Industry stakeholders are trying new ways to deliver and pay for care, but the shift to value remains an unfinished journey.
The ongoing shift from a volume-based business model to payment for services based on value has prompted a back-to-the-future scramble in the healthcare industry.
A generation ago, healthcare providers were called upon to assume more risk in the delivery of their services, including the first ill-fated formation of health maintenance organizations across the country. Most providers eventually backed away from both the financial burdens of bearing risk as well as a consumer backlash to managed care, retreating to their familiar fee-for-service payment model. But a select few, such as Salt Lake City-based Intermountain Healthcare, have remained at risk in delivery of services to this day.
"We have a long history with full-premium payments—full, at-risk healthcare," says Greg Poulsen, senior vice president and chief strategy officer at Intermountain. "We think at-risk contracting is, by far, the best approach. There are games you can play with almost all the other value-based payment models. For example, shared savings programs frequently end up being anemic in terms of return on investment and don't do enough to overcome the volume incentives for providers. If you simply get bits and pieces of value-based contracting, you may not be able to overcome the inertia that is U.S. healthcare."
Now, with Medicare transforming reimbursement metrics, health systems are taking up the challenge anew to emphasize value rather than volume in their business models.
The Centers for Medicare & Medicaid Services threw down a value-based gauntlet earlier this year, announcing a drive to link at least 50% of Medicare payments to value-based financial models by 2018. This year, about 20% of Medicare payments to providers are linked to programs designed to boost quality and reduce costs, according to CMS.
In Washington, D.C., this past January, with representatives from nearly two dozen healthcare industry stakeholders at her side, U.S. Health and Human Services Secretary Sylvia Burwell described her vision for the shift from volume-based to value-based payment.
"Whether you are a patient, a provider, a business, a health plan, or a taxpayer, it is in our common interest to build a healthcare system that delivers better care, spends healthcare dollars more wisely, and results in healthier people," Burwell said. "We believe these goals can drive transformative change, help us manage and track progress, and create accountability for measurable improvement."
Large health systems, which generally have the most resources among providers, are leading the adoption of new care and payment models. Based mainly on key local factors such as the patient population, market economics, and organizational culture, large health systems are implementing a range of value-based payment models, with many of the early adopters reporting gains in clinical outcomes and cost efficiency. However, setting the pace of transformation is perilous, with public and commercial payers just beginning to roll out payment models that can finance redesigned delivery of services based on value.
Survey results published in the Premium edition of the March 2015 HealthLeaders Media Intelligence Report, Payer-Provider Strategies: New Rules for Facing Risk Together, show that health systems lead providers in adoption of at-risk contracting for healthcare services; only 12% are not participating in any type of at-risk programs, which is smaller than the 23% among hospitals and 28% among physician organizations. Also, more than one-quarter of health systems (26%) report that they own or operate a payer business unit or health plan, which is greater than the 16% of hospitals and 7% of physician organizations that have that component as part of their business.
Harold D. Miller, president and CEO at the Pittsburgh-based Center for Healthcare Quality and Payment Reform, says the biggest advantage for large health systems in the shift from volume to value is deep pockets. "Are the big health systems doing value-based care because they want to do it or because they are the only ones who can do it?" he says.
Citing Oakland, California-based Kaiser Permanente as a prime example, Miller says health systems achieving the most success in the value-based space have payer business units to help finance value-based care while Medicare and commercial payers develop value-based payment models.
"They have their own health plan. They can at least pay themselves differently for at least some of their value-based business. A lot of these systems are making a bet—it's sort of at a tipping point. They're not making a bet that they are going to be paid for value. They are arranging to pay themselves."
Indeed, the March Intelligence Report indicates that 29% of health systems are considering establishing or acquiring a health plan, more than twice the share reported by hospitals (14%) or physician organizations (10%).
Until more value-based payment models are available down to the physician-specialty level—and more payers deploy more value-based payment models—large health systems are best equipped to lead the drive to value-based care, Miller says.
"It's not automatic that they can do that. Some systems have leadership that really wants to move to better health. Some are able to do it because they have a monopoly in their community. They are reinventing healthcare, which is a good thing. And they have a lot of money to do this thing."
Flexing financial muscle
Kevin E. Lofton, FACHE, CEO of Englewood, Colorado–based Catholic Health Initiatives, says CHI has spent several billion dollars over the past four years on the value-based retooling of the health system—which includes 105 hospitals and 10 health plans with 104,000 covered lives—bankrolling the nonprofit organization's effort with its massive cash reserves. He says CHI made a strategic decision to dedicate a substantial portion of the system's cash reserves toward value-based care rather than generating investment income.
"We're not a bank. We still have about $7 billion in investible cash, even after spending $2.5 billion on [healthcare information technology]," Lofton says. "We're still spending $1 billion to $1.5 billion in capital expenses to make this transition [to value-based care]. We definitely have been utilizing the strength of our balance sheet." The system reported total assets of nearly $22 billion in fiscal year 2014.
CHI's vigorous effort to adopt value-based care features several elements, including direct managed care contracting with large employers, developing its Prominence Health payer business unit (a wholly owned for-profit subsidiary), and physician-led adoption of value-based payment models.
"First, we have made investments knowing we were not going to be paid for our services. We had to begin implementing these investments before payment models were in place," Lofton says. The hit to the balance sheet from these efforts for the fiscal year that ended in June is estimated between $250 million and $300 million. "The second part of it is that we have reached out directly to employers because we can demonstrate how we are gaining with our own employees through value-based care."
Large health systems are large employers, of course, and have a good measure of flexibility with their own employees in redesigning care and finding innovative ways to pay for healthcare services crafted to deliver value. "That's one of our larger value-based programs," says Christopher Stanley, MD, vice president of care management at CHI. "We are using our own employees as a kind of a canary in the coal mine."
Health systems can more quickly overcome the managed care learning curve by establishing such programs with their own employees, Stanley says, citing the importance of "quick feedback" drawn from CHI workers who were among the first to enroll in the health system's new value-based clinically integrated networks. CIN enrollment for CHI employees began soon after passage of the Patient Protection and Affordable Care Act in 2010.
At the outset, about 30,000 workers and their dependents enrolled in CHI's internal managed care initiative, Lofton says. This year, about 102,000 lives are covered in CHI managed care, including about 45,000 employees and about 58,000 dependents. CHI employs more than 95,000 people in 19 states.
"We began launching managed care initiatives about four years ago—as an initial pilot in Nebraska, then as the next wave in a pilot in Des Moines, [Iowa]," Lofton says. "The big launch really came at the beginning of last year, in 2014. We are still in the early stages. We now have about 50% of our employees and dependents in these programs. We've lowered costs in a few different areas. One is by managing high-risk individuals within our population, the 3% to 5% that drive 40% or 50% of healthcare costs. We have seen a drop in emergency department visits and hospitalizations, and an increase in medication adherence and preventive-medicine screening."
For employees and dependents who have received care through a clinically integrated network, ED visits have dropped 10% and the average length of stay for hospitalizations has fallen 10%, CHI reports.
In 2014, CHI launched Prominence Health. Lofton says Prominence has boosted CHI's health insurance know-how and opened new revenue streams. "We have built up an expert payer staff, when two years ago, we didn't have anybody."
With the additional acquisition in 2012 of a majority interest in Soundpath Health, a Medicare Advantage plan in Federal Way, Washington, and the 2014 purchase of QualChoice, a Little Rock, Arkansas-based commercial insurer, CHI is making market-share gains in Medicare Advantage, Lofton says. "It appears to be a little easier to manage that population, and you don't face the same level of competition as you do in other areas from commercial payers."
Lofton says physician leadership is a crucial component of CHI's adoption of value-based payment models and value-based redesign of care. "They're the ones who come up with the ideas. They have skin in the game."
The focal point for CHI physician leadership in the adoption of value-based care is the Medical Group Leadership Council, Lofton and Stanley say. MGLC members include about 26 physician enterprise leaders who represent each of CHI's markets. Council members have accountability in their markets for several key operational functions, including revenue cycle, clinical quality, labor productivity, patient satisfaction, legal compliance, provider compensation, managed-care contracting, and supply chain management.
Stanley says that "operational dashboards with key performance indicators—financial, productivity, supply chain, etc.—were put into place over the past couple years and are reviewed by MGLC members at frequently recurring leadership meetings. MGLC leaders are held accountable by their market CEO as well as by their peers [in areas] including goal-setting and transparency of information. Leadership
changes have occurred in circumstances where results did not meet expectations."
CHI's heavy investment in information technology combined with administrative support provided through an internal physician services business unit gives the MGLC significant resources, Lofton says. "We've relieved them of the electronic billing and business side of the value-based world."
With the health system's multibillion-dollar IT investment serving as an "absolutely critical" infrastructure component, CHI has focused care redesign efforts on enhancement of primary care capabilities, such as the formation of patient-centered medical homes, Stanley says.
He says one of the top goals of CHI's primary care transformation initiatives is to include behavioral health specialists in staffing. Adding social workers and mental health specialists to the resources available to primary care physicians "augments the physicians and augments the team approach," Stanley says.
CHI is banking on resource-rich patient-centered medical homes to help drive high quality at low cost, such as improvement in medication compliance, he says. "Sometimes, noncompliance is because of financial issues. Sometimes, it's because of psycho-social, mental health, or other behavioral issues, and the team can tackle these issues."
The health system is "just starting the journey" toward incorporating behavioral health resources in patient-centered medical homes, but the PCMH model of care is already generating patient engagement gains, Stanley says. "We are now identifying patients who are in need of care but are not following up the way they should. Using data to identify gaps in care, we are now making direct outreach to them and conducting collaborative interviews to get patients to take more direct care ownership."
Targeting primary care is part of a strategic decision to shift CHI away from reliance on hospital income as the dominant financial pillar of the organization, Lofton says. "We are at about 53% of our net patient service revenue coming from nonacute care sources. Our goal, which we set about five years ago, is to be at 65% of all net patient service revenue coming from nonacute care services by 2020. One of our biggest growth areas will be primary care, which is the real underpinning or foundation of all of our value-based programs.
"We are certainly going to see more and more outpatient procedures that were historically done in an inpatient setting, in part because our technology and care management is so much better," Lofton says. "We'll also be extending this care out to the communities—especially rural communities—through virtual health services."
Stanley acknowledges there are challenges to fostering physician leadership and quelling concerns among clinicians about the shift from volume to value. "That's probably what I spend 80% to 90% of my time on: leading the change in the organization," he says.
Among CHI physicians, eagerness to embrace value-based care varies widely, with three broad categories, Stanley says.
Physicians who have received training in population health and patient-centered care have stepped into leadership roles in the shift from volume to value at CHI, he says. "They're the champions. They're the leaders. They're the torchbearers."
Stanley says there are other CHI physicians "on the opposite end of the spectrum" who have spent their entire careers receiving volume-based payments for services and are deeply skeptical over the transition to value-based payments. He says CHI has eased the organizational tension from this clash of philosophies with a strategy rooted in an undeniable reality: There will always be health system settings and services such as emergency medicine that operate with volume-based payments. "There's a real value to physicians who just want to show up and see patients, and we have places for them to be successful."
Then there is everyone else in between.
"These are the physicians who can be convinced that value-based care is better for patients," Stanley says, adding that he sits down and talks with physicians about redesigning care to be patient-centered, prevention-oriented, and outcomes-based. "Most physicians will absolutely get there."
Even with a strong balance sheet, CHI has faced difficult decisions regarding opportunity costs in its four-year-long quest to conquer the clinical and financial dimensions of the value-based world, Lofton says.
"To come through that period, we had to also look at our operating model and look at places to trim back. It was not without turmoil."
Historically, CHI has posted an operating margin of about 3%, but investments in infrastructure for value-based care such as IT and the creation of clinically integrated networks drove the health system's financial performance below that benchmark for the 2013 and 2014 fiscal years, CHI officials say. While Lofton is forecasting that the costs of investing in value-based care will outstrip the financial gains again this fiscal year, he says CHI expects that to improve in 2016. "This is the fiscal year that we told our board that we would get operating performance back to historical levels."
CHI had considered cutting up to 1,500 jobs this year, but the reduction amounted to a loss of about 500 actual jobs and a decision to eliminate about 500 unfilled positions. CHI officials say the workforce reduction was not related to the transition to value-based delivery, but a recognition of the need to reduce the number of employees so the system could become more efficient in certain areas.
Lofton says a measure of turmoil has been linked to opportunity costs and an ongoing effort to wring out $250 million in overhead. "We have certainly looked at costs across the system—personnel and overhead—to become more efficient. Like other health systems, we are adapting to changing times. We have made a huge investment in information technology. That has caused us to ratchet back, at least for a time, some of the capital investments we typically make on a yearly basis in terms of infrastructure improvements, new construction, and upgrades."
Again emphasizing the importance of CHI's healthy balance sheet, Lofton says the health system has been able to help finance the adoption of value-based care with investment income. "During this time, the capital markets have been very strong. We still had a healthy bottom line because of the investment income we earned."
Lofton says it is imperative for health systems to plan carefully and act decisively as they shift from volume to value. "We need to make sure when it's the right time that we have made the right investments to be ready."
Embracing accountability
There is an assortment of options on the value-based menu, including accountable care organizations, bundled payments, capitation, shared savings contracting such as the Medicare Shared Savings Program, and warranty payments. But most models have limited track records, and some have had underwhelming appeal to providers.
Several factors are determining the overall appetite for value-based care at health systems and the taste for particular payment models, including corporate culture and local market circumstances.
Some health systems such as Intermountain Healthcare are enjoying the benefit of a track record of delivering care with assumption of risk.
Operating in Utah and Idaho, Intermountain has 750,000 members enrolled in the organization's health plan, SelectHealth, and the integrated health system features a 22-hospital network on the provider side. Intermountain's involvement with its own health plan stretches back three decades.
Poulsen, the senior vice president and chief strategy officer at Intermountain, says one-third of its healthcare services are tied to value-based payment, and the organization is seeking to double that figure.
"We call our program shared accountability as opposed to accountable care. It's partly the lifestyle of our patients, but it is also medical decisions designed to consume healthcare in the right way—the providers of healthcare have to be fully engaged. When we put those two together, we think we have something really powerful."
Intermountain is engaging providers to generate value by holding them accountable to total-cost-of-care budgets, Poulsen says.
"We create budgets that are essentially regional. We distribute accountability to four geographies, with a risk-adjusted budget for each region. Then the team in each region—doctors, hospitals, ancillary services, care managers—works together within their budget. There are rewards if quality and service measures are met at the team level. We believe value-based care is a team sport. We do not anticipate financial incentives will change any provider's behavior. Instead, financial incentives are simply a nod to the fact that doing the right thing will come with a cost in some cases," such as a lost opportunity to increase volume.
On a monthly basis in each region, Intermountain's Geographic Committees—which are composed of physicians, hospital administrators, actuarial specialists, and data analysts—gauge performance of the four budgetary regions and compare that to other value-oriented organizations recognized for operating with best practices. "They identify weak links and fix them. This is a way to get that information out in a transparent, actionable way," Poulsen says.
Intermountain's shared accountability approach to providing managed care services for 700,000 patients is sustainable financially, he says, noting revenue is outpacing costs. "The margin varies significantly by type of patient: Medicare, Medicaid, and commercial are all part of this group of 700,000. Overall, there is a 2% to 3% margin."
The primary metric Intermountain uses to assess the cost-effectiveness of its managed care efforts is total cost of care, Poulsen says. "We have been focused on total cost of care as a legitimate measure of public benefit for a long time, and population metrics suggest that our populations look pretty good on those metrics."
In the decade before passage of the PPACA, Utah was among the lowest-cost states for healthcare services, according to CMS. In 2009, the state posted the lowest annual per capita cost of care in the country at $5,031.
Local and national leadership
With its vision for a value-based healthcare future, a track record in care delivery innovation, and market power in northern New England, Lebanon, New Hampshire–based Dartmouth-Hitchcock Health has taken a regional and national leadership role in the adoption of value-based payment models.
The academic medical center includes a main hospital, a children's wing, a cancer center, an association with the Geisel School of Medicine at Dartmouth, and community group practices. About half of the health system's revenue is tied to value-based payment models, and it plans to increase that figure to 70% within two years, according to President and CEO James N. Weinstein, DO, MS.
Weinstein also is a founding member of the High Value Healthcare Collaborative, a coalition of value-oriented health systems across the country serving 70 million patients. "It's not just Dartmouth-Hitchcock trying to move New England; we're trying to move the country."
He says the HVHC has been involved in value-based care initiatives such as promotion of three- and four-hour bundled care protocols for sepsis treatment. Adoption of the Surviving Sepsis Campaign protocols at Dartmouth-Hitchcock led to dramatic improvements in clinical outcomes, Weinstein says. "By the way, saving lives also saves money, and also helps providers run their businesses better."
He says Dartmouth-Hitchcock has fully embraced the transformational power of value-based care.
"This is a time when there's an industrial revolution in healthcare and the old models are broken," says Weinstein, adding that Dartmouth-Hitchcock has become a leader in accountable care contracting because value-based care fits with the organization's culture. "We didn't go into this ACO work to make money. We did it because it matched our values and the way we practice medicine."
Dartmouth-Hitchcock's experience with value-based healthcare innovation stretches back years. The Dartmouth Atlas project was founded in 1996 to track variations in healthcare spending nationwide. In recent years, Dartmouth-Hitchcock has been among the early adopters of several value-based payment initiatives, including Medicare's first accountable care organization program featuring upside and downside risk, Pioneer ACO.
Dartmouth-Hitchcock has lost some money participating in Pioneer ACO, a demanding venture with a roster that has dwindled to 18 participants after launching with three dozen provider organizations in 2012. Like Medicare's most popular ACO program with providers, the Medicare Shared Savings Program, the Pioneer ACO is afflicted with a value-based innovation irony. Assuming they make effective value-based changes, providers that have been riding high on the fee-for-service model will gain more from the Pioneer ACO contract than providers that have historically posted low utilization rates.
Despite taking a financial blow in the Pioneer ACO program, Robert A. Greene, MD, MHCDS, FACP, executive vice president and chief population health management officer at Dartmouth-Hitchcock, says the chance to learn and lead is priceless.
"We have been disappointed with Pioneer ACO," Greene says. "We saved CMS about $20 million, but because of the ways that contract is structured, we may end up sending a couple million back to CMS. We view that as a tremendous learning process and opportunity. We have been more successful in
other contracts. But Pioneer ACO has been an opportunity to influence and give perspectives on future ACOs at CMS."
From Dartmouth-Hitchcock's financial perspective, Pioneer ACO has three primary flaws, he says.
"For the first three years of the contract, CMS used the 'matched cohort' methodology instead of applying a more time-tested risk adjustment methodology approach," Greene says. "This was corrected for the fourth year of Pioneer by converting to a version of the Hierarchical Care Condition methodology that is more similar to that used by Medicare Advantage plans. [Second,] benchmark trending factors were solely based on national trends, and therefore did not necessarily reflect the specific region and market that Dartmouth-Hitchcock's Pioneer ACO operated in. This has been somewhat addressed in the fourth year of Pioneer by adding a locality adjustment factor, but we don't believe this goes far enough to address the disparate differences between regions. [Finally,] the baseline is established by applying an algorithm to a defined set of historical claims incurred by an attributed population, and then trended. The challenge with this approach is that ACOs that start out with lower per beneficiary per year Medicare spends, and lower rates of utilization have less opportunity to generate shared savings results compared to ACOs that start out with higher per beneficiary per year Medicare spends and/or higher rates of utilization."
Dartmouth-Hitchcock has operated financially successful value-based payment models with Medicare and commercial payers, Greene says.
"Dartmouth-Hitchcock was one of 10 participants in Medicare's Physician Group Practice Demonstration model, which was the precursor to Medicare's shared savings programs. Over the five years of the PGP Demo, we met or exceeded quality measures in each year and earned $10.6 million in shared savings payments over the course of the five-year contract period. We have had a shared risk contract with Anthem since October 2010," Greene says.
"Over the past four completed contract periods," Greene says, "Dartmouth-Hitchcock has passed the quality gate in each year, and earned $6.7 million in shared savings payments over the course of the four-year contract period. We have also had a shared risk contract with Harvard Pilgrim Health Care since January 2011. Under this contract, we have earned $1.7 million in shared savings payments over the course of the past four completed contract periods.
"All three of these contract models have one thing in common: Our financial performance and quality scores are compared to our own performance year over year," he says. "Dartmouth-Hitchcock has been more successful under models that reflect our continuous improvement process. Because our utilization started low, compared to much of the U.S., we have been less successful under models that require Dartmouth-Hitchcock to produce results that are better than a 'reference population,' 'market,' or 'peer group.' "
Greene says Dartmouth-Hitchcock was able to make a significant impact on the rulemaking for the newest Medicare ACO model, Next Generation ACO, which was unveiled in March. "We can see in the changes they have made in Next Generation ACO, they have incorporated some of our ideas."
For providers with a history of low service volumes to succeed in the transition to value-based payment models, "redesigning care becomes imperative," Greene says, noting that Dartmouth-Hitchcock is focusing on developing patient-centered medical homes, telemedicine capabilities, and clinical partnerships.
Dartmouth-Hitchcock is leveraging telemedicine across a broad range of care delivery, including a telestroke program that, in collaboration with the Mayo Clinic Arizona, provides patients with 24/7 access to a neurological assessment.
"We see telemedicine as a huge opportunity. It solves some interesting problems that people have been thinking about for a long time, like rural patient management and remote sensing programs. The big question now is, how do we best integrate those things into patient-centered
medical homes?"
One of Dartmouth-Hitchcock's new partnerships is a clinical affiliation with Woonsocket, Rhode Island–based CVS Health's MinuteClinic. "There are people who just need convenient care and need to pop into someplace, and MinuteClinic has the same version of Epic for electronic medical records. That information will upload directly into Dartmouth-Hitchcock's electronic record. On Monday mornings, there will be an alert, and the doctors and nurses here will know what happened with their patients at MinuteClinic over the weekend."
Partnerships represent a huge building block for all healthcare providers as they transition from volume-based to value-based financing of their services, Greene says.
"You have affiliates instead of adding space for inpatient beds or spending on other costly investments," he says, noting the clinical affiliation Dartmouth-Hitchcock has established with New London (New Hampshire) Hospital, a federally designated Critical Access Hospital about 25 miles from the health system's main campus in Lebanon.
"New London used to run eight beds out of their 25, which was not sustainable. Now, we coordinate with them. We keep their care local, and we can start using our telehealth capabilities with this population of patients. Their average daily census is up to 20 patients. It's a win-win because it frees up more of our beds in Lebanon for tertiary care," Greene says.
As an organization, Dartmouth-Hitchcock continues its journey to adopt value-based care delivery, Weinstein says.
"We are already on the right side of this curve," he says. "We are going to put our money where our mouth is. We do not want to sustain an unsustainable health system. We need to change this system, and I have dedicated my life to doing that, and we're making incredible progress."
That progress includes solid performance in several value-based contracts with commercial payers, Greene says.
For example, Greene notes that despite not earning a shared savings payment from Cigna for the most recent contract performance period, Dartmouth-Hitchcock's rate for inpatient admissions per 1,000 patients was 4% below the New Hampshire market's, and the related cost of care for these inpatient admissions was 1% below the state market. Also, the advanced imaging scans per 1,000 patients rate was 8% below the state market's and avoidable emergency visit rates were 3% below the state market's, he says.
The attributed members assigned to its Anthem risk contract increased 32% from the 2013–2014 contract performance periods, yet it was able to keep admissions per 1,000 rates flat year over year, Greene says. Dartmouth-Hitchcock also was able to reduce emergency room visits per 1,000 patients by 6.5% during this same time period. Despite this significant growth in membership, overall cost of care increased just 1.9% between 2013 and 2014.
Greene also notes that the attributed members assigned to the Harvard Pilgrim risk contract increased 17% from the 2013–2014 contract performance period, yet Dartmouth-Hitchcock was able to reduce admissions-per-1,000 rates by 17% year over year and was able to reduce emergency room visits per 1,000 by 22% during this same time period. Despite this substantial growth in membership, the overall cost of care increased just 0.8% between 2013 and 2014," he says.
Embracing bundled payments
CHI has a shorter historical experience delivering value-based care than Dartmouth-Hitchcock, but the multistate health system is operating with a similarly broad set of value-based payment models.
Stanley says about 30% of CHI's healthcare service revenue is linked to some form of value-based payment, with more than 400,000 patients receiving care through value-based payment models such as Medicare Advantage, bundled payments, the managed care program for CHI employees, and direct managed care contracting in the employer-sponsored group insurance market.
He says bundled payments tied to episodes of care have been among the most rapidly adopted value-based payment models at CHI. "They really resonate well with our clinical staff and our administrative staff. We've been able to gain more traction in our organization in this area."
Bundled payments are relatively easy for all of the key clinical and administrative players to comprehend and operationalize, Stanley says. "A trigger event provides the starting point. There's a clear start and clear finish to when that episode occurs. Specialists can understand their sliver of care: procedure preparation, procedure, then procedure follow-up through a 90-day recovery period."
A robust healthcare IT capability is needed for large health systems to provide services through value-based payment models such as bundled payments, he says.
"There are multiple data elements. There's clinical data: status of patients, experience of care, and aggregate data as a program, not just data by patient. There's creating a real-time data capability alongside monthly and aggregate data collection," Stanley says, adding that the ability to track data digitally is indispensable to keep providers within their bundled payment bounds. "You have to not only have the data but also the analytics to drill down into it."
He says CHI monitors several classes of metrics in the health system's bundled payment programs.
"We track multiple metrics including clinical (complication rates, readmissions, and clinical risk), utilization (discharge locations such as rehab, skilled nursing facilities or home, and average length of stay in all settings), financial (total cost of care and supply cost during acute stay), and service and clinical quality metrics as determined by CMS. In our longest operating bundled payment program—St. Vincent Infirmary in Little Rock—our 90-day readmission rate has dropped by about 50%, average length of stay is now less than two days, and total cost of care has dropped significantly, with total reduction in costs of about $2 million in the first 12 months under the program for knee and hip replacements."
Options for smaller organizations
Large health systems possess big advantages over other providers in the shift from volume to value. But independent hospitals and physician practices have several strategies at their disposal to survive the rigors of the transition to value-based payment models.
In some markets, commercial payers—a healthcare industry stakeholder that providers have often viewed as a business nemesis—can be the best value-based care comrade.
For the past decade, Detroit-based Blue Cross Blue Shield of Michigan has helped lead a statewide value-based initiative that features physician organizations and patient-centered medical homes. In 2005, BCBSM launched the Value Partnerships program with a set of provider partners featuring 10 physician organizations and 3,000 doctors, says David Share, MD, MPH, senior vice president of value partnerships at BCBSM.
"We started out 10 years ago with a recognition that the healthcare system was fragmented and had no meaningful accountability," he says. Value Partnerships has grown to 46 physician organizations, with 19,000 primary care physicians and specialists across the state.
"We wanted physician organizations to be responsible for cost and quality of care more and more over time. The physician organizations were held responsible for results on a population level," Share says.
In 2009, the Value Partnerships program launched a PCMH designation program that included variable reimbursement for physician practices based on cost and quality performance, he says. "If you had a good cost and quality experience, you got a bounce up in your fee. Providers can generate up to a 30% increase in value-based payments from success in the program."
As of July, the Value Partnerships program had designated 1,551 physician practices as PCMH sites eligible for value-based payments, Share says. "It's the largest such program in the country. The PCMH practices that are most involved achieve a 5% improvement in HEDIS [Healthcare Effectiveness Data and Information Set] scores and a 4% to 5% reduction in costs from effective preventive measures. For the past four years within the preferred provider organization, the trend for increases in cost has been 2% or lower, one of the lowest cost trends among comparison plans nationally."
Coping with costly investments
While costly investment in healthcare IT systems is essential for most health systems to deliver value-based care, providers of all sizes can adopt elements of value-based care without huge expenditures on digital technology, according to Miller, of the Center for Healthcare Quality and Payment Reform.
"The myth that has developed is that you need to spend a lot of money on information technology. It's a top-down approach. ... You're spending a ton of money on IT to be able to watch the doctors, instead of trying to involve the doctors themselves," he says.
But specialty practice leaders have proven they can redesign care based on value, as long as they can find a way to pay for it. Miller cites, for example, the New Mexico oncology practice of Barbara McEneny, MD, who also serves on the American Medical Association Board of Trustees. With grant funding, the New Mexico Cancer Center hired oncology triage nurses to track and coordinate patient care, which led to a significant reduction in treatment costs.
"There's a little bit of IT in there, but it wasn't a massive investment," Miller says. "The key investment there was not the IT. It was the triage nurses. They can figure out what to do as soon as patients get into trouble, like bringing someone in for IV rehydration as an intervention at the practice, which is far less costly than at the ER. But at most oncology practices, a chair at the practice for an IV gets paid relatively little, whereas that chair is far more profitable for the practice if someone is in it receiving chemotherapy drugs."
Dartmouth-Hitchcock's Greene says providers seeking to adopt value-based payment models can and should leverage capabilities beyond healthcare IT. "There are some very big bites you have to swallow, and healthcare IT is one of them. But people and processes are probably the biggest bite of them all."
David Lansky, PhD, president and CEO of San Francisco-based Pacific Business Group on Health, says providers seeking to improve managed care contracts directly with employers need to keep the motivations of these potential customers in mind. PBGH is a purchaser-only coalition, representing 60 public and private organizations across the United States that collectively spend $40 billion a year purchasing healthcare services for 10 million Americans.
"Whether it's direct relationships with [the] provider or health plan managed care products, the employers are still looking for the same kind of features," Lansky says. "For ACOs with shared savings and other value-based contracting, the employers want to see that contracting tied to a quality threshold. They feel a responsibility for the care of their employees. They need to feel especially confident about quality."
As a way to cater to that concern over quality, PBGH has established a centers-of-excellence program that features a handful of providers that its employer members may use—for example, Baltimore-based Johns Hopkins Health System. PBGH selects providers for the program based on a large set of factors, including patient experience scores such as complication rates and the collection of patent-reported outcomes.
"There's a long list of quality-based criteria, at a reasonable price," Lansky says. "It sends a lot of really powerful signals. For employees, they know they are getting top-notch care. And there's a strong message for providers: 'We're not going to take the community norm, and we'll put an employee on a plane to Baltimore if we have to.' "
Although value-based payment models are more demanding on providers than fee-for-service, and are likely to be less rewarding financially, there is a value-based promised land on the horizon, Weinstein insists.
"As doctors, we take the Hippocratic Oath to 'do no harm.' The wrong incentives—as in the fee-for-service system that we're in now—can lead to the wrong solutions. And there is a pot of gold at the end of the rainbow: It's the creation of a health system where patients, when well-informed, receive only the care they want and need—care that's delivered safely and at the lowest possible cost."
The top performers in the Medicare Shared Savings Program are leveraging their experience with population health and their willingness to embrace innovation.
The pathways to shared-savings success are becoming clearer.
Houston, TX-based Memorial Hermann Accountable Care Organization and Portland, ME-based MaineHealth Accountable Care Organization are two of the most successful MSSP participants in the country. Executives at these ACOs say their organizations have been able to earn millions in MSSP shared-savings payments based on lengthy experience in population-health initiatives and wise investments in new capabilities.
Christopher Lloyd
"One of the reasons we have been so successful is this is not a new conversation for us," says Christopher Lloyd, CEO of Memorial Hermann ACO.
Memorial Hermann ACO's financial success as an MSSP participant is impressive, with the organization posting shared-savings payments in the federal program's first and second performance years, according to Centers for Medicare & Medicaid Services data. In Performance Year 1, which reflects data collected from 220 MSSP ACOs in calendar year 2013, Memorial Hermann ACO served 34,430 Medicare beneficiaries and earned shared-savings payments totaling $28.3 million. In Performance Year 2, which reflects data collected from 333 MSSP ACOs in calendar year 2014, Memorial Hermann ACO served 40,911 Medicare beneficiaries and earned shared-savings payments totaling $22.7 million.
The Memorial Hermann health system, which features 13 not-for-profit hospitals and about 5,500 affiliated physicians, was well-positioned for MSSP participation when the organization launched its ACO in July 2012, Lloyd says.
Having clinically integrated hospital and physician networks has been "absolutely fundamental" to Memorial Hermann ACO's success, he says. Prior investments in establishing patient-centered medical homes also have boosted MSSP performance. "That's the foundation. [Our primary care physicians] understand the concepts of cost and quality."
On the hospital side, Memorial Hermann ACO has sought to maximize value for both inpatient and outpatient services, driving down costs while maintaining quality in areas including supply chain and pharmacy.
"It helps us manage the total cost of care. We're pretty sophisticated at determining total cost of care, but we're not sophisticated enough yet. … We're calling it medical economics: understanding total cost of care and where the spending occurs," Lloyd says.
Strengthening the capabilities required to track total cost of care has been a top priority at Memorial Hermann ACO and throughout Memorial Hermann health system, he says. "The fastest area of investment is in medical economics." Those investments have included information technology upgrades and hiring a range of data-oriented staff members such as actuaries and data analytics specialists. "It is a whole series of people who have not been in the health system before."
Next month, Lloyd and a half dozen other Memorial Hermann executives are slated to provide a three-hour online presentation about the health system's ACO prowess.
MaineHealth ACO, which has an independent board, but is staffed through the Maine Medical Center Physician-Hospital Association, is built on a solid foundation crafted over the past two decades, says Betsy Johnson, MD, who serves as CEO of MMCPHO. She is slated to serve in a similar leadership role at MaineHealth ACO as part of a reorganization set to be finalized in January.
Since joining the MSSP program in July 2012, "We've evolved with the times," she says. And it's been lucrative.
Along with Memorial Hermann ACO, MaineHealth ACO was among the Top 10 MSSP shared-savings earners in Performance Year 1, serving 48,273 Medicare beneficiaries and receiving shared-savings payments totaling $9.4 million. The ACO did not realize an MSSP return in Performance Year 2, serving 49,413 Medicare beneficiaries and falling $831,000 short of the benchmark for receiving shared-savings payments.
Betsy Johnson, MD
"Because of our success in Year 1, and our ability to hold steady in Year 2, we get asked a lot about the reasons for our success," Johnson says. "We point to the existing infrastructure that we had in place."
The crucial component of MaineHealth ACO's existing infrastructure has been the physician-hospital organization MMCPHO, which has been in existence for more than 20 years. MMCPHO has experience providing care management as well as teams dedicated to care transitions, service contracting and data analytics. MMCPHO also had a clinical registry in place long before the launch of MaineHealth ACO, which provided an essential building block for population-health success, Johnson says. "We already had 10 years of experience in building our own registry."
Jen Moore, who serves as chief operating officer of MMCPHO, says expanding the physician-hospital organization's care management capabilities has bolstered MaineHealth ACO's performance significantly. "We had really been focusing on chronic disease management," she says. MMCPHO formed a care management team in 2003 to help treat patients with conditions such as diabetes and mental health disorders. "We needed to be in a different space for complex case management."
One of the innovative areas where MaineHealth ACO has invested time and resources is improving relationships among the organization's 10 hospitals and the region's post-acute care facilities. The historical experience at the hospitals was akin to having acute-care patients "discharged into a black hole," Johnson says.
"A single care plan is our vision across the entire continuum of care," the practicing primary care physician says. "That's a care plan that is the patient's care plan that everybody has access to… We are all learning together."
Engagement with physicians, skilled nursing facility staff, and other caregivers is an essential ingredient of the MaineHealth ACO's "secret sauce" for share-savings success, Johnson says. "Ultimately, it's all about how you engage the frontline team."
Minnesota-based ACO Embraces Innovation
Primary care is the prime focus of St. Paul, MN-based Community Health Network from top to bottom, says Paul Berrisford, MBA, a member of the MSSP participant's governing board and chairman of the ACO's finance committee. "Our ACO is primary care-driven. It is not your typical hospital-driven ACO."
Launched in January 2013, Community Health Network (CHN) was formed as a partnership between HealthEast Care System, Entira Family Clinics and two dozen specialty physician practices. The ACO's 12-member governing board has four representatives each from HealthEast and Entira, three representatives from the specialty practices, and one patient representative. "It was built around the concept of collaboration," Berrisford says.
The ACO has only four hospitals, all owned by HealthEast. "The patients get the care they need when they need it, which is easier said than done. … We use the ACO as the platform by which to do this and avoided the regulatory problems that come with collaborating with competitors."
With 13,553 Medicare beneficiaries in MSSP Performance Year 1, CHN earned $1.4 million in shared-savings payments. With 15,021 Medicare beneficiaries in Performance Year 2, the ACO earned $5 million in shared-savings payments.
So far, CHN has invested about $800,000 annually to build up its population-health capabilities, Berrisford says. That level of annual spending could rise to as high as $3 million to hire care managers and to staff a care transitions team. "We invested a substantial amount of resources in data analytics… In this year's budget, we will probably invest substantially more resources to care coordination and care management."
Another key investment for CHN has been contracting with Des Plaines, IL-based Pharos Innovations to provide telephonic and online patient engagement services. "We had a challenge… Population health is like looking at a matchstick from 50,000 feet," he says.
CHN has leveraged Pharos algorithms, data-gathering capabilities, and personnel to help provide care management to patients in several costly condition categories, including congestive heart failure and complex diabetes cases. "It made the focusing of our resources on those patients very efficient," Berrisford says, adding that CHN was able to limit the number of care-management phone calls to congestive heart failure patients from potentially 2,000 calls per day to about 20 per day.
The CHN leadership team is deeply committed to providing value-based care, he says. "We are evangelical about change. We don't think it can happen fast enough… It's better for us to do it to ourselves than wait for someone else to do it to us."
HealthLeaders Media LIVE from Memorial Hermann: A Care Management ACO,will be broadcast on Wednesday, November 11, 2015, from 11:00 to 2:00 p.m. ET. Memorial Hermann reveals its multi-pronged approach for their successful Accountable Care Organization. How physician alignment, patient engagement methodologies, and a focus on community health has propelled them to the top.
Payment reform, new regulations, and opportunities to boost quality of care for older patients with comorbidities are revolutionizing skilled nursing facilities.
Transformational change has reached a critical mass in the post-acute sector in general and at skilled nursing facilities in particular, a pair of experts in the field says.
"The skilled nursing facility industry has migrated from an industry that was based on residential services to an industry that is based on healthcare services," says Philip Glassanos, vice president for business development at Norwell, MA-based Welch Healthcare & Retirement Group.
Kris Mastrangelo, MBA
About 75% of patients at Welch's skilled nursing facilities (SNFs) have lengths of stay less than 20 days, he says. "The industry has fundamentally changed."
An ever-increasing number of SNFs nationwide are embracing the shift from fee-for-service medicine to delivering quality care at the lowest possible cost, says Kris Mastrangelo, MBA, president and CEO of Harmony Healthcare International, a post-acute care consultancy based in Topsfield, MA. Mastrangelo was recruited to work as an occupational therapist at a post-acute care facility in the late 1990s, when quality was problematic at many SNFs, she says. "They had such a tainted reputation"
Now, payment reforms such as hospital readmission penalties and bundled payment initiatives are spurring change in post-acute care, Mastrangelo says. "The driving factor is reimbursement. No one is going to improve quality unless there is reimbursement… This is the revolutionary change—Tying the payments to the outcomes. It's not the display of five stars or the display of quality outcomes. It's about the reimbursement. Everybody's toes are going to be held to the fire on outcomes and payment."
The Centers for Medicare & Medicaid Services is set to revamp regulations for SNFs and other post-acute settings, she says. In July, the agency released a proposed rule that includes several new regulations, with the Final Rule expected in November. In the Proposed Rule, CMS officials note that regulations for post-acute care facilities have not been comprehensively reviewed and updated since 1991.
The proposed regulations include several significant changes:
New protections against resident abuse and neglect such as specifying that "facilities cannot employ individuals who have had a disciplinary action taken against their professional license by a state licensure body as a result of a finding of abuse, neglect, mistreatment of residents, or misappropriation of their property"
"Visitation requirements to establish open visitation, similar to the hospital conditions of participation"
Resident rights revisions such as "addressing roommate choice"
A declaration that "quality of care and quality of life are overarching principles in the delivery of care to residents of nursing homes and should be applied to every service provided"
"This document is fascinating," Mastrangelo says. "The concepts are excellent, but the cost implications are enormous."
Pace of SNF Change Accelerating
The growth of accountable care organizations in Massachusetts since passage of the Patient Protection and Affordable Care Act in 2010 has accelerated cooperation between hospitals and SNFs significantly, Glassanos says. "What's different now is the pace of change has moved dramatically. The pace is much more compelling."
The Pioneer ACO program, which CMS launched in 2012, has helped push SNF reforms in the Bay State, Glassanos says, noting that there are fewer than two dozen Pioneer ACOs nationwide and five of them are located in eastern Massachusetts. "The ACOs have tried to pick a select number of skilled nursing facilities to whom they make a commitment, and we have made a commitment to them. There are real opportunities to improve quality and reduce cost at the same time."
He says one major opportunity is that Pioneer ACOs have an exemption from the CMS rule requiring patients to spend at least three days admitted at an acute-care facility to qualify for the highest rate of Medicare coverage at SNFs. "The upside for us by working in these relationships is we have been able to improve what we do clinically. Our goal is to say we can do more. We can take patients right out of the emergency room, and they don't have to be admitted into the hospital."
Although SNFs are getting the opportunity to work with more medically complex patients, they also are losing patient volume to home health agencies as hospitals strive to discharge more and more patients to the home setting for procedures such as hip and knee replacements, Glassanos says. "Most of these patients should be going home."
Particularly in the sphere of bundled payments, hospitals also are pushing their SNF partners to drive down length of stay, he says. "Length of stay has gone down dramatically. The financial impact has been significant. We still get paid based on days."
Until payment reform efforts catch up with care redesign initiatives, SNFs will face a daunting financial challenge.
"Getting from here to there is the painful part," Glassanos says. "The transition piece is difficult. We're seeing a lot more patients, but they're staying for a shorter period of time."
SNFs are being confronted with an adaptation imperative, Mastrangelo says. "You are going to need savvy leaders. They are going to make or break this transition… They need to adopt an evolutionary philosophy."
Key SNF Survival Strategy
A crucial area for SNF leaders is managing partnerships between their organizations and hospitals, she says. "Tighter relationships with hospitals ensure patient census levels at skilled nursing facilities, but it's easier said than done. Not everyone gets a tighter relationship with a hospital."
Mastrangelo says one way SNFs can make themselves an attractive partner for hospitals is to boost their star ratings on Nursing Home Compare, the online assessment tool administered by CMS. The star ratings have three primary components: state surveys, staffing levels, and a quality rating based on a dozen metrics. "If I'm running a SNF, what can I impact immediately? It's the quality indicators," she says.
Just like a consumer seeking to improve credit scores, the first step SNFs need to take to improve their Nursing Home Compare star ratings is to make sure their quality documentation is free of errors, she says. SNFs need to ensure proper preparation of each patient's Minimum Data Set document, which establish a detailed clinical assessment at the time of admission to a skilled nursing facility. "That's low-hanging fruit… then you see how you can improve individual quality indicators such as pain and wound care," Mastrangelo says.
For many SNFs, improving quality of care to attract hospital partners will require a leap of faith, Glassanos says. "There is no way to ensure anything. All you can do is provide quality services and be a facility that others want to do business with."
While acknowledging the existential challenge that faces SNFs with limited resources, Mastrangelo says post-acute care innovators have the potential to achieve success as organizations and caretakers for older patients with comorbidities, who constitute the country's most vulnerable patient population. "In a time of change, don't panic. You need to sit back and see the opportunities."
Health systems and hospitals bracing anxiously for adoption of orthopedics bundled payments should take a close look at Meriter Hospital's success with the value-based payment model.
Hospitals need time to prepare for the proposed federal Comprehensive Care for Joint Replacement bundled payment model, says the American Hospital Association. But Meriter Hospital says "Bring it on!," citing lower costs and better outcomes from its work in orthopedics bundled payments.
Meriter, a 448-bed acute-care facility located in Madison, WI, is part of West Des Moines, IA-based UnityPoint Health. In 2012, Meriter made its first foray into bundled payments, focusing on knee replacements. In 2014, the hospital expanded bundled payments to hip replacement procedures through a contract with the Centers for Medicare & Medicaid Services Bundled Payments for Care Improvements (BPCI) initiative.
Philip Swain, PT, MBA
The financial and clinical results of Meriter's work with bundled payments have far exceeded expectations, says Philip Swain, PT, MBA, the hospital's director of orthopedics and rehabilitation. "We were cutting costs, particularly from sending people home rather than to a skilled nursing facility, and I expected that to happen. What I didn't expect is people are getting better care and better outcomes."
Since 2013, Meriter's bundled payment programs for joint replacements have resulted in a 12% reduction in patient length of stay, a 23% decrease in discharges to skilled nursing facilities (SNFs), and a 68% drop in hospital readmissions, according to Wellbe, Inc. The Madison, WI-based company is providing Meriter with online patient engagement tools for joint replacement bundled payments. In addition to serving as "an electronic version of a care navigator," Wellbe's patient engagement capabilities include online preparedness surveys to gauge patient readiness for surgical procedures and collection of clinical outcome data for generating monthly reports, Swain says.
Administrative and Clinical Challenges of Bundled Payments
The partnership with Wellbe has been one of several key administrative investments driving Meriter's positive experience with bundled payments, Swain says. "In order to make bundled payments successful, you need to devote some resources."
Other essential administrative investments Meriter has made to support bundled payments include: hiring a part-time project manager to serve as a liaison with CMS and to coordinate the efforts of physicians and the hospital's financial team, dedicating an internal financial analyst to monitor data, and contracting a consultant to help launch bundled payments, he says. "When we got into bundles, one of the biggest challenges was there was no roadmap. We had to set up accounts. We had to rethink how we were going to process claims. We had to figure out how the Medicare gainsharing was going to work."
Meriter is participating in Model 2 of the BPCI initiative for joint replacement bundled payments, in which expenditures are reconciled against a target price for an episode of care that includes the inpatient stay, post-acute care, and all related services up to 90 days after hospital discharge.
That was not a simple calculation. BPCI has three risk tracks. "We went with the middle one. Our risk wasn't very high, and the middle track didn't affect our reward at the end of the episodes of care," Swain says. Data analytics played a pivotal role in the risk-track decision. In particular, Meriter examined the hospital's past experience with hip and knee replacement procedures based on three metrics: historical cost, historical claims, and historical risk. "If there is an outlier case, the risk track protects you from that," Swain says. "We tried to figure out the frequency with which those outliers occurred."
There also were key clinical factors to address at Meriter to get the bundled payments ball rolling, he says. "The first clinical challenge is engaging your physicians. We had to pull all of our orthopedic surgeons together, both employed and non-employed, and get them to buy into this concept. If you can't get physician buy-in for bundled payments, you have a tough hill to climb in achieving success."
Standardizing supplies, equipment, and "care paths" for joint replacement procedures is another crucial clinical hurdle in bundled payments, Swain says. "It sounds easier than it really is … but we now have single-source contracting for all of our implants, which generates a tremendous cost saving."
Meriter has set up a robust patient engagement program for bundled payments to help boost clinical outcomes. In addition to the patient engagement partnership with Wellbe, the hospital's model for bundled payments dedicates specific members of the nursing staff to work with patients from admission to several weeks after discharge from the hospital. These care navigators help develop a discharge plan and follow up with patients after discharge. "It's all about risk mitigation. We cut down on infections. Our readmission rate has gone down significantly. The care navigators hold the hand of the patient all the way through the episode of care. They serve as a point of contact for patients along the care continuum," he says.
The post-acute care setting has posed the highest clinical hurdle for bundled payments at Meriter, Swain says. "We had a poor understanding of the post-acute world—and a lot of other hospitals do, too. We had to have a new understanding of the post-acute world, especially for SNFs and outpatient rehabilitation."
Bundled payments have revolutionized the hospital's relationship with skilled nursing facilities, he says. "Some of our priorities for bundled payments were not aligned with some of our nursing home partners. We wanted to minimize utilization while getting the best outcomes. We met with the nursing homes. … Most of them understood this is the direction post-acute care is going."
Participation in Medicare bundled payment programs gives health systems and hospitals unprecedented access to SNF data, including costs, claims, readmission rates, and length of stay. Meriter has used that data to evaluate skilled nursing facilities and encourage patients to gravitate to the best performers, Swain says, noting that CMS does not allow acute-care facilities to direct patients to specific SNFs. "If SNFs can demonstrate that they are keeping their costs down while generating good outcomes … we're going to get patients to nursing homes that are high quality at a low price. We can't direct all patients, but we can direct patients who are open to choice. In the next year or two, hospitals are going to be developing essentially narrow networks for post-acute-care. It's got to happen."
Preparing for Mandatory Bundled Payments for Joint Replacement
Meriter's experience with joint replacement bundled payments through Model 2 of BCPI has the hospital well-positioned for the Comprehensive Care for Joint Replacement (CCJR) bundled payment model, Swain says.
CMS is proposing mandatory participation in CCJR at hospitals in 75 geographic areas that have "core urban centers" with populations of at least 50,000 people.
"There's very little we have to do to prepare for this new model. We are thrilled to have this structure in place," Swain says. He and his Meriter colleagues are confident the hospital is poised for CCJR success. "Bring it on!"
Officials at the Chicago-based American Hospital Association say many other hospitals are not ready for CCJR and need accommodations from CMS. "There are many reasons hospitals need more time to prepare for CCJR," says Joanna Hiatt Kim, vice president of payment policy at AHA. Among them, hospitals need to negotiate new agreements with SNFs and physicians to increase the chances of success with bundled payments.
With the final rules for CCJR expected in November and the program set to start Jan. 1, 2016, time is working against hospitals, Kim says. "Having 60 days to negotiate these new arrangements is very, very tight."
For hospitals set to participate in CCJR, AHA is pressing CMS to waive two fraud and abuse laws: the Physician Self-Referral Law and the Anti-Kickback Statute. "What we have heard from our members is if these requirements are not waived, they will not be successful with the CCJR model," she says.
The Physician Self-Referral Law, also known as the Stark law, which is designed to separate the financial interests of hospitals and referring physicians, is particularly problematic for the level of cooperation required to operate bundled payments effectively, Kim says. "That law absolutely stands in the way."
She says the AHA supports the CCJR model in principle, in part because the initiative has created a "burning platform" to spur change. "For CCJR hospitals, we really have gotten to that point. Medicare has clearly signaled this is the direction we are going to move. The CCJR bundle was a bold move."
Shifting from an old-school "back office" to a consolidated revenue cycle model is hard work, but well worth the effort, says a senior revenue cycle executive at KY-based Norton Healthcare.
"It was an extremely difficult process, but when you put the patient first, you find a way to do it," says Jim Meyers, system vice president of revenue cycle at Louisville, KY-based Norton Healthcare.
Norton Healthcareis a not-for-profit health system with five hospitals and more than 90 physician practice locations in Kentucky and southern Indiana. In 2011, Norton's leadership team decided to adopt EPIC as the health system's electronic medical record system and to simultaneously create a consolidated revenue cycle organizational structure.
Jim Meyers
In a recent exchange of questions and answers with HealthLeaders Media, Meyers shared the essential ingredients of Norton's secret sauce for consolidated revenue cycle success. The transcript below has been edited for clarity and brevity.
HLM: Describe the challenges of transitioning to a new EMR while simultaneously revamping your organization's revenue cycle.
Meyers: The transition to any new [EMR/EHR] system is always a game changer, but for the revenue cycle team this took on a whole new meaning as we decided to move forward with the relatively new idea of what EPIC calls a 'single business office.' The idea is to simplify the billing process for patients so they receive just one bill for all hospital and employed physician services.
In concept this seems fairly easy, but the reality was really something else. First and foremost, hospital revenue cycles have evolved tremendously over the past 10 years, becoming well-oiled machines that maximize technology and standardization.
The medical practice side, in contrast, is just starting to take form. The employment of physicians by health systems has exploded, and what used to be done fairly manually by people in an office is now moving to the centralized environment, where there is a new focus on automation.
HLM: What are the primary elements of Norton's consolidated revenue cycle model?
Meyers: There are three main areas. Patient access, which is only on the hospital side now, includes functions such as patient registration and centralized diagnostic scheduling. Revenue integrity includes coding, charging, audit, and charge master. And patient financial services includes billing, collection, and customer service.
HLM: What were the main drivers behind Norton's decision to adopt the consolidated revenue cycle model?
Meyers: The patient was the main driver. The ability to reduce the number of statements a patient receives from the organization and provide a single customer service number for them to call was too big of an incentive for us to pass up, even though we knew it would be a very difficult journey.
The physician revenue cycle had made great strides since beginning to centralize several years before this revenue cycle "merge," but the hope was that the consolidation would take them to another level from an operational and efficiency perspective.
HLM: Describe how the creation of Norton's consolidated revenue cycle model played out.
Meyers: Norton essentially had three distinct revenue cycles – there was the hospital, the oncology physicians, and the rest of the physicians. There was little to no interaction [among them], separate vendor contracts, and different cultures.
Once it was established what processes needed to change and what could stay the same, the organizational structure had to be established. In a lot of ways, this was the biggest decision to be made because without it, all future decisions were potentially in jeopardy. The structure we ended up developing made it as easy as possible to make quick decisions and align system goals.
Once the organizational chart was complete and the teams were notified, the next biggest decision was physically moving them to a central location. In some cases, teams were integrated together, such as vendor services or customer service, while others, such as hospital and physician billing, remained separate, but [were relocated to] the same floor.
The physical move itself screamed change, and the fact that the independent teams now interacted together on a regular basis just by proximity, started to move the cultural dial in ways we could not have done otherwise.
HLM: Norton has achieved significant gains in monthly posted payments. How has the health system's consolidated revenue cycle model helped achieve these gains?
Meyers: In nearly every metric we are tracking, we are meeting or exceeding the goals we have put forth on both sides of the house… The consolidated revenue cycle lets the physician and hospital groups work as a team toward a common goal instead of different agendas, and it gives us the ability to take the best of both worlds to improve the overall process.
HLM: Have you seen other benefits from having a consolidated revenue cycle model?
Meyers: Absolutely.
Patients get a single bill for hospital services and employed physicians.
There is a single customer service number for patients.
Consolidated vendor contracts [mean we can] obtain better products and services at lower rates.
We think more strategically as a system.
Consolidated registration processes, with hard stops and forms ensure compliance and consistency.
Standardized policies, procedures, job descriptions, and job grades.
HLM: "Single bill" appears to be the Holy Grail of revenue cycle. For Norton, which providers are still sending bills outside the consolidated revenue cycle teams?
Meyers: Any of those physicians who are not employed by the health system are still sending their own bills. It's mainly emergency room physicians, anesthesiologists, and radiologists.
HLM: What was the full-time equivalent employee impact of implementing Norton's consolidated revenue cycle model? How did Norton manage the FTE impacts?
Meyers: When we combined the revenue cycle teams, we noticed the physician team was actually understaffed. The number of employed physicians had grown quickly in the few years leading into the consolidation, and the number of people coming from the practices to the central business office had not kept pace.
Having such a large variance going into to the structure change posed a risk to the project, so we pulled benchmarks, ran the numbers, and asked leadership for another 20 people, which was approved. Leadership saved the day… I can't imagine what would have happened had that not been approved.
HLM: What are the major learning points from Norton's adoption of the consolidated revenue cycle model that could be applied to other health systems?
Meyers: What we really did, at the highest view, is combine the organizational chart:
Senior leadership must be in agreement with the direction of the process.
Determine your "future-state" revenue organization structure before you do anything else. If leadership is not in place when key decisions need to be made, the project quickly can become at risk.
Get the right people in the right leadership positions. What we went through was all about change, and having the right team for the job will make up for a lot of mistakes you make along the way.
Get a consultant who knows your health system inside and out. The biggest problem we had was the intersection of process and technology. Having a consultant who can pull those two things together and only focus on future-state and not day-to-day operations can pay big dividends.
Always think of the patient first. How will this benefit them?
Payers, legislators, and regulators are intensifying their efforts to stop out-of-network hospitals and physicians from charging whatever they want for medical services.
Like Joanne Woodward's character in the 1957 film "The Three Faces of Eve," the healthcare industry is in desperate need of a good psychotherapist.
In this country, healthcare has multiple personalities – payers, providers and pharmaceutical manufacturers to name just a few. Like a patient afflicted with the internal turmoil of dissociative identity disorder, these sectors have been locked in a struggle over the apportioning of spending for decades, breeding distrust and animosity.
One of the most contentious clashes between providers and payers is over billing for out-of-network medical services. This year, legislatures in at least seven states have considered creating laws to set firm ground rules for how much money physicians and hospitals can charge when they are not included in a payer's provider network. Charges above the in-network rate are called balance billing.
The sparks are flying furiously in New Jersey, where Hartford-based Aetna, Inc. has sued a half dozen out-of-network physicians in recent years, alleging gross over-charging for services. "New Jersey is our primary play," says Elena Butkus, head of state government affairs at Aetna. "They have the highest charges in the nation."
From Aetna's perspective, the commercial insurance carrier has an obligation to protect its beneficiaries from price gouging, particularly for out-of-network physicians who work at hospitals as emergency department doctors, anesthesiologists, pathologists, and radiologists, she says.
Lawrence Downs, JD
"They send the big bills. … The fundamental issue is greed and bad players in certain instances on the hospital-based physician side. Out-of-network physicians in those four specialties charge 300% to 400% of the Medicare rate."
Medicare as Gold Standard for Payment
Aetna is grossly overstating its case, according to Lawrence Downs, JD, who serves as CEO of the Medical Society of New Jersey. "If doctors don't sign an oppressive provider agreement, they're considered bad guys… They're labeled a bad actor or a crook by Aetna."
There is a fundamental economic reason behind out-of-network New Jersey physicians charging relatively high rates for their services, but it has nothing to do with greed, he says. "It's a very high-cost state to live in, whether you are buying groceries or healthcare."
Setting Medicare rates as the benchmark for medical service reimbursement is unfair to out-of-network hospitals and physicians, Downs says. "Payers act as if Medicare is the gold standard for payment. It's not. It's a government program that gets the best price for every procedure."
Commercial payers that use Medicare as a reimbursement benchmark are standing on firm ground, Butkus says. "We do believe Medicare is a good tool for two reasons," she says, noting that many commercial payers reimburse providers based on the Medicare fee schedule and Medicare rates are "comparable to actual costs."
On a national scale, Downs says commercial payers should bear their fair share of blame for balance billing as they rely more and more heavily on narrow networks as a cost-control mechanism. "A lot of payers complain about their higher out-of-network costs… They have actually created, with a lot of these narrow networks, more of an out-of-network problem."
Downs adds that patients with high-deductible health plans are at high risk for balance-billing costs. "A lot of this stuff is the 'Wild, Wild West' in terms of benefit design and network adequacy. From the healthcare consumer's perspective, understanding what you are buying in the healthcare marketplace is daunting. It's daunting for me, and I'm in the business. There needs to be much more transparency."
Consumer Protections
Butkus says the best solution to the out-of-network billing problem is nationwide adoption of key provisions found in an Illinois balance-billing law enacted in 2011. Those key provisions include arbitration for balance billing disputes and consumer protections for health plan beneficiaries who receive medical services at in-network hospitals and ambulatory surgery centers.
Specifically, the consumer protections in the Illinois law apply to out-of-network ED doctors, anesthesiologists, pathologists, radiologists and neonatologists who practice at in-network hospitals and ambulatory surgery centers. Those classes of physicians are barred from charging patients out-of-pocket costs that exceed in-network out-of-pocket costs.
Katherine Hempstead, PhD
A coalition of payers, business associations, and consumer groups is urging the National Association of Insurance Commissioners to adopt the provisions of the Illinois balance-billing law in the organization's "state model act" for network adequacy, Butkus says. "Payers, consumers and business groups have joined hands to help resolve billing disputes and take patients out of the middle." NAIC is expected to set new network adequacy guidelines this fall.
Katherine Hempstead, PhD, health insurance program director at the Princeton, NJ-based Robert Wood Johnson Foundation, says out-of-network physicians working in emergency departments are particularly problematic in balance-billing scenarios.
"There is a strong sense that patients should be held harmless in these situations, which would tend to leave the payers on the hook. Payers will want to incentivize hospitals to minimize the extent to which this happens, but of course, in many cases the hospital is a major beneficiary of the high charges, so their interests are not aligned with the payer. This is a situation in which the market power of both parties becomes extremely important; and in more rural areas, there can be the additional issue of specialist supply. These costs ultimately get baked into premiums and consumers pay them that way."
Although patients are poorly positioned to drive the debate over balance billing, consumers do have a measure of influence, she says.
"These out-of-network balance bills that end up in patients' mailboxes are basically the messy byproducts of the dysfunctional relationship between payers and providers, whose antipathy for each other outweighs their regard for their customers… There is much evidence that consumers are willing to make the tradeoff between provider availability and the cost of their health insurance."
Recommendations
Hempstead says, "Consumers are demanding that they be given better information about their options, and this is a more specific instance of that general issue. There is a movement to add information about network size in plan choice tools, because consumers want to better understand that tradeoff when shopping for insurance. With narrower networks, it sort of comes with the territory that the probability of unintentionally using an out-of-network provider will increase."
"There is no way to completely eliminate the unintentional use of out-of-network providers, especially as narrower networks become more prevalent" she says. "But what can happen through a variety of processes, including state regulation, are some common sense ground rules to protect consumers and eliminate surprises."
Hempstead lists several possibilities:
Setting a maximum charge, perhaps expressed as multiples of Medicare;
Requiring healthcare facilities to inform consumers when they are at risk of being treated by out-of-network providers;
Protecting consumers from these bills in cases of emergencies;
Allowing consumers to apply payments to their deductibles if [out-of-network services were provided] during a hospitalization and a substitution was not possible
Collective counseling to fix the dysfunctional relationship between providers and payers would help, too.
The next wave of telemedicine, in which providers are now making investments, will retool the entire healthcare industry, according to a trio of experts in the field.
As telehealth visits for patients are growing exponentially across the country, health systems and hospitals are gearing up for the broad application of telemedicine technology across the entire care continuum.
Dozens of initiatives are already underway in areas such as pharmacy, nursing, telestroke assessments, and the creation of "digital communities" centered on patients with specific conditions, according to Win Vaughan, acting president of virtual health services at Englewood, CO-based Catholic Health Initiatives.
Win Vaughan
"From a consumer-driven perspective, everybody in healthcare is going to have to offer these kinds of services," Vaughan says.
A virtual pharmacy program at CHI is paying off for the health system in several key metrics, including patient satisfaction and reduction of adverse medication incidents, and has tremendous potential in terms of cost avoidance such as readmission reductions, he says.
The virtual pharmacy model at CHI features pharmacists who process medication orders remotely. "We can have a pharmacist who works from home or from a centralized hub. They have remote access to electronic medical records… They just do order management. They don't get distracted with other activities."
The program has freed up time for hospital-based pharmacists to work closer with physicians and their patients, Vaughan says. "If you have pharmacists doing clinical activities with patients from admission to discharge, you avoid adverse reactions and pharmacists can make recommendations to the doctors who ordered the drugs."
CHI has begun assessing the financial impact of the virtual pharmacy program, and the early data is promising, he says. At a 65-bed hospital in the health system, CHI estimates it is saving at least $87,000 per month by having a virtual pharmacist review medication orders. "You have to make some assumptions about how much an adverse drug event costs the health system," he says.
Until payment reform catches up with telemedicine retooling in the healthcare industry, financing will be the main obstacle to growth, Vaughan says.
"We're trying to find ways to generate enough revenue from the virtual health programs that we can make them sustainable… That's the tricky part," he says, adding the virtual pharmacy program is a sustainable model but telehealth patient visits with specialists and "third-party" healthcare providers are financially problematic. "In telehealth visits, we are restricted to working with entities that have responsibility for total cost of care."
CHI expects its telemedicine retooling efforts, which include a budding initiative to have highly skilled nurses work remotely in a care management role, to generate significant returns on investment. "As people realize this is having a huge impact downstream, the payment piece will fall into place… We are trying to get experience in this space because we think it is going to keep on growing."
A Long-Term Perspective
The leadership team at Philadelphia-based Thomas Jefferson University Hospitals views telemedicine retooling as an essential investment in its future, according to Judd Hollander, MD, associate dean for strategic health initiatives.
Jefferson has spent about $20 million on a long-term strategy toward telemedicine-based initiatives over the past four years, he says. "We're going to lose money now because it is uncompensated care. We're going to make money later because it will be compensated care. We realize we are taking a financial hit now, but we're going to be ready when the reimbursement catches up."
Jefferson has a telehealth visit partnership with Boston-based American Well, which is bullish on telemedicine retooling, according to Chief Marketing Officer Mary Modahl. "The top areas where we see return for hospitals are: reducing readmissions and lowering the cost of post-surgical follow-up care; attracting new patients to the health system by offering the most convenient care; and, for those under ACO contracts or other quality- or population-based payment mechanisms, keeping patients within the system so they can coordinate all their care needs."
In addition to the American Well partnership, Jefferson has launched several telemedicine initiatives, including a virtual rounds program launched in November 2014, Hollander says. At Jefferson, virtual rounds feature a video link that allows family members to participate remotely when a physician or other caregiver meets with a patient at one of the health system's hospitals.
"Every hospital patient gets asked whether they have family members who they would like to be included in virtual rounds. We call the families to make sure they can download the technology on their computers. We've done 300 of those virtual rounds so far. … The patients love it."
Telemedicine retooling is an example of the kinds of long-term investments health systems and hospitals are making as the healthcare industry shifts from service volume to service value, Hollander says.
"I view telemedicine as an infrastructure cost, just like [electronic medical records]. You've got to invest in your infrastructure to take care of your patients five years from now… In the end, everybody is going to be doing telemedicine for some segment of their system of care. Over time, more and more patients will get comfortable with it. Telemedicine is high value at low cost, but we're not trying to push it on anybody. We're just trying to give people options to get care the way they want to get it.
'The Next Quantum Leap in Healthcare'
"The entire healthcare system, both in the United States and globally, is on the verge of a major transition," says Anita Goel, MD, PhD, chairman and scientific director at Nanobiosym in Cambridge, MA.
Goel, who has several academic and research organization affiliations such as serving as an associate of the Harvard University Department of Physics, is a pioneer in the field of nanobiophysics. She describes this new scientific discipline as the merging of physics, nanotechnology, and biomedicine.
Anita Goel, MD, PhD
"The next quantum leap in healthcare will come with the convergence of these silos, not through advancements in any one of these silos," she says.
At Nanobiosym, Goel has added a dash of information technology to nanobiophysics to develop Gene RADAR. The cloud-connected, mobile device is designed to give healthcare providers the ability to diagnose disease in real-time during a patient visit. Gene RADAR is 10 times cheaper to build than existing "bulky machines" weighing" several hundred pounds and requir[ing] costly infrastructure," she says. Each Gene RADAR diagnostic test costs one-tenth the price of tests conducted with existing technology, she says, adding that the device is on the verge receiving its first approval from the federal Food and Drug Administration.
"You save money, you save time, and you save logistical costs. The overall impact on the healthcare system is tremendous. When you wait longer to get into therapeutics… the greater the chance of advancement of illness and costly complications."
Gene RADAR is an example of how telemedicine and a shift to less costly medical technology can achieve monumental change in the delivery of healthcare services, Goel says. "The next generation of healthcare will be decentralized, mobilized, and personalized. Instead of the blunt instruments of the past, we will be giving patients more precise medications and therapies."
Healthcare providers need to act aggressively to address the multitude of challenges facing their organizations, say executives at this year's HealthLeaders Media CFO Exchange.
If you don't do it to yourself, someone else will do it to you.
Every time this witticism was uttered at the HealthLeaders Media CFO Exchange last week—I heard the quip or variations thereof many times—everyone within earshot nodded approvingly.
Among the four dozen healthcare provider finance leaders who attended the event, which was HealthLeaders’ fifth annual retreat for finance executives, outlooks on their organizations ranged from cautiously optimistic to nearly grim. There was certitude among the participants on a crucially important development for the entire healthcare industry: The transition from volume to value has taken hold and a wave of revolutionary change is inundating the vast majority of health systems and hospitals nationwide.
Dennis Dahlen, senior vice president of finance and CFO at Phoenix-based Banner Health, told his colleagues that boosting care coordination and population health management can require costly investments and unsettling changes. But he says the time has come to embrace change.
"Some of the work we're doing is counter-cultural and trying to keep people out of the hospital," he said of several population health initiatives underway at Banner Health. "We're piloting a lot of things that are scarily effective in keeping people out of the hospital."
Those initiatives include leveraging telemedicine capabilities across an ever broadening spectrum of the care continuum, including constant remote monitoring of ICU patients.
In addition to physicians, Banner has made several kinds of healthcare professionals accessible online to patients, including social workers, pharmacists, and "mobile teams" featuring home health nurses and health coaches. Even with the cost of technology figured in, Dahlen says telemedicine and other population health-oriented initiatives have generated significant benefits for Banner and the health system's patients, particularly among the 5% of the patient population with chronic conditions that drive the bulk of costs. Telemedicine "is successful in keeping people out of the hospital, and it's an attractor," he says. "Patients love it."
In 2014, Banner's care coordination and population health initiatives resulted in an estimated 1,890 lives saved, $109 million saved, and 45,861 fewer patient days in the health system's hospitals, Dahlen says.
John Grigson, senior vice president and CFO at Covenant Health, told CFO Exchange participants that the Lubbock, Texas-based health system is making progress in assuming more risk for cost of care.
Care coordination is a key factor in mitigating risk, particularly for the majority of patients who have moderate risk factors for disease, he says: "There is real money in keeping the risk group from moving into the 5% of high-risk patients."
As Covenant has taken on more risk for cost of care in payer contracting, the health system has been launching initiatives to limit exposure to risk, including creation of a narrow network of post-acute care providers. "The biggest cost overrun we were having was on post-acute care," Grigson says.
Covenant has also moved aggressively to encourage doctors to embrace population health-oriented contracting, he says: "We had to find a better way to influence our physicians."
Monthly and quarterly physician "report cards" have been an effective way to boost influence with the medical staff. "We show doctors the metrics and whether or not they are meeting the metrics," he said, adding that Covenant has begun to "unblind" physician data to show which doctors are delivering high quality at low cost. "The point is to get physicians to think about who they are referring patients to."
Although Covenant is in the early stages of assuming more risk for cost of care, so far gain-sharing contracts have generated about $5.2 million for the health system, Grigson says. "The good news is we saved $5.2 million. The bad news is that if we were at full-risk, we would have saved $10 million."
Several factors have driven the cost savings, including lower readmission rates and increases in diabetes patient compliance with care plans. "We're going to take the next step next year and move to full risk," he says.
Richard Rothberger, corporate executive vice president and CFO at Scripps Health, told peer participants that the San Diego-based health system is planning about $100 million annually in performance improvement initiatives to meet budget targets. "It takes a lot of work, and you have to pay attention to the details," he says.
Scripps is committed to meet performance improvement targets because nearly half of the health system's revenue is generated through serving Medicare patients, who are reimbursed at less than the full cost of care, and competitors are offering commercial services at lower cost through narrow networks. "The opportunity and imperative we have is lowering costs without lowering quality," he says.
Two of the most significant performance improvement initiatives at Scripps have been establishing a horizontal management structure and creating clinical care lines with physician co-management to standardize clinical processes in cardiology, oncology, orthopedics, and women's services, Rothberger says.
Over the past five years, Scripps' performance improvement initiatives have cut costs and generated revenue totaling $425 million. These efforts have enabled the health system to consistently post strong positive operating margins rather than posting low margins or just breaking even, Rothberger says.
After the CFO Exchange concluded, Edward "Ted" Dudley, executive vice president and CFO at Manchester, NH-based Catholic Medical Center, reflected that the event was a unique opportunity for top healthcare financial leaders to share ideas that can be applied at organizations across the country. "It provided me with insights into what initiatives large health systems are launching," he told me.
Dudley says two kinds of initiatives were particularly striking during the roundtable discussions at the CFO Exchange, which was held at the Broadmoor resort in Colorado Springs, CO.
First, squeezing the volume of hospital-based services to lower costs of care is a reality that healthcare providers need to face, he says. "It's not just talk. People are doing it now."
Second, developing technology for the future is an essential element for success. "Technology is not only going to redefine how healthcare is delivered but also who is delivering healthcare," Dudley says. Technology is enabling non-physicians such as registered nurse practitioners to perform many frontline healthcare services that doctors have provided in the past.
Since adoption of the Patient Protection and Affordable Care Act in 2010, uncertainty has been a hallmark of the healthcare industry. As CFOs and other healthcare finance leaders look to the near future, one thing is certain: adaptation is a necessity, not an option.
The nation's alarming obesity rates pose a grave threat to population health and to efforts to contain healthcare costs, a trio of experts says.
Obesity weighs heavily on American health and wealth.
Carrying extra pounds undermines several major weight-bearing pillars of value-based healthcare, including disease prevention, population health management, and cost control. In interviews and email exchanges over the past week, a trio of obesity experts helped me gauge the crisis and suggested ways to slash obesity rates.
Jay H. Shubrook Jr., DO, a diabetes specialist and professor at Touro University College of Osteopathic Medicine in Vallejo, CA, says the societal costs of obesity are becoming too great to bear.
Jay H. Shubrook, DO, FACOFP, FAAFP
"Our public health is at stake," he says. "We will not make meaningful headway on the prevention and treatment of chronic disease until we change the infrastructure that supports unhealthy habits. An immigrant from almost any other country who moves to the U.S. becomes at higher risk for diabetes once they live here. We have a sedentary lifestyle with an abundance of high caloric foods at our disposal."
Shubrook has been witnessing the impact of historically high obesity rates in his patients for nearly two decades.
Before moving to California this year, he served in several clinical, leadership, and academic positions at OhioHealth O'Bleness Hospital, a 132-bed acute care facility in Athens, Ohio. In 2013, O'Bleness identified obesity and poor dietary infrastructure in Athens County as "areas of concern" in the organization's Community Health Needs Assessment. In addition to pegging the adult obesity rate in Athens County at about 31%, the O'Bleness health needs assessment sounds an alarm over limited access to healthy foods in low-income areas and an overly high percentage of fast food restaurants among the area's eateries.
"Obesity is a crisis for two reasons," Shubrook says. "We are seeing lower life expectancy rates among our children, and we already know we can't handle the economic impact of diabetes. It will wipe out healthcare."
Otis Brawley, MD, chief medical officer at the American Cancer Society, says obesity is one of the top cancer risk factors in the United States.
"The combination of high caloric intake, obesity and lack of physical activity will surpass tobacco as the leading cause of cancer death within the next two decades. It is already a leading cause of heart disease, diabetes and orthopedic injury," he says.
Poor dietary habits and high obesity rates threaten to cripple the healthcare industry and the broader economy, Brawley says. "It is imperative that we reverse the trend, as healthcare costs associated with [the obesity] epidemic are already dragging our economy down and eventually will collapse our economy if it continues over the next several decades."
Justin Noble, a certified nutrition coach, children's book author and cofounder of MyBodyVillage.com, says the healthcare industry will be unable to "move the needle" on cost of services as long as obesity and other lifestyle-related health risk factors remain out of control.
Otis Brawley, MD
"The main issue with healthcare in America is that it is focused on treatment instead of prevention. Eighty-six percent of all healthcare spending in 2010 was for people with one or more chronic medical conditions. The gross majority of these conditions are brought about by lack of exercise, poor diet, stress, smoking, and alcohol consumption. In a nutshell, these ailments are brought on by the choices people make. If we put more effort into giving people the tools and the resources they need to make healthy choices, we will find ourselves paying less for the diseases associated with these poor choices. Until that happens, I only see the needle moving up."
The data demonstrating the dire health effects of obesity is distressing:
More than one third of adults and about 17% of youths are obese, the federal Centers for Disease Control and Prevention (CDC) reported in February 2014.
Obesity-related conditions include heart disease, stroke, Type 2 diabetes and several types of cancer, according the CDC's Division of Nutrition, Physical Activity, and Obesity website.
In 2008, the estimated annual medical cost to treat obesity-related diseases was $147 billion, the CDC reported.
Many peer-reviewed studies have identified obesity as a high-risk factor for diabetes. A study published in 2000 concluded size definitely matters in the relationship between obesity and diabetes: "Relative to overweight people with stable weight, each kilogram of weight gained annually over 10 years was associated with a 49% increase in risk of developing diabetes in the subsequent 10 years."
A half century ago, Americans rose to another public health-related crisis with immediate actions and a long-term commitment to change.
Beginning in the 1960s, polluted river infernos, overflowing landfills and other environmental calamities sparked a societal shift in American attitudes about natural resources. The country's collective nest had been fouled. A coalition of powerful institutions – including government agencies, public schools and the entertainment industry – teamed up with communities to protect the environment.
Counter marketing was part of the immediate response to environmental degradation, including one of the most memorable public service announcements of the 20th century, the Keep America Beautiful campaign "Crying Indian" ad in 1971.
Shubrook says similar public service announcements and high-shock-value communication techniques need to be deployed as soon as possible to help reduce obesity. He cites a spoofof Coca-Cola's polar bear ad campaign that features ursine cartoon characters becoming obese on sugary drinks, then developing several related health problems such as diabetes and erectile dysfunction.
"It takes the sexiness of commercials and puts out a different message," he says. "When I show this spoof ad to my medical students, they see the power of marketing. There has to be some counter marketing [to offset advertising of high-calorie foods]."
The American obesity crisis poses more challenges than the healthcare industry can address on its own, Shubrook says, urging the formation of community coalitions to promote healthier lifestyles. In Athens, OH, and surrounding towns, healthcare professionals, political leaders, and business owners have banded together, creating a "critical mass" of activism to reduce obesity in their communities. "In each community, that [coalition] is going to be different. In some cases, youth groups will be crucial. That's the trick: You have to identify the key mass."
Brawley and Nobles say education, particularly for children, will play a decisive role in whether the country can contain the obesity epidemic.
"I do have some hope that we can change our eating practices," Brawley says. "I have more hope for preventing obesity in younger generations. Very few obese adults over 50 are successful with weight loss. European patterns of obesity have not risen over the past forty years as American patterns have. This tells us that populations can eat responsibly. I believe an aggressive education effort can prevent obesity."
Health and nutrition education should be a top public health priority, Nobles says. "First and foremost, the easiest way to get us on the right track is to start at an early age. Healthy children make healthy adults, which make a healthy society. The earlier we teach children about making healthy choices the better. It's much easier to stop a bad habit before it starts than it is to break a bad habit."
Last week I reached out to these food industry companies and associations, but not receive responses to my requests for comment: the American Beverage Association, Coca-Cola, The Food Institute, and Little Caesar Enterprises Inc.
As narrow provider networks become more widespread, healthcare payers and regulators are focusing on the ground rules for out-of-network care payments. Chiropractic and telemedicine practitioners may benefit.
With exclusionary underwriting such as pre-existing condition culling outlawed under the Patient Protection and Affordable Care Act, provider network design has emerged as a key tool for payers to control the quality and cost of healthcare services.
The first stage in the evolution of these so-called narrow networks focused on the adequacy of provider networks, with regulators setting service accessibility standards for patients such as travel distance limits.
As state and federal officials finalize provider-network adequacy standards, billing for out-of-network healthcare services appears destined to dominate the next evolutionary stage of narrow networks.
Robin Gelburd, president of New York-based FAIR Health, says establishment of ground rules for out-of-network care should be a top transparency goal in the healthcare industry.
"Out-of-network care is squarely in the spotlight now, but there are two major prongs to that discussion—elective out-of-network care and 'the surprise bill.' In elective out-of-network care, there often is a unique issue or a pre-existing relationship with a physician who is no longer in the payer's network. When there is a lack of transparency in these elective out-of-network cases, there are unexpectedly high out-of-pocket costs for patients. If there is going to be cost-sharing for this care, it's better for patients to know that before they get a service," Gelburd told me recently.
"With the surprise bill, a patient thinks that a service is covered at the in-network rate, but the bill includes an unexpected out-of-network fee. This is the exacerbation of the times."
FAIR Health is a not-for-profit corporation founded in 2009 to gather and leverage payer claims information. The organization has taken a leading role in healthcare transparency efforts, including provision of data used to set pricing benchmarks for New York's recently adopted healthcare transparency law.
Gelburd says the Empire State's healthcare transparency law, which includes consumer protections for patients who seek out-of-network services, reflects a growing regulatory trend.
"We're starting to see ripple effects across the country, with states experimenting. Protective provisions are needed for consumers, and those protections will vary from state to state," she says, noting that Connecticut has established out-of-network billing standards for emergency care. "The New York law is becoming the national model. Connecticut, New Jersey, and Texas are all looking at regulating surprise bills. It's a necessary outflow of a changing marketplace."
Gelburd says healthcare industry stakeholders who resist the transparency trend are taking a high-risk gamble. "The consumers are not in the chorus line anymore. … They have been pushed into the spotlight, and they are asserting their voice."
New Jersey is another state on the front lines of clashes over billing for out-of-network care.
In a commissioned study that Horizon Blue Cross Blue Shield of New Jersey released in March, the Newark, NJ-based payer calls for limits on the prices that providers can charge for out-of-network care.
"Health plans build provider networks both to manage costs and to promote higher quality care for their members. These relationships are also critical building blocks needed to support evolving accountable and coordinated care structures that aim to promote and reward high-value patient-centered care rather than high-volume fee-for-service medicine," the study concludes. "Current New Jersey rules that apply when health plan members involuntarily utilize out-of-network providers, with no limit on what out-of-network providers can charge, create an incentive structure that is at odds with these goals."
Unreasonable billing for out-of-network services is costing Horizon BCBS hundreds of millions of dollars, the study finds. For out-of-network service claims in 2013, Horizon BCBS would have saved $497 million if the claims had been paid at 150% of the Medicare rate rather than paid at 100% of the out-of-network charge.
In November, Hartford, CT-based Aetna filed suit against a staff physician at Monmouth Medical Center in Lakewood, NJ. The lawsuit, which was filed in the Superior Court of New Jersey, claims the physician filed excessive claims for treatment of abdominal pain totaling $31,939. The doctor's bills exceeded the Medicare rate by nearly $30,000, according to Aetna. The suit also claims the doctor failed to inform his patient that he was not in Aetna's provider network.
Aetna's complaint in the lawsuit accuses the doctor of pricing gouging for out-of-network services: "After Aetna properly paid Defendant the fair value for his services and the accepted rate for similar services in the community by providers in Defendant's area of practice, Defendant sought to exploit and to gouge [the patient] by billing the member for the difference between his charges and what Aetna paid to him—a practice commonly referred to as 'balance billing'."
The patient was billed $10,635, according to Aetna's complaint.
The defendant in the case, Sanjay Bhagat, MD, says the lawsuit was dismissed. He declined to comment about details of the case.
Chiropractic, Telemedicine Could Benefit
While the out-of-network frontier is generating friction over billing for services, some physicians and their patients are mutually benefiting from the rigorous regulatory review of provider networks for adequacy and consumer protection.
A new interpretation of the PPACA by a trio of federal agencies—the departments of Labor, Treasury, and Health and Human Services—requires provider networks to include doctors of chiropractic medicine or coverage for chiropractic services at in-network rates.
"We are calling this a game-changer," John Falardeau, senior vice president of government relations at the American Chiropractic Association, told me recently. "We are thrilled these three agencies went back and gave a better take on guidance for payers. We saw a lot of confusion before."
He says chiropractic physicians have struggled for decades to be included in provider networks. "It's always been a challenge. It's certainly something that many of our providers have become so fed up with that they have gone to cash-only services."
The struggle for inclusion has generated positive results for chiropractors and their patients, Falardeau says. "Chiropractic care has become much more mainstream. You can find it in most health plans. For plans on the new [PPACA] exchanges, 90% of plans cover chiropractic."
Tyler Brannen, health policy analyst at the New Hampshire Insurance Department, says telemedicine could be the final out-of-network frontier for healthcare regulators.
"There is massive growth in telemedicine, which could create coverage issues. Is it covered as a telemedicine service or as a physician who is using telemedicine to provide a service? Is a telemedicine visit covered or is it out-of-network? How do you cover telemedicine services in the home?" he asks.
There may be a couple years of awkward puberty ahead, but provider networks and the rules that govern them are taking their final shape.