 1, 2015

Health care resources, no matter how represented, are ultimately finite. Trade-offs occur as spending in one area means that those same resources are unavailable to fund another program. In spite of this, U.S. policymakers remain reluctant to engage in conversations that even hint at “rationing.” This reluctance is evidenced by the fact that the Patient-Centered Outcomes Research Initiative (PCORI) is legislatively forbidden to include cost-effectiveness ratios in its comparative effectiveness evaluations.

Diametrically opposed to the U.S. system, most other countries embrace cost-effectiveness, whereby competing programs are evaluated in terms of costs and the health gains they produce.

The U.S. reluctance to embrace cost-effectiveness analyses as a policy tool is misguided, particularly as concerns about the level and distribution of health care spending remain front and center. Foremost, it means missed opportunities to lead much-needed discussions about the inherent trade-offs in health care investments.

Following the model of the clinical literature, policy researchers, analysts, and foundations should become familiar with economic evaluation tools and integrate them into their work and reports as a matter of course.

Cost-effectiveness analyses generally identify what must be paid to generate a health gain. If the focus of an intervention is extending life, results are reported as the cost per life-year gained. Little appreciated is the notion that these analyses describe the cost and health benefit produced. Only in limited circumstances, for example when an intervention is cost-saving, do they prescribe that a particular investment be made.

Extending life is one type of health gain, while improving quality is another. Quality changes can be paramount in populations affected by chronic conditions. The quality-adjusted life-year (QALY) is an outcome measure developed by economists in the 1970s, which adjusts survival gains by quality of life provided over the life-years.

At present the U.S. economic evaluation literature uses both QALYs as a standard outcome measure and an informal cost-effectiveness ratio of $100,000 per QALY gained.

PCORI, however, continues to focus on outcomes alone, including QALYs.

Curing Hepatitis C, Social Values, And Rationing

While cost-effectiveness analysis offers a solid starting point for discussions about health care trade-offs and spending prioritization, there are clear limits to its contributions in decision-making. New, potent, and expensive drugs are a case in point as they increasingly pose challenges for health systems and payers.

The new drug Harvoni offers a cure for Hepatitis C. This condition was previously treated with Interferon costing $15,000 per course, while the new regimen costs approximately $84,000. The budgetary implications of providing it are game-changing, with California alone estimating a total for Medicaid of $18 billion out of a $64 billion budget.

Such breakthroughs end the pretense that the U.S. does not need to confront rationing. Further, as the chance is minimal that Harvoni will be cost effective by any standard, determining whether to fund it falls outside the cost-effectiveness domain. It will involve some stark choices, ultimately reflecting social values, which the public seems woefully unprepared to make.

Policy analysts can lay the groundwork now for these more complex discussions by incorporating cost-effectiveness and the language of trade-offs into their work. This includes embedding these concepts into research, briefs, commentaries, and policy discussions, along with helping edge PCORI in a similar direction.

http://healthaffairs.org/blog/2015/09/01/the-value-and-limits-of-economic-evaluation-in-policy-analysis/

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Comment:

By Don McCanne, MD

Although there are many factors contributing to the increases in health care spending, the advances in technology such as new drugs, innovative surgical procedures, advances in imaging, and now, the potential of pharmacogenetics in personalized medicine, are playing an increasing role in driving up health care costs.

The entrepreneurial drive in health care seems to be expanding as a manifestation of the more general trend of mega-wealth seeking behavior. The outrageous overpricing of the drugs for hepatitis C is but one example of this behavior. But just think of the potential for pharmacogenetics and personalized health care – seven digit pricing would not be beyond the aspirations of the next generation entrepreneurs in the medical-industrial complex.

It is now commonplace for prices to be based not on costs but rather on value attained. Since a quality adjusted life year (QALY) is currently considered to have a value of $100,000, it does not take much imagination for these entrepreneurs to assign a price of $1,000,000 to personalized medicine interventions that add ten QALYs to an individual’s life. Though these numbers look preposterous now, the new prices we are already seeing indicate that we are headed in that direction.

The United States is unique in having a laissez faire attitude toward pricing in health care. All other nations use some sort of public control of pricing. Although our government does play a limited role through public programs such as Medicare and Medicaid, in general we tend to rely on market forces when markets are mostly about getting the highest prices the consumers will bear.

We can no longer sit back and watch more and more of us being priced out of health care. Although as a nation we are ready to accept comparing the effectiveness of various approaches in health care, we now have to make the decision that evaluations must also include cost-effectiveness analyses. Federal law currently prohibits cost evaluations under the Patient-Centered Outcomes Research Initiative (PCORI). That prohibition must be lifted.

Under a single payer national health program, abusive pricing would not be tolerated. Opponents say that government efforts to moderate pricing would stifle innovation and research. Nonsense. There is no way that the medical-industrial entrepreneurs would walk away from trying to get as large of a share as they can of the $3 trillion that we are spending on health care.

Court rules Ohio spouses are eligible for Medicaid

By Jim Provance
The Blade, September 2, 2015

In a decision that could have far-reaching effects, a federal appeals court ruled Tuesday that Ohio must count an applicant’s spouse as a member of his family when determining eligibility for financial assistance to pay Medicare bills.

A three-judge panel of the Cincinnati-based U.S. 6th Circuit Court of Appeals told the state it can’t exclude a beneficiary’s spouse when it comes to income calculations simply because the federal law doesn’t define the word “family.”

At issue is a program under Medicaid, the federal-state insurance program for the poor, that helps low-income Ohioans pay their premiums, co-payments, and deductibles under Medicare, the federal health insurance for senior citizens.

The larger the family, the more a beneficiary may earn and be eligible for that financial help.

“Ask 100 Americans whether a 74-year-old man’s ‘family’ includes his wife who lives with him, and every one of those Americans will likely say yes,” 6th Circuit Judge Raymond M. Kethledge wrote. “But the Ohio Department of Medicaid answered no, with the result that it denied Joe Turner’s application for benefits under the Medicaid Act.”

“It should have been clear to Ohio that the word ‘family,’ as used in the provisions here, does not mean whatever the state’s officials want it to mean, but instead includes at least a beneficiary’s resident spouse,” Judge Kethledge wrote.

https://www.toledoblade.com/Medical/2015/09/02/Court-rules-Ohio-spouses-are-eligible-for-Medicaid.html

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Comment:

By Don McCanne, MD

What kind of bureaucrat would make a decision that Medicaid benefits can be denied to an applicant by arbitrarily declaring that the applicant’s spouse is not part of the family and thus the family is too small to qualify? Perhaps Ohio’s family-values Governor John Kasich could explain, if he weren’t so busy running for President.

The real lesson here is that we really need to question the wisdom behind the multitude of health reform proposals that would provide federal grants to states and allow them to craft their own health care financing policies. It’s bad enough that states can refuse to participate in the Medicaid expansion, depriving millions of the health care that they should have. Just imagine the liberties they could take if allowed to make decisions such as redefining a family as having only one spouse when there are actually two.

Although a single payer system would be administered on a state or regional basis, the basic requirements would be established at the federal level. An example is the Canada Health Act which simply requires public administration, comprehensiveness, universality, portability and accessibility. Although their single payer systems are administered on the provincial level, there are no provinces that exclude a spouse from the definition of a family.

In the United States, it would not work to have federal legislation defining a national health program that is as simply stated as in the Canada Health Act. We have a track record of shameless gaming of the system to the detriment of patient care. That’s why we need greater specifications of the requirements – such as those in HR 676, the Expanded and Improved Medicare for All Act, by Rep. John Conyers with 51 cosponsors. We really can’t turn the decisions over the bureaucrats in supposed family-values states who actually don’t believe in family values.

The Value of Socialized Medicine: The Impact of Universal Primary Healthcare Provision on Birth and Mortality Rates in Turkey

By Resul Cesur, Pınar Mine Güneş, Erdal Tekin, and Aydogan Ulker
NBER Working Paper 21510, National Bureau of Economic Research, August 2015

Abstract

This paper examines the impact of universal, free, and easily accessible primary healthcare on population health as measured by age-specific birth and mortality rates, focusing on a nationwide socialized medicine program implemented in Turkey. The Family Medicine Program (FMP), launched in 2005, assigns each Turkish citizen to a specific state-employed family physician, who offers a wide range of primary healthcare services that are free-of-charge. Furthermore, these services are provided at family health centers, which operate on a walk-in basis and are located within the neighborhoods in close proximity to the patients. To identify the causal impact of the FMP, we exploit the variation in its introduction across provinces and over time. Our estimates indicate that the FMP caused large declines in mortality rates across all age groups with more pronounced impacts among infants and the elderly, and a moderate reduction in the birth rates, primarily among teenagers. Furthermore, the results are suggestive that the program has also contributed towards equalization in the mortality disparities across provinces. Our findings highlight the importance of a nationwide supply-side intervention on improving public health.

From the Introduction

An  increasing number of countries are devising reforms aimed at improving public health and reducing disparities in the delivery of and access to basic healthcare services. Many countries have taken a primarily demand-side approach to extending health coverage, through mechanisms such as health insurance, user-fees on the basis of ability-to-pay, and conditional cash transfers. There are also countries that have opted for mainly supply-side schemes by extending government financed public provision of healthcare services or creating incentive mechanisms that financially motivate providers to expand their coverage.

The emerging consensus from the strand of the literature that focuses on the demand-side healthcare financing reforms is that extending health insurance coverage improves both access and utilization, at least among the targeted groups. However, the evidence on the degree to which these interventions limit out of pocket expenditures for services and improve health outcomes is mixed and inconclusive.4 The relatively few studies that have focused on supply-side reforms, on the other hand, find that increased availability of free or heavily subsidized healthcare improves both access and health outcomes.

In this paper, we study the impact of a supply-side healthcare intervention implemented in Turkey on measures of mortality and birth rates. The Family Medicine Program – called FMP hereafter – introduced in 2005, has extended basic healthcare services to the entire Turkish population under a free-of-charge and single-payer system that is fully financed and administered by the central government. The key operational feature of the FMP is the assignment of each Turkish citizen to a specific family physician, who offers a wide range of basic healthcare services at easily accessible walk- in clinics called the Family Health Centers.

The Turkish reform has essentially established a socialized medicine program for basic healthcare services since the services are provided free-of-charge by state-employed family physicians. This is in sharp contrast with most other interventions, especially those concerning demand-side incentives, which primarily focus on the impact of reducing out-of-pocket healthcare expenses. Additionally, there is a growing conviction among the leading global health organizations, policymakers and practitioners about the importance of achieving universal health coverage, i.e., ensuring basic and affordable healthcare services to whole citizens irrespective of their ability to pay.

Our results indicate that the FMP led to considerable health benefits. In particular, we find that the FMP caused a large and statistically significant decline in overall mortality rate with more pronounced and long-lasting effects among infants and the elderly. We also find that the FMP reduced the birth rates, especially among teenagers.

From the Conclusions

Over the past decade, the Turkish healthcare system has undergone a major transformation marked by significant investments in infrastructure, education of healthcare personnel, modernization of patient tracking and payment systems, and most importantly, the launching of the Family Medicine Program (FMP). With the introduction of the FMP in 2005, Turkey has essentially established a socialized healthcare system for primary healthcare services, under which every Turkish citizen is ensured a comprehensive package of healthcare service that is free-of-charge irrespective of the citizen’s ability to pay. This paper provides the first comprehensive analysis of the impact of the FMP on the outcomes of age-specific birth and mortality rates using province level data between 2001 and 2013. 

Our results indicate that the FMP has caused reductions in both mortality and birth rates. The benefits associated with the FMP appear to be the strongest among the most vulnerable populations, i.e., the infants and the elderly for the mortality rate, and the teenagers for the birth rate. Furthermore, the results indicate that the program resulted in a more rapid reduction in mortality in provinces with a higher baseline mortality rate. This implies that the FMP might have also contributed towards an equalization of the mortality disparities across provinces.

A handful of recent studies highlight the importance of supply-side reforms in improving public health and reducing disparities in health outcomes in countries like Brazil and Thailand. The current study builds upon this growing strand of literature by documenting evidence on the effectiveness of a nationwide supply-side intervention from Turkey, which emphasizes direct service provision and effective government oversight. The findings in this paper provide further compelling evidence in favor of the view that extending healthcare services to all citizens is critical to achieving universal coverage and improving public health.

The signature feature of the Turkish FMP is the assignment of every citizen to a new category of “family physicians,” who are the central and first point of contact for patients. Every Turkish citizen is required to register with a particular family physician, who is in charge of providing a wide range of healthcare services at neighborhood clinics that operate on a walk-in basis.

http://www.nber.org/papers/w21510

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OECD Reviews of Health Care Quality: Turkey 2014

OECD, November 25, 2014

From the Executive Summary

Over the past decade, Turkey has implemented remarkable health-care reforms, achieving universal coverage in 2003, and dramatically expanding access to care for the population. Accompanied by significant investment in the hospital sector and the establishment of a family physician system, the Health Transformation Programme (HTP) has delivered a high level of activity in the health system. The reforms benefited from ambitious leadership and a clear set of priorities (focused on expanding health insurance and improving access and, in the clinical domain, on maternal and child health). An evaluation culture built in from the beginning and a willingness to open up the reform process to external scrutiny were also fundamental elements. Centralisation and rationalisation of the health system’s governance was critical in achieving recent health-care successes.

http://www.oecd.org/publications/oecd-reviews-of-health-care-quality-turkey-2013-9789264202054-en.htm

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Comment:

By Don McCanne, MD

Turkey’s phenomenal success in health care reform is largely due to the establishment of the supply-side Family Medicine Program – a socialized health care system for primary health care services. Maybe we in the United States should be thinking beyond a single payer social insurance program. A single payer socialized medicine program built on a primary care infrastructure offers many advantages that may never be realized if we stop short with mere insurance reform. Just a thought.

Larger Issuers, Larger Premium Increases: Health insurance issuer competition post-ACA

By Eugene Wang and Grace Gee
Technology Science (Harvard University), August 11, 2015

Abstract

The Patient Protection and Affordable Care Act (ACA) has substantially reformed the health insurance industry in the United States by establishing health insurance marketplaces, also called health exchanges, to facilitate the purchase of health insurance. The ACA has increased transparency in insurance pricing and in issuer pricing behavior. Using 2014 and 2015 Unified Rate Review (URR) data, this study examines changes in health insurance premiums made by individual health insurance issuers in 34 federally facilitated and state-partnership health insurance exchanges.

Results summary: Our study shows that the largest issuer in each marketplace had a 75% higher premium increase from 2014 to 2015 compared to other same-state issuers. On average, the largest issuers raised rates by 23.9%, while the other issuers only raised rates by 13.7%. Moreover, the largest issuers’ premium increase affects a larger proportion of plans and do not seem justified from the standpoint of incurred claims-to-premium ratio. Projected Index Rate from the rate review process is used as a summary of an issuer’s premiums across different plans and Projected Member Months as a proxy for on-exchange market share. Our findings suggest that even after the Affordable Care Act, the largest on-exchange issuers may be in a better position to practice anti-competitive pricing compared to their same-state counterparts.

From the Results

But can the largest issuers justify their higher premium increases in 2015 by claiming that they had higher incurred claims relative to collected premiums in 2014, compared to other issuers? To test this hypothesis… (technical details available at link)…

Note that this is very similar to the Medical Loss Ratio (MLR) as formulated in 45 CFR §158.221, which is used to calculate the MLR rebates issuers have to give to consumers if the MLR falls below 0.80 (i.e. they spent too little on medical expenses) in the experience period. But the MLR calculation would require the denominator to include only premiums collected in the experience period net of taxes, licensing and regulatory fees, which data is unavailable in the URR (Unified Rate Review public use files).

To test if the largest issuers in each state have higher incurred claims relative to premiums in 2014, the following null hypothesis was tested… (technical details available at link)…

After omitting states where data on the largest issuer was not available (the largest issuers having only joined the exchange in 2015) and omitting issuers without experience data (issuers can choose not to input experience period claims and premiums data if they deem that the data they have collected is not substantially representative), the test statistic is eventually calculated… (technical details available at link)…

… with a mean of 0.02, which means that the largest issuer has a higher claims ratio of only 0.02. Figure 9 shows that the claims-to-premium ratio for the largest issuers is 0.85 while that for the other issuers is 0.83. Since the test statistic is 0.50139 with a one-tailed p value of 0.31092, we conclude at 5% significance level that there is insufficient evidence to reject the null hypothesis in states where this ratio could be calculated. The claims-to-premium ratio of the largest issuer is not statistically significantly higher than other same-state issuers. Even if it were significant, a 2.5% higher claims-to-premium ratio is unlikely to be sufficient to justify the 75% higher premiums increase that the largest issuer incurred.

From the Discussion

Overall, this study is important in light of recent market consolidation efforts in the health insurance industry. This paper provides evidence that even after ACA, the largest on-exchange issuers may be in a better position to practice anti-competitive pricing compared to their same-state counterparts. This evidence should be prudently considered in any antitrust debate.

http://techscience.org/a/2015081104/

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CMS seeks emergency review of request for more insurance information

AMA Morning Rounds, August 31, 2015

Congressional Quarterly (8/29, Subscription Publication) reported that the Centers for Medicare and Medicaid Services “is seeking an emergency review of its request to collect more information from health insurance companies in connection with the medical-loss-ratio data and risk corridor regulations, which both are part of the agency’s effort to fully implement the 2010 health law.” The agency said it found a “number of significant discrepancies in the 2014 benefit year submissions that insurers made.” CMS officials said in a filing with the Federal Register “that they are concerned that the agency ‘will be unable to verify the accuracy of the submission and validate the data needed to operate the MLR or risk corridors programs’ if it doesn’t get additional information.”

http://www.ama-assn.org/ama/pub/news/newsletters-journals.page

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Comment:

By Don McCanne, MD

This is scandalous. The co-authors of this article, Eugene Wang and Grace Gee (with Harvard degrees in Applied Mathematics), have shown that the largest insurance issuer in each federally-facilitated and state-partnered ACA insurance exchange had a 75% higher premium increase this past year than did other insurers in the same states. But what is really shocking is that they have shown that, based on claims-to-premium ratios, these excess premium increases are in no way warranted.

This should not have happened since the Affordable Care Act requires that at least 80% of the premiums be spent on health benefits (the medical-loss ratio). Now we learn that the Centers for Medicare and Medicaid Services found a “number of significant discrepancies in the 2014 benefit year submissions that insurers made” regarding medical-loss-ratio data. CMS is seeking an emergency review of its request to collect more information from the health insurers.

With the current merger activity of the nation’s largest insurers, we should be very concerned about their too-big-to-follow-the-rules attitude. The insurers contend that they need higher premiums because of their claims experience, yet they have failed to provide CMS with adequate, accurate data to show that they are spending at least 80% of the premiums on health care. This study strongly suggests that they are not.

It’s time to throw out the crooks and establish our own single payer national health program – one owned by the people. We aren’t going to cheat ourselves.

Moody’s revises US not-for-profit healthcare outlook to stable from negative as cash flows increase

Moody’s Investors Service, August 26, 2015

Moody’s Investors Service has revised the outlook for the US not-for-profit and public healthcare sector to stable from negative due to improvement across the industry’s fundamental business, financial and economic conditions. The outlook had been negative since 2008.

Following several years of flat growth, operating cash flow growth increased to 12.3% in 2014 from 0.3% in 2013.

Moody’s says factors driving the stronger operating cash flow are increases in the number of insured individuals and a reduction in bad debt, particularly in states which expanded Medicaid eligibility.

The outlook change to stable from negative expresses Moody’s views for the sector will neither erode nor significantly improve materially for the 12 to 18 months. Looking beyond that horizon, pressures linger.

“The not-for-profit and public healthcare sector industry faces long-term challenges stemming from who pays for care, how providers are reimbursed, and changes in patient behavior. These risks may weigh on profitability and growth,” says (Moody’s Vice President — Senior Analyst Daniel Steingart ).

https://www.moodys.com/research/Moodys-revises-US-not-for-profit-healthcare-outlook-to-stable–PR_333323

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Comment:

By Don McCanne, MD

It seems ironic to celebrate profits in the not-for-profit and public health care sector, but at least this Moody’s report does show that the not-for-profit/public sector has moved from negative to stable as cash flows increase. That is reassuring.

Nevertheless this industry still faces long-term challenges, especially based on uncertainties of future funding.

This sector is particularly important since it serves as the primary safety net for those who have impaired access for reasons such as being uninsured. So it is essential that a reliable source of adequate funding is always available.

How can we do that? Simple. Establish a single payer national health program which will fund the entire health care delivery system equitably. Part of that process involves converting the investor-owned, for-profit delivery system to not-for-profit status. Why? The primary mission of non-profits is patient service whereas the primary mission of for-profits is creating wealth by achieving a maximum return on investment. The former works better for patients than does the latter.

Although it is nice that the not-for-profit/public sector has temporarily stabilized, we could be assured of more funds in the future if the administrative waste of our entire system were eliminated. Single payer would ensure stability in our system well into the indefinite future… and beyond.

Quality Improvement: ‘Become Good At Cheating And You Never Need To Become Good At Anything Else’

By David Himmelstein and Steffie Woolhandler
Health Affairs Blog, August 27, 2015

The Centers for Medicare and Medicaid Services (CMS) has trumpeted the recent drop in hospital readmissions among Medicare patients as a major advance for patient safety. But lost amidst the celebration is the fact that hospitals are increasingly “observing” patients (or treating returning patients in the emergency department) rather than “readmitting” them. But while re-labeling helps hospitals meet CMS’ quality standards (and avoid costly fines), it probably signals little real quality gain and often leaves patients worse off financially.

Observation Status

In most cases, observation patients receive care in a regular inpatient unit, and get treated just like other inpatients. And in many cases, observation stays stretch out to several days: in 2012, 26 percent lasted two nights and 11 percent at least three. But from Medicare’s point of view, this is outpatient care, which leaves patients responsible for more of the bill, and ineligible for Medicare-paid rehab or skilled nursing care.

Hospitals started designating more stays as “observation” after Medicare’s auditors began disallowing the entire payment for some brief hospital “admissions.” Even though “observation stays” pay less than inpatient admissions, hospitals took a better safe than sorry approach, classifying many brief stays as “observation.” Between 2006 and 2013, observation stays increased by 96 percent, accounting for more than half of the apparent decline in total Medicare admissions during that seven-year period.

Observation Classification

Medicare’s recent adoption of penalties for readmissions offered hospitals a new incentive to shift some patients returning within 30 days of their discharge to observation status. A patient stay labeled “observation” doesn’t count as a readmission, allowing hospitals that might otherwise be fined for having too many readmissions to skirt the penalty.

About 10 percent of all hospital stays occurring within 30 days of discharge are now classified as “observation;” a quarter of hospitals classified 14.3 percent or more of all repeat stays as “observation.” Moreover, analysis of time trends in observation stays makes it clear that they account for a significant chunk of the reduction in readmissions. Between 2010 and 2013, 36 percent of the claimed decrease in readmissions was actually just a shift to observation stays.

Emergency Department Use

And it’s not just observation stays that have been on the increase. More of the recently discharged patients are being treated in emergency departments (EDs) — without being admitted — as well.

Factoring in the 0.4 percent increase in ED visits within 30 days of discharge, the fall in the percent of discharged patients returning to hospitals for urgent problems is only 0.3 percent over the past three years — less than one-third of the improvement that CMS claims. And even this 0.3 percent overall fall may be partly an artifact of hospitals’ “upcoding” (exaggerating the severity of patients’ illnesses), which boosts diagnosis-related group (DRG) payments, and could also corrupt the formula used to risk-adjust expected readmission rates.

Medicare’s readmission penalties are among the growing number of pay-for-performance (P4P) and value-based purchasing initiatives that offer bonuses to high performers and/or penalize the laggards. We previously pointed out that the evidence for this carrot and stick approach is unconvincing. More recently, a long-term follow-up of the English hospital P4P program found that P4P generated no improvement in patient outcomes, damping the enthusiasm generated by the rosy short-term findings, and reinforcing the need for skepticism.

Adopting unproven everywhere P4P strategies that have been proven nowhere risks quality failure on a monumental scale. It pressures hospitals to cheat, saps doctors’ and nurses’ intrinsic motivation to do good work even when no one is looking, and corrupts the data vital for quality improvement.

As the graffiti artist Banksy once said: “Become good at cheating and you never need to become good at anything else.”

http://healthaffairs.org/blog/2015/08/27/quality-improvement-become-good-at-cheating-and-you-never-need-to-become-good-at-anything-else/

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Comment:

By Don McCanne, MD

In lieu of adopting comprehensive health care financing that actually would improve value – a single payer system – our national leaders have elected to continue with our current dysfunctional system and try to make it work. One measure that has been introduced is the assessment of penalties for patients who are readmitted within 30 days of being discharged from a hospital – on the theory that the patients should be fully stabilized at discharge with followup arranged that would prevent the need for readmission.

Physician and hospital administrators do not want patients readmitted soon after discharge. Their efforts are directed at providing the best care appropriate to improve patient outcomes. But there are some clinical conditions that are inherently unstable, or that can have unavoidable complications, that can result in the need for readmission. Also, in spite of outreach efforts, socioeconomic variables can result in destabilization of the patient’s condition. Some readmissions are absolutely inevitable.

This report is important because it shows that the improvement in lowering readmission rates that occurred after the introduction of penalties is not so much due to improved inpatient and post-discharge management, but rather is due to gaming rules that are characteristic of pay-for-performance (P4P) schemes.

Specifically, there has been a dramatic increase in placing patients on observation status instead of formally admitting them to the hospital. The care may be identical – provided in the inpatient service departments – but by not certifying the patient as being a formal readmission within 30 days of the last admission, the penalty is avoided. Medicare comes out ahead since outpatient services are priced lower than inpatient services, even if they are identical services – thus the trumpeting by CMS of another success in their reform efforts. But the patient loses since the cost sharing requirements for outpatient services are much higher than they are for inpatient. But then who ever said that health care reform was to benefit patients?

A variation of this gaming is to manage the followup hospitalization completely within the emergency department, perhaps even holding the patient overnight. The result is essentially the same as holding them on observation status.

This P4P-type gamesmanship is really a form of cheating. But it works. Instead of shifting to a much more efficient financing infrastructure – a single payer system – we can continue to follow the Banksy dictum – “Become good at cheating and you never need to become good at anything else.”

Maybe we should start to think about becoming good at financing health care instead.

Results from the 2015 Cal Wellness–Field Health Policy Survey – Part 1

By Mark DiCamillo, Director, The Field Poll
The Field Poll, August 26, 2015

Increasing voter support for extending Medi-Cal to undocumented residents

The current survey repeated a question first posed to California voters last year about whether the state’s Medi-Cal program should be expanded to provide preventive health services to undocumented residents, who are not currently eligible for coverage under the ACA. The results show that 58% of the state’s registered voters now favor extending Medi-Cal for undocumented residents, while 39% are opposed. This represents a significant increase in voter support from last year when supporters outnumbered opponents by a narrower 51% to 45% margin.

However, there are big differences in voter opinions about this proposal by party. Democrats favor the idea four to one (78% to 19%), while Republicans are opposed nearly three to one (72% to 25%). No party preference voters largely reflect overall voter sentiment, supporting the proposal 60% to 38%.

When examining voter opinions by race and ethnicity, registered Latinos report the highest level of support for extending Medi-Cal to undocumented immigrants, with 77% in favor. However, the proposal also now receives majority support from the state’s white non-Hispanic, African American and Asian American voters.

Topline findings

10. I am going to read some proposals that have been made to expand or modify the way the health care law is implemented in California, and please tell me whether you favor or oppose each one. Do you favor strongly, favor somewhat, oppose somewhat or oppose strongly this proposal?

a. Expand the state’s Medi-Cal health care program for low income residents to provide preventive health services to undocumented residents who are not eligible for coverage under the current health care law.

35%  Favor strongly

23%  Favor somewhat

14%  Oppose somewhat

25%  Oppose strongly

 3%  Don’t know/Refused

http://www.field.com/fieldpollonline/subscribers/Rls2510.pdf

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Comment:

By Don McCanne, MD

One of the major deficiencies in the Affordable Care Act is that undocumented residents were deliberately excluded from mandated coverage. It has been estimated that roughly one-third of the 30 million or so who will remain uninsured are these undocumented residents. Was Congress following the wishes of the people when they excluded these individuals from coverage? Not if you judge by the views of Californians: 58% support expanding Medi-Cal to low-income undocumented residents.

In fact, every racial group of California voters polled is in support: Latino, white non-Hispanic, African American and Asian American voters.  The only group opposed is not racial, but rather political: Republicans, with 72% opposed, while 78% of Democrats are in support.

At Physicians for a National Health Program, we support health care reform that advances health care justice through sound health policies, devoid of politics. Although we can expound on the virtues of those policies, it is unfortunate – no, tragic – that our voice is muffled in the tainted arena of politics.

Conservatives frequently chastise progressives for accusing them of supporting mean-spirited policies. Well? Prove us wrong. You can do that by supporting the replacement of our inequitable, fragmented, dysfunctional system of financing health care with a single payer system that ensures equitable access and affordability for everyone, including our undocumented residents.