A recommendation from the American Medical Association calls for physicians to determine how care teams are paid. The American Association of Nurse Practitioners calls the AMA's link of reimbursements to physician-led teams "anti-competitive."
The American Medical Association House of Delegates this week adopted recommendations for creating payment structures for physician-led team care delivery models with physicians determining who gets paid and how much.
"The success rate of physician-led team-based models of care has been proven time and again by trusted industry leaders like the Mayo Clinic, Geisinger Health System, Intermountain Healthcare and Kaiser Permanente," AMA President Ardis D. Hoven, MD, said in prepared remarks.
"In the words of Dr. William Mayo, 'It has become necessary to develop medicine as a cooperative science: the clinician, the specialist, and the laboratory workers uniting for the good of the patient.' The AMA and the broader physician community firmly believe that this approach represents the future of health care delivery in America."
The AMA recommendations call for:
Physicians who lead team-based care in their practices to receive payments for healthcare services provided by the team and to establish payment disbursement mechanisms that foster physician-led team-based care;
Physicians to make decisions about payment disbursement in consideration of team member contributions, including factors such as volume and intensity of the care provided, the profession, training and experience of each team member and the quality of care provided;
Payment systems for physician-led team-based care: to reflect the value provided by the team, with the savings accrued by this value shared by the team; to reflect the time, effort, intellectual capital provided by individual team members; to be adequate to attract team members with the appropriate skills and training to maximize the success of the team; and, to be sufficient to sustain the team over the time frame that is needed.
Not surprisingly, nurses associations are not embracing a list of recommendations that leaves physicians calling all the shots.
"We have supported integrated models of care moving towards reimbursement alignment for quality and outcomes over fee-for-service," says Tay Kopanos, DNP, FNP, vice president of state government affairs for the American Association of Nurse Practitioners.
"However the AMA's continual link of reimbursements to physician-led teams and outdated licensure approaches is not only anticompetitive, it limits patient choice and access to care. It fails to recognize not only the Institute of Medicine recommendation on team-based care, it also fails to recognize the national accreditation standards for team-based care and patients who are in medical homes that allow flexibility in team leadership."
The AMA's House of Delegates also passed a report that more specifically defines team-based roles and terms including "physician-led," "supervision," and "collaboration."
"Virginia recently adopted a law that supports and promotes physician-led healthcare teams as a collaborative, consultative approach to healthcare," Hoven said. "With an aging population and a surge of newly-insured patients entering the system, we encourage other states to consider adopting this innovative approach to helping facilitate the work of highly-functioning teams of medical professionals who can meet the growing demand for healthcare."
Kopanos says states' efforts to develop guidelines for physician-led team-based care have not worked well for nurse practitioners.
"In any state that has nurse practitioner practices owned and operated by nurses or nurse-managed health centers, their ability to participate in insurance and managed Medicaid is eroded when physician leadership is a requirement," she says.
"Many nurse-managed health centers see patients, diagnose them, treat them, manage them and write prescriptions without any involvement from physicians. If a reimbursement model requires physician leadership those nurse-managed health centers close and the patients who get their care at those sites can no longer get care."
Kopanos says it is well established that not all care regimens require a physician's input, which otherwise adds needless costs and wastes resources for an already short-staffed national healthcare workforce.
"Team-based care is centered on the needs of the patient and the providers who can best meet that care. We have a multitude of providers, nurse practitioners, pharmacists, physical therapists, behavioral health experts, who at certain times based on the needs of the patient may be the best ones to lead the team for what that patient needs," she says.
"When we artificially move the licensure or reimbursement to one particular profession we are shortchanging the patients' ability to get the provider they need and to utilize our workforce more efficiently to take care of patients."
Even though compensation growth has slowed a bit—CEOs report a gain of only 4% over two years—the demand for physician executives continues to increase. Median annual pay reported by doctors in executive roles is $325,000.
The sluggish economy and the uncertainty around healthcare reform have slowed physician executive median compensation growth over the last two years. However, it's still a very good living.
The 2,364 physician executives who responded to the 2013 Physician Executive Compensation Survey from Cejka Executive Search and American College of Physician Executives reported that their compensation grew an average of 7% between 2010 and 2012 with median of $325,000 across all 19 titles and 26 organization types.
Cejka President Lori Schutte says the news on slower compensation growth isn't really surprising given the state of affairs in healthcare and the overall economy. "Compensation has slowed a little bit," she says. "While we used to see 12% increases, this year it was 7% over the last two years. That is indicative of the economy. Nobody is getting big raises."
In the C-Suite, chief executive officers reported a 4% gain over two years, the smallest median increase among executive groups, which Schutte says may reflect the reliance of their pay packages on organizational financial performance during an economically and politically uncertain period.
Seniority and longevity are rewarded, but only to an extent.
Lori Schutte, President of Cejka
The survey found "a discernible shift this year in a long-term pattern. From 2005 through 2011, there was little or no growth in compensation after an executive has spent more than 15 years in administration. For the first time since the 2005 report, the rate of increase in median compensation did not drop as significantly between those with 10–15 years and those with 16 or more years."
"It isn't necessarily how long you are in the role determines how much your pay is going to increase," Schutte says. "You may not be getting big increases every year where if you are earlier in your career, you've only been there a few years and you've had good performance, you're likely to get bigger increases. It may also be that once you've been in that job, after 15 years you may be topped out, especially if you are with the same organization. It is not that you aren't performing well, you're just at a different spot in your career."
Even as compensation growth slows, however, Schutte says the demand for physician executives continues to increase "in a lot of different areas."
"It used to be just their niche was [vice president of medical affairs] or [chief medical officer] but now it's really expanded and it continues to expand," Schutte says. "There is a growing demand for physician executives in lots of different areas – chief quality officers, chief medical information officers, and CEOs. I don't know if it is necessarily a surprise."
And increasingly, Schutte says physician executives are demonstrating the value of obtaining advanced graduate degrees such as masters in business administration.
"That shows the complexity of what they are asked to deal with," she says. "Those jobs are harder. They're dealing with many of the business issues as much as they are the medical issues. Whereas in the past it was just 'we are hiring you to direct the physicians.' Now the physicians are dealing with the business of the hospital."
Schutte says there is a clear link between advanced degrees such as MBAs and job opportunities in senior management and earning power for physician executives. The survey found that physician executives holding MBAs enjoyed a 10% difference in median compensation when compared with colleagues with no post-graduate management degree.
The difference is even more pronounced at the C-Level. The MBA is the most prevalent post-graduate business degree among C-Level executives and respondents showed that there is a 7% to 28% difference in median compensation between those holding an MBA and those with no post-graduate management degree.
"They will get paid more having an advanced degree," she says. "We have some clients who will require it and we have other clients that don't necessarily require it but prefer it, but will consider applicants based on their experience and what roles they have. So, it depends upon the individual client. It also depends on the scope of the position, how large of a facility it is, what the scope of the responsibility is. If a physician who wanted a leadership role asked me if they should get an MBA I'd tell them they'd get a good return on investment."
For the sake of perspective, the median compensation of $325,000 reported by physician executives keeps them among the top 1% of wage earners in the United States, federal data shows.
A merger would unite two of the strongest health systems in the mid-Atlantic region. Physician-led Geisinger is known for its work advancing population health and value-based care. New Jersey-based AtlantiCare has a national reputation for performance excellence. Both have high bond ratings.
David P. Tilton, president/CEO of AtlantiCare
Geisinger Health System and AtlantiCare announced this week that they are exploring an affiliation.
"What we are contemplating is a fully integrated model," says David P. Tilton, president/CEO of Atlantic City, NJ-based AtlantiCare. "That is the way that we will most effectively share best practices, learn from each other, and develop AtlantiCare in Southeastern New Jersey. Ultimately we are trying to build a healthy community in southern New Jersey. That is what we've always been about and this opportunity with Geisinger helps us move more quickly and effectively in that direction."
The health systems signed a letter of intent this week after AtlantiCare spent a year winnowing the field. They will spend the next nine months to a year exploring their affiliation options.
If the talks are successful, a merger would unite two of the strongest health systems in the region. Danville, PA-based Geisinger has built a national reputation for its work advancing population health and value-based care, and its innovative use of healthcare information technology. Geisinger is the nation's largest rural health services organization, serving more than 2.6 million people in 44 counties in central and northeastern Pennsylvania. The physician-led system has more than 20,800 employees, including a 1,000-member multi-specialty group practice, seven hospitals, two research centers and a 448,000-member health plan.
AtlantiCare is the 2009 winner of the prestigious Malcolm Baldrige Award, and its flagship AtlantiCare Regional Medical center was designated as a Magnet hospital in 2004 and re-designated in 2008. The system includes AtlantiCare Solutions, the AtlantiCare Foundation, the AtlantiCare Physician Group and AtlantiCare Regional Health Services, with more than 5,461employees and 600 physicians serve Southeastern New Jersey in nearly 70 locations.
Geisinger CFO Kevin Brennan says "the optimal outcome would be a complete integration of both companies into a system." He rejected any suggestions that there was a "weak sister" in the proposal.
A Unified Objective
"We are both in pursuit of the same objective, which is to improve the health of our communities," he says. "Of course we are a lot larger and we own a health plan and we have a lot of national accolades for the type of advances we have been able to accomplish in population health management. But both of us are financially strong. They're A-rated and we are AA-rated, which is why we would be interested in going outside of our more traditional service area. So there is no weak sister."
Tilton says AtlantiCare "has never been stronger" as it enters the merger talks.
"Our clinical outcomes are exceptional. We are a recent Baldrige winner. We share the highest bond rating in the state of New Jersey. We have great employee satisfaction. We are hitting on all cylinders now making great progress transforming our business model and we are please with where we are and what is occurring," he says.
Why Mess With Success?
"There is a fundamental shift that is occurring in our business and it is changing the way that healthcare is provided, consumed, and paid for," Tilton says. "We see great opportunity in that set of circumstances and believe we need to innovate care models more effectively and achieve better outcomes in quality and patient experience and of course value for the healthcare consumer. This is the time when wise organizations should move forward and accelerate their transformation because the market is shifting and it is time to do it now."
"Geisinger is a national thought leader," Tilton says. "We have a national reputation, but theirs is exceptional. They've done wonderful work in adopting these new value-based models. They have been able to continue to refine their model and achieve outcomes that are very special. So, I think in that respect they've developed further than we have. Like any good relationship I hope we can add to the conversation and the work we are doing together. I see it as a very win-win opportunity for us in terms of what we need to do for the future."
How Geisinger May Benefit
Tilton says AtlantiCare "brings to the table a very high-performing organization with an incredible culture, the way people work and focus on patients first."
"I know a lot of people say that but we are doing it each and every day," he says. "The quality outcomes that we achieve, the way our employees are engaged in the work we are doing and the work environment created here, the way we connect with our community in ways that are very special in terms of engaging them and activating them around their own care, we have a very balanced approach to not only leading the organization but achieving outcomes."
"What we bring to the table is a partner for Geisinger who knows how to organize work effectively, engage our staff and physicians in that work, connect with the community in a meaningful way, and really execute very well on our plans. We are an example of how they hope to scale their model to other markets."
Tilton and Brennan say they're not concerned about a clash of cultures or egos when two successful and progressive leadership teams get down to brass tacks on deciding how to run a health system.
"When you bring two companies together you hope to take what is extremely good and make it great," Brennan says. "That is the hope here, not that there is any one model that has figured it all out. Winning a Baldrige Award sets them apart nationally. And all of the things that we've been able to innovate and demonstrate nationally with our proven care models totally differentiate us from any other type of suitor that may have been considered by AtlantiCare in their year-long process."
Tilton says AtlantiCare's success has been in great part due to its willingness to learn from others.
"One of the key characteristics of our organization is that we know we don't have everything figured out," he says. "That has been part of what has driven us as a learning organization for the past 25 years. We are always open to new ideas and best practices and learning from others. In my interactions with Geisinger they see the world that way too. I don't think you can perform at a high level in this field unless you were open to others' thinking. That is how you earn a Baldrige Award. You learn best practices, you shape it for your own organization and you try to execute on it. That's been part of our culture for some time."
Senior healthcare executives responding to HealthLeaders Media researchers indicate that their biggest stumbling block to an effective patient experience strategy is the difficulty of changing organizational culture.
Why is that so difficult, and what can leaders do to help bring about a culture that embraces patient experience?
Pauline Arnold
Chief Nursing and Quality Officer
Vice President of Clinical Operations
IU Health La Porte (Ind.) Hospital
On mission drift: When you ask people why they are in healthcare, the answer invariably is "I want to help people." In that helping, sometimes we didn't engage people to become part of the helping. The helping became doing it for them.
On engaging the patient: We have to change the way we think about patients and their families and the role they play in their own healthcare. Patients seek out providers to give them answers to their healthcare questions. They want solutions that they can understand and embrace. Often they have researched information on the Internet that may or may not be correct. But there is an inconsistent embracing of their own responsibility for their own healthcare and seeking to partner with the healthcare provide to achieve their own healthcare goals.
Leaders have to commit to changing their own behaviors that then support those core beliefs. Tools aren't enough and educating people isn't enough. It requires a fundamental change in how we think. Then you use the tools to help establish the consistency for the behaviors that you know are required to meet your new beliefs.
On effecting the change: You can implement a change but that doesn't become the culture until it is embedded into the DNA of what we believe in the organization. You know it's in the DNA when it happens every time. It becomes a culture of always. We are on a journey. We are not there yet.
Jeffrey M. Fried, FACHE
President and CEO
Beebe Medical Center
Lewes, DE
The reason why it is so difficult is because changing culture involves changing everything in your organization. It involves looking at every process and opportunity for communication. It looks at performance reviews, how you recognize people, the values that you communicate to the organization. It involves not just communicating but also getting everybody in the organization to embrace it and be engaged in what is happening.
What has worked for us is having a clear message about what we are trying to accomplish, setting high standards, reporting frequently on how we are doing, and letting the frontline staff who interact with the patients come up with the ideas about what we can do to improve patient satisfaction.
We are continuing to improve, and the more we can get people involved, the more creative and innovative can be the ideas they come up with. For example, several years ago our employees came up with the idea of creating a competition among the different units, departments, and floors. We looked at team sports. We have a quarter where we are focused on football and we use football analogies and terms to help promote the idea of competition when we are trying to do a better job. Then we go to basketball and baseball and NASCAR. That idea didn't come from anybody in leadership. It came from frontline staff.
Timothy Putnam, DHA President Margaret Mary Health
Batesville, IN
We are realizing that if we are really patient-centered it requires teamwork and you have to convey trust in the skill you are giving to the patient but also in the rest of the team. That takes time. It wasn't how we were trained.
We don't have a shortage of people wanting to do the right things for patients. It's getting them to understand what those right things are: recognizing that we are all caregivers, from direct patient care to all the other departments. Information technology, environmental services, dietary are all caregivers whether we interact with patients directly or not. We have to reinforce that day in and day out.
As we make the transition from volume to value we look at how we add value from the patient perspective and that is the next logical step. It fits right in with patient-centered care. What is the value to the patient? What do they want? What is going to help their health improve? And a lot of what we are finding is that to improve their health it is not additional health services. Sometimes it is social and support services, transportation, and other things that we are going to have to figure out how to engage if we are really delivering patient-centered care.
Gary Muller CEO
Marquette General Health System
President and CEO
Superior Health Partners
We have to somehow let the patient be the only thing we are thinking of during the day. This is perfect for us because we are looking at the value equation being quality and service over lower costs so the service part is just as important as anything.
There are many components. It's not just how to take care of the patients. It's about hiring the right people. It's retaining the right people. It's supporting the team. It's looking at the patients' needs first. It's coming into your job, whatever it is, and thinking my job is taking care of people. Some people do that naturally. Others just need to have that reinforced all the time, and that is where leadership comes in.
The expectations and accountabilities will be rolled into their job evaluations, rewards, and incentives. We are taking the carrot approach and putting a lot of emphasis on the patient satisfaction scores.
A big part of our culture and at any hospital starts with the physicians. We are putting a lot of emphasis on physician training and using them as part of the culture of change. That is a little more difficult. We employ about half of our physicians. We can influence them a little bit more than the private docs. A big part of it is getting them into the loop for training.
The transaction cleared a key sticking point when Glenview Capital Management, which owns 14.5% of Health Management Associates stock, agreed to the sale. Community Health Systems is expected to complete its acquisition during the first quarter of 2014.
A $7.6 billion deal that would create the nation's largest for-profit hospital company moved closer to completion when the board of directors at Health Management Associates, Inc. announced Wednesday that it unanimously endorsed the sale of the Naples, FL-based hospital chain to Community Health Systems, Inc.
"After conducting an extensive review in conjunction with our legal and financial advisors, we are confident that this transaction provides maximum value to HMA stockholders and represents the best path forward for the Company," HMA Board Chairman Steve Shulman said in prepared remarks.
"HMA and Community Health Systems are stronger together. The combined entity will be better positioned to address healthcare trends and challenges. In addition, the combined organization will have a greater local and regional market depth, expanded physician relations and physician footprint, and solid clinical operations infrastructure. The transaction remains on track to close during the first quarter of 2014, as scheduled, and we appreciate the patience of all our stakeholders as the board conducted its review."
The deal, expected to be finalized in the first quarter of 2014, cleared a key sticking point when Glenview Capital Management, which owns 14.5% of HMA stock gave its approval.
"We believe in the compelling strategic rationale driving the transaction and believe CHS is acquiring high quality assets whose fundamental performance will be significantly enhanced through the combined efforts of HMA and CHS leaders," Glenview said in prepared remarks. "CHS is well positioned to apply its best practices in core operational areas like physician relationships and recruiting, vendor contracting and clinical management to further stabilize and improve HMA's quality, service delivery and financial performance."
Under terms detailed by the two companies, HMA will be acquired by CHS for approximately $7.6 billion, including outstanding debt. CHS will acquire each issued and outstanding share of the common stock of HMA for $10.50 in cash, 0.06942 of a share of CHS common stock and a Contingent Value Right, which could yield additional cash consideration of up to $1 per share. HMA stockholders will own approximately 16% of the shares of the combined company following close of the transaction, the two companies said in a joint press release.
Franklin, TN-based CHS is already one of the largest publicly-traded hospital companies in the nation and operates 125 mostly general acute-care hospitals in nonurban and mid-size markets in 29 states with approximately 20,000 beds. HMA through affiliates owns and manages 71 hospitals and ambulatory surgery centers in small cities and selected larger urban markets in 15 states with approximately 11,000 licensed beds.
"We are excited to combine these two organizations to create a hospital company with more than 200 facilities and leverage our relative strengths and combined scale to better serve our patients, physicians and communities. We are pleased to have the full support of HMA's new board of directors as we move forward to complete this transaction in the first quarter of 2014," Wayne T. Smith, chairman/president/CEO of CHS said in prepared remarks. "This transaction will broaden our footprint into new geographic markets, allow us to form stronger networks and improve access to care, and strengthen our position for greater benefit and success under health care reform."
The HMA board had already approved the deal in July. However, Glenview raised concerns about the competence of senior leadership and the board at HMA and whether or not they had secured the best deal from CHS. Glenview ousted the board and installed a new board in August.
Since then, the new board has met 11 times, conducted 18 committee meetings, and hired independent analysts to conduct a review of the deal. The board also assumed short-term oversight of the company after a period of upheaval that included the departure in July of CEO Gary Newsome.
Adam Powell, a healthcare economist and president of Boston-based Payer+Provider Syndicate, says the new company that emerges from the acquisition "will have a larger footprint than any other company. Given the massive scale of the combined entity, it is likely to achieve both economies of scale and negotiating strength that HMA could never have achieved independently."
"It has been reported that building a hospital costs roughly $300 per square foot. Thus, spending $7.6 billion on hospital construction would yield about 25 million square feet of hospital space. If a large hospital has an average of about 600,000 feet of floor space, spending $7.6 billion on new hospital construction would yield about 40 hospitals. Thus, receiving 71 hospitals for the price seems like a deal," Powell says.
"That being said, not all of the hospitals may be optimally situated, and some may need to close, making them less valuable than new constructions. However, the hospitals have reputations and referral networks that new hospitals would not have. These intangibles add value, and may offset some of the drawbacks associated with acquiring a few undesirable hospitals."
Healthcare has become "a surrogate for all the other problems of the country," and "patients have been disenfranchised in the process," says the leader of a Johns Hopkins study on factors that drive healthcare cost growth.
We've been told that key drivers for healthcare cost growth are an aging demographic and the large numbers of tests and treatments in a fee-for-service world.
That's not necessarily so, say researchers from Johns Hopkins University. In a study released this week in the Journal of the American Medical Association, they place considerable blame for healthcare cost growth on the increasing prices of drugs, medical devices, and hospital costs, which doctors, patients and insurers usually don't even know about until the money has been spent.
The study found that since 2000:
Hospital charges have gone up 4.2% annually; professional services have gone up 3.6%; drugs and devices have gone up 4%; and administrative costs have gone up 5.6%, and are all responsible for 91% of cost growth.
Personal out-of-pocket spending on insurance premiums and co-payments has declined from 23% to 11%; while chronic illnesses account for 84% of costs overall among the entire population, not only the elderly.
Three factors have produced the most change: Consolidation, with fewer general hospitals and more single-specialty hospitals and physician groups, producing financial concentration in health systems, insurers, pharmacies, and benefit managers; Information technology, with considerable investment but elusive results; And the patient consumer movement, which goes outside traditional channels, using social media, informal networks, new public sources of information, and self-management software.
Unfortunately those key drivers often are not a central part of a substantive national dialog on what is pushing healthcare cost growth, says study leader Hamilton Moses III, MD, because the debate over healthcare has become politicized, polemic, and poisonous.
"Healthcare has become a surrogate for a host of other factors, primarily the role of the federal government and the respective roles and responsibilities of states," says Moses, a consultant with Alerion Advisors, LLC, and an adjunct professor of neurology at Johns Hopkins University School of Medicine. "This surrogate issue comes at a time when the country has confronted a series of economic crises and wars and forces that are very difficult for us as a country to control and very difficult for us to grapple with."
Ironically, Moses says that his team's research has found that all the news isn't necessarily bad. For example, while the pace of healthcare cost growth remains unsustainable, it has "moderated substantially since early 2000." Even at 3% annual cost growth, healthcare outstrips any other industry, and overall growth as measured by the Gross Domestic Product.
"The untold story here is that beginning in the 1970s but particularly in the 1990s, when cost control measures became routine, the rate of yearly increase has substantially moderated, so much so that if the economy had grown as it had historically before the 2007–08 recession, healthcare as a percentage of GDP would have leveled off or even declined," Moses says.
"Secondly, we point out that the cost of care is really for chronic illness among those under age 65, whereas most of the political attention has been paid to those over 65 in Medicare, which is not surprising since the government share of the payment is about 43% of the total," he says.
Also, most wage earners who glance at their pay stubs each week would be surprised to learn that the individual's share of his health insurance coverage—both in government and commercial plans—has actually declined from 23% of the cost in 1980 to 11% in 2011.
"The consumer has lost a great deal of the say in the debate over healthcare by virtue of the fact that the individual is not directly purchasing care," Moses says. "Public opinion polls have shown consistently since the 1990s that though patients trust their physicians they are progressively less likely to trust insurance companies or hospital systems. That trend has only accelerated since 2010 and the Affordable Care Act."
Why?
"At some level, patients realize that the system is very badly broken in the sense that they have an indirect say, costs are not clear, [and] prices are not transparent," Moses says. "That is all the more important because prices have driven the increases we have seen over the past decade. The patient therefore has in large measure been marginalized in this process. In our view that is what is behind the politicization of healthcare. First, healthcare is a surrogate for all the other problems of the country, but secondly patients have been disenfranchised in the process."
Moses notes that the politicization of healthcare began in the mid-1960s with the advent of Medicare, decades before the Affordable Care Act. "It took 20 years, fully until the mid 1980s, for the full effect of Medicare to become clear," he says. "We expect the same now with the ACA. And in the meantime there is a great deal of political rancor and discussion long before the effects of this legislation are known and long before the effects of previous changes have been completely assimilated."
"We felt the reason for this study was that there needed to be in one place the facts and figures relative to the healthcare debate. Our motivation was that healthcare is a topic that has been deeply politicized over the past two or three decades by really all of the forces and all of the factors that are involved in healthcare. We felt strong as did JAMA that there needed to be a reasoned dispassionate conversation in the country based on real data, real information. That is the gap that we tried to fill."
With that in mind, Moses says he and his fellow researchers made sure that their study would take no positions on any political point. "In fact, among the six authors we've never discussed the politics," Moses says. "The remarkable thing about this process which has gone on now a number of months is that we have avoided politics. I suspect we each have very different views of the role of the federal government and all of the contentious issues that we confront. Our goal was to be decidedly non political but to be as objective as possible in putting together an array of publicly available information that can be used by anybody for any purpose."
So how can we create a substantive dialog on the real factors pushing healthcare cost growth? Rather than looking to the politically paralyzed federal government for solutions, Moses says healthcare executives and clinicians must take the lead, particularly on issues such as improving care processes.
A good starting point, Moses says, is to press for adding more primary care physicians into the healthcare system to direct wellness regimens and coordinate treatment when patients become ill. His study notes that while 4% of healthcare spending goes to biomedical research, only 0.1% goes to improving the process of care.
"The innovation that has to occur here to solve any of these problems in my view, personally, should come from the private sector," Moses says. "The private sector has largely not been a participant in care process innovation. There are very few appropriations for it. The question is 'will innovations in health services occur by virtue of investment by health systems?' The Mayo Clinic, Geisinger Health System, [and] my own institution at Johns Hopkins have historically, for decades, invested in care process innovation. However it has not been widespread. It must be now."
The American Academy of Actuaries is warning that delaying the individual mandate could affect risk pools and claims in 2014 and beyond. Health plans say they cannot work without this key provision of the Patient Protection and Affordable Care Act.
Insurers and actuaries are warning that extending the enrollment period and delaying the individual mandate under the Affordable Care Act will create "potentially adverse consequences" for the law.
A letter to Congress [PDF] from the American Academy of Actuaries' Health Practice Council noted that the individual mandate and limited open enrollment period were included in the law to bring in a broad cross-section of risks—the young and the old, the healthy and the sick—to ensure the markets are viable and premiums are stable. The group said the approved premium rates for 2014 were based on the assumption that the individual mandate and limited open enrollment period would be in effect.
"If either provision is delayed, there would be an incentive for lower-cost individuals to delay purchasing coverage. If predominantly higher-cost individuals purchase coverage, 2014 premiums may not be adequate to cover that population's costs," the actuaries said.
"Further, as a result, the ACA risk-corridor mechanism would more likely be triggered and the U.S. Department of Health and Human Services would have to make payments to insurers if losses due to insufficient premiums exceeded a certain threshold."
The actuaries said that the adverse selection that would occur as a result of delaying these provisions could affect not only the risk pools and claims in 2014, but also the premiums for 2015, since enrollment information from 2014 would factor in to the development of 2015 rates.
"Irrespective of your views of the ACA, the individual mandate and limited open enrollment periods are integral components of the law, and delaying their implementation could have significant implications for health insurance coverage and costs," the letter said.
However, the actuaries did not entirely rule out delaying a reconfiguration of the implementation dates and deadlines if the technical issues that have hobbled the "marketplace enrollment process persist over a longer period of time."
Payers' Reaction
America's Health Insurance Plans on Monday flatly stated that the PPACA cannot work without the individual mandate[PDF].
"The ACA includes a broad array of insurance market reforms, such as guaranteed issue, community rating, and prohibiting pre-existing condition exclusions that are intended to work in tandem with new insurance marketplaces, subsidies, and the individual coverage requirements to extend coverage to 30 million Americans," AHIP said.
"However—absent the individual mandate—these reforms will result in higher premiums, more uninsured, and disruption in coverage for millions of Americans due to adverse selection. That is the conclusion of independent, non-partisan experts— including the Congressional Budget Office (CBO), the Urban Institute, and the RAND Corporation."
Senators Request Delay
The AHIP and AAA letter comes as a growing number of lawmakers in both parties call on the Obama administration to take some sort of action to alleviate the bungled rollout of the health insurance exchanges. Sen. Jeanne Shaheen (D-NH) has asked the White House to "extend the open enrollment period past March 31, 2014 to give Americans more time to obtain coverage."
"Further, in light of the difficulties individuals may be having with enrolling through healthcare.gov, I ask that you clarify how the individual responsibility penalty will be administered and enforced. If an individual is unable to purchase health insurance due to technical problems with enrollment, they should not be penalized because of lack of coverage," Shaheen said. Ten senators, all Democrats, signed Shaheen's letter.
So far, the Obama Administration has rejected calls to significantly modify critical deadlines for the law.
"Delaying the Affordable Care Act wouldn't delay people's cancer or diabetes or Parkinson," Health and Human Services Secretary Kathleen Sebelius told the Senate Finance Committee last week. "It doesn't delay the higher cost all of us pay when uninsured Americans are left with no choice but to rely on emergency rooms for care. So, for millions of Americans, delay is not an option."
A lack of standards, privacy concerns, and proprietary and competition issues are just a few of the hurdles hampering the interoperability of EHR data among participants in health information exchanges.
Healthcare providers have made solid progress over the last decade building in-house electronic health records systems to share patient data within their networks. However, interoperability with outside providers and payers remains a significant barrier, according to eHealth Initiative's 10th annual survey of health information exchanges.
Three-quarters of the nearly 200 eHI survey respondents said they've had to build numerous time-consuming and expensive interfaces between different systems to facilitate information sharing, including 68 organizations that said they had to build 10 or more interfaces with different systems. More than 140 respondents cited interoperability as a pressing concern.
Jennifer Covich Bordenick, CEO of the nonprofit, independent eHI, says the results of the survey are "mixed," but adds that it would be a mistake to say that no progress is being made.
"If you look back five years you can see huge leaps in progress, but when you are looking year-to-year it is very slow. It is hard to look at these things in such a small period of time," she says. "The type of problems we are having now is a sign of moving in the right direction. These issues wouldn't have arisen five years ago because we didn't have enough knowledge or we weren't connected enough. Now we're having connection issues, which is a good thing, whereas before we were just trying to convince people that they should do this."
Bordenick says the hurdles in front of interoperability aren't necessarily technical.
"There are proprietary and competition issues where people don't want to share data with other organizations," she says. "While we are all focused on the patient there are a lot of concerns that competitors are going to use their data to their advantage. So competition is one barrier and the other is standards."
"We talk about standards all the time," she says, "but really requiring standards on some of these simple areas would be helpful because right now you have a lot of systems that are proprietary. You have vendors who don't necessarily want to interface with their competitors. So you have competition both with the groups with data, and completion just with connecting. There are all kinds of different politics involved here."
To her surprise, Bordenick says the survey also shows that many HIEs have not yet developed ways to allow patients to enter or view their own data in the health exchanges. As part of the federal EHR Meaningful Use Program, patient engagement is a critical step for providers looking to receive incentive payments for using EHRs.
This could change in future years, as 102 organizations reported that they have plans to offer patients access to their data. However, only 31 organizations currently offer patients access to their information. Even simple patient engagement services, like tools for managing appointments or prescriptions, are rare Bordenick says.
"I would love to know what people in the field think about this," she says. "It's not clear why it's not moving. Is it because somebody else is doing it? Are the exchanges relying on providers, the individual doctors? Somebody has to be doing it. So, is it that we don't know who is doing it or is it that they're not doing it because of privacy concerns?"
"While it's a little disheartening to see such low patient engagement, overall I think we're in a better place than we were last year. Awareness around healthcare reform has helped build the business case for data sharing and engaging consumers."
Bordenick rejects suggestions that the federal government step in to play a greater role in setting interoperability standards. "The last four years have shown us that HITECH has done some wonderful things and Meaningful Use has pushed the envelope, but it has to come from the market," she says.
"The more that customers or consumers or providers [push] for these connections, the more likely it is that vendors are going to do it because we have the capability to do it. Again, it is not about not having the capability. It's about everyone having the same desire to connect."
A Moody's Investors Service executive says she expects downgrades will continue to outpace upgrades in the fourth quarter of 2013 for many of the approximately 500 not-for-profit hospitals and health systems that it rates.
Declining patient volumes and other bottom line pressures continue to pose a challenge for not-for-profit hospitals and there is no indication that things will get better any time soon, Moody's Investors Service says.
The bond rating agency reported 10 ratings downgrades affecting $2.7 billion in debt in the third quarter of 2013 that were due primarily to declines in admissions averaging 5.3% when compared with fiscal 2011-2012. Providers cite the ongoing shift away from admissions and toward reimbursement-drainingobservation stays as the key driver behind the decline, followed by rising co-pays and deductibles that are causing patients to defer medical care.
Moody's Senior Vice President Lisa Martin expects that downgrades will continue to outpace upgrades in the fourth quarter of 2013 for many of the approximately 500 not-for-profit hospitals and health systems that it rates.
"The activity that we are seeing is consistent with the outlook that we have on the sector, and one of the factors in our negative outlook for the sector is the decline in patient volumes," Martin says. "That is not the only reason but one of the main reasons for the rating downgrades in this last quarter. And in 2013 we are seeing large variations in volume trends and in some markets significant declines in admissions that are due to a number of different factors."
Offsetting the downgrades were eight upgrades affecting $2.4 billion in debt in 3Q 2013, mostly driven by improving patient volumes and cost cutting strategies. Of the eight upgraded providers, six had positive volume trends and multiple years of financial improvements and were considered market leaders in their regions. Five of the upgrades had average admissions growth of 3.7% from FY 2011 to FY 2012.
Martin says downgrades signal the continuing difficulty that some, but not all, hospitals and health systems have with the fundamental shift away from fee-for-service volume-based care and towards reimbursements that reward outcomes and population health.
"It really varies by market," she says. "That is very difficult to quantify because it is a very slow start in terms of the industry trying to make this shift. We don't think it is going to happen quickly. But in certain markets where the volume declines are disproportionately large, there may be some of that dynamic going on."
Martin says lower volumes are not a temporary phenomenon that will improve with a rebounding economy, but are "more related to a fundamental shift in the industry."
"As we have emerged from the recession, technically you would have expected volumes to at least stabilize, because during the recession part of the volume decline was related to higher co-pays and higher deductibles," she said.
"While that may be still the same reason, it is because employers are fundamentally changing their commitment levels to providing healthcare insurance. Some of that early evidences of that are what you are starting to hear about in terms of employers turning to private exchanges. It is still very early on, but that is an example of an underlying shift in the industry. While caused by a number of issues, it is more of a fundamental change in the industry than a temporary one."
With three quarters in the books, Martin says 2013 is meeting predictions that it would be a "difficult year for the industry as a whole."
"Once we get the numbers for the whole year, our expectation is that volumes are down, obviously, and revenue growth rate is going to be down. We are expecting to see margins decline," she says.
Moody's reports that:
Over the first three quarters of 2013, there have been 30 downgrades affecting $10.3 billion in debt affected, nearly double the 18 upgrades affecting $4.8 billion in debt for a ratio of 1.7 to 1.
18 rating changes were made in 3Q 2013, one fewer than 3Q 2012. Downgrades outpaced upgrades by a ratio of 1.3 to 1, compared to an anomalous 0.6 to 1 in 2012 when there were 12 upgrades and seven downgrades.
As of Sept. 30, six ratings were under review for downgrade, affecting $1.3 billion of debt. One rating is under review for upgrade, impacting $22.5 million of debt.
72 ratings were affirmed, which represented 80% of all rating activity, affecting approximately $42.5 billion of debt and consistent with the long-standing historical trends. Of the 72 affirmations, seven were accompanied by negative outlook changes and four by positive outlook changes.
"There are some health systems that are doing well and are generally stable or maybe slightly improving and that is in part due to their efforts around cost reductions to offset some of the revenue challenges. In some cases it's due to operating in favorable markets where there is limited competition and/or population growth."
With healthcare reform and bottom line demands favoring economies of scale and market share that come with size, Martin says mergers and acquisitions "will continue at a high pace because of these pressures."
"There are some smaller hospitals that maybe because of their dominance in their market may be able to go it alone for a certain period but in the long run they may need to partner."
Chris Van Gorder, Scripps Health CEO, explains why his organization would want to shoulder the challenges of buying an acute care hospital in a small farming community. The potential deal is appealing he says, because from a "population health basis, we need to grow."
San Diego-based Scripps Health and El Centro (CA) Regional Medical Center announced this week that they are in acquisition talks.
Chris Van Gorder, President and CEO of Scripps Health
It's pretty clear why ECRMC would want to join Scripps. Tucked into the southeastern corner of the state, the 161-bed city-owned acute care hospital is located in Imperial Valley in the middle of the desert, 100 miles east of San Diego. It serves a farming community of about 43,000 souls just north of the Mexican border with a challenging patient mix that includes a substantial number of undocumented workers and uninsured U.S. citizens, and an unemployment rate close to 25%, one of the worst in the nation.
ECRMC earned an "F" in its Fall 2013 hospital safety score from the Leapfrog Group, and scored at or near the bottom of the pack on a number of measures including surgical site infections, ICU physician staffing, and falls and trauma injuries.
David Green, CEO at ECRMC, said the medical center had explored affiliations with more than 30 organizations before deciding to negotiate exclusively with Scripps. "Their mission and values align with the mission and values of El Centro Regional Medical Center, and we feel that together the city, the hospital, and most importantly, patients will greatly benefit from this affiliation," Green said in prepared remarks.
All of this makes perfect sense from ECRMC's perspective. What's not so clear is why blue chip Scripps Health would want to shoulder the challenges and liabilities presented by ECRMC. Scripps Health CEO and President Chris Van Gorder addressed those questions in an interview this week.
HLM: Why did you do this? What's in it for Scripps?
CVG: Actually El Centro reached out to over 30 organizations. I have no idea who else they approached but I know they reached out to others in San Diego… we are the largest metropolitan area near Imperial County and the hospitals out there.
These days it is going to be extremely difficult, if not impossible, for a freestanding hospital to survive and develop the necessary infrastructures around accountable care and economies of scale and everything that is going to be required in the future. They recognized that they were going to need to reach out and they did.
For us, we have been preparing for growth for the last decade and we also recognize that to gain economies of scale and meet patient needs from an accountable care perspective and a population health basis we need to grow.
HLM: The hospital is on the border with Mexico and the community has high numbers of uninsured. Why would you take this on?
CVG: I would reverse that and say that it is obvious that they need a quality healthcare organization to help them. We have that capability. Scripps Health right now has the closest hospital to the border in San Diego so we are very familiar with handing cross-border issues and dealing with what can be a challenging payer mix.
Anybody who is an American citizen is going to be required to have insurance of one kind or another under the Affordable Care Act, so we fully anticipate that a lot of the people there will have one form or insurance or another. They will still have the undocumented issue. But from our perspective we are a community health provider with an excellent tertiary care capability and our job is to meet the healthcare needs of our communities. This is an expansion of what we define as our community.
HLM: Will population health be a priority, and how might you go about improving population health?
CVG: Population health is going to be an issue for everybody across the country. We are in this era now where we need to look at value. Today's healthcare system I often describe as a sick business. If you're not sick we are out of business. We are moving into an era where we focus on keeping people well and that requires population health management. That means intervening earlier in our patients lives to try to do everything we can to keep them well.
We anticipate that we will reach out with wireless technologies, video conferencing, and other [telehealth] capabilities to lower costs of care, reach more patients in that community and bring more services to that community. I have never believed that it is the best for a patient to have to leave their community to receive care. Certainly they are not going to have every tertiary and quaternary service.
A number of patients will still come to San Diego. But under Scripps leadership, we think we can bring new services to that community and meet that community's much closer to their homes. It's the right thing to do… assuming we can put this transaction together.
HLM: Do you anticipate cutting some services or downsizing ECRMC?
CVG: Over time, every inpatient hospital is going to shrink. But there will clearly be an expansion of ambulatory services. El Centro understands that already and they have already invested in a number of ambulatory sites. I would anticipate growth in that area. We still have to do some work under the California Seismic Safety Law out there and eventually, probably, we will build a brand new hospital. When that happens, we will work with the community to determine what their needs are for inpatient and ambulatory care.
HLM: Are you committed to keeping some sort of inpatient acute-care hospital in El Centro?
CVG: Absolutely. That hospital is 120 miles away from Scripps and that community absolutely has to have an inpatient capability. I would have no interest in shutting down the inpatient capacity out there.
HLM:Are you going into these negotiations looking for an outright acquisition?
CVG: El Centro is looking for an outright acquisition. That is what we will be approaching it as. It's a city-owned hospital. The city recognizes that running healthcare facilities of the future requires an enormous amount of expertise that elected city council members might not have necessarily. Certainly it needs a very large organization these days to meet the broad range of community needs. They are looking for an acquisition so we would look for the very same thing, not just a loose affiliation.
HLM: Does the fact that ECRMC is city-owned complicate things?
CVG: I don't think it matters. City-owned hospitals were not unusual a few decades ago, but it is my understanding that El Centro is the last city-owned hospital in California, or there may be two of them, and El Centro is the largest in the state. They recognize that it is no longer the kind of business that a municipality ought to be running.
HLM: What can ECRMC leadership and physicians expect with this deal?
CVG: They are looking for more services to be delivered in their community. They are very excited about the way Scripps works with its physicians [and] with our physician leadership cabinet and care board. We really engage our physicians. I know the doctors are excited about that.
We also have a very robust graduate medical education program at Scripps. We have a couple of internal medicine residency programs and a family practice residency program and we have the opportunity to rotate some of our physicians-in-training out to Imperial County. It will give them a very different look at medicine in a very different community and potentially some of those physicians might stay in that community at well.
HLM: Are physicians in El Centro interested in joining Scripps Health Foundation?
CVG: At this point I have not heard any physicians out there express an interest in joining our foundation. I think they actually enjoy their independence. And to put it in perspective, while we have around 2,600 physicians at Scripps, about 700 of them are in the integrated model and the rest are independent.