Two St. Louis-based providers enter a partnership deal that is expected to be finalized in the spring.
Mercy health system, which features a service area in four Midwestern states, and St. Louis-based St. Anthony's Medical Center announced an affiliation deal this week.
Mercy, which also is based in St. Louis, operates 32 acute-care hospitals in Arkansas, Kansas, Missouri and Oklahoma. In the 2016 fiscal year, the health system reported $5 billion in operating revenue.
St. Anthony's Medical Center features a comprehensive healthcare complex with 767 licensed beds, a Level II trauma center, and Level I stroke center. The organization also operates four urgent care centers. For the 2015 fiscal year, St. Anthony's reported total revenue at $482 million.
Both organizations are faith-based healthcare providers.
Care access and coordination of care are key goals of the affiliation, Donn Sorensen, Mercy regional president, said in a media statement announcing the deal Monday.
"St. Anthony's leadership and legacy of quality, compassionate care aligns naturally with Mercy. Their strong presence in the growing south St. Louis County area enables us to work together to expand access and provide a more coordinated system of care for patients across the entire St. Louis region."
The definitive agreement announced Monday calls for St. Anthony's to affiliate with Mercy's four acute-care hospitals in the metropolitan St. Louis area. Further details of the affiliation deal are under negotiation and are expected to be finalized this spring.
The affiliation between Mercy and St. Anthony's reflects a national trend of healthcare providers entering consolidation contracts that fall short of traditional merger and acquisition (M&A) transactions.
Survey data in a HealthLeaders Media Intelligence Report shows that affiliations, collaborations or alliances are the most common forms of reported non-M&A contractual relationships.
A Georgia-based oncology practice has embraced a multifaceted approach to shifting away from the fee-for-service business model to value-based care.
To succeed in the transformation to value-based care, John K. Hudson, MD, and his colleagues at Augusta Oncology have a plan.
Hudson earned his medical degree from the Augusta-based Medical College of Georgia and has been a practicing oncologist for more than two decades.
Below, he shares the five-step process that Augusta Oncology has adopted to support the practice's quest to succeed in providing value-based care.
1. View Value-Based Care as an Opportunity
The rise of value-based care opens a new chapter for oncologists and their practices, one with its own set of processes, requirements and measures.
But it's critical not to get overwhelmed and lose sight of the exciting opportunity before us. Value-based care promises to reinforce a whole-person, team-based approach that will significantly improve the quality, accessibility, and affordability of the care we deliver to cancer patients and their loved ones every day.
Meanwhile, applying the most advanced treatments with greater efficiency ultimately benefits everyone in our healthcare system.
2. Be Proactive in Adopting New Payment Models
At Augusta Oncology, we knew from the start that we wanted to engage early to both adopt and help shape emerging alternative payment models. We became one of 190 oncology practices from across the country selected for the Centers for Medicare & Medicaid Services Oncology Care Model (OCM).
The OCM enables us to deploy and extend patient-oriented services that address challenges we historically faced to delivering the highest quality care across all patients. In exchange, the OCM provides needed reimbursement for these services, helping keep patients safe while they fight cancer and away from costly hospital visits.
Similar programs are on the horizon for other specialties, and we recommend that practices actively engage them and consider involvement as part of their long-term value-based care success.
3. Prepare for Learning Curves
As oncologists assume holistic responsibility for the quality and cost of patient care, it is important to anticipate the new knowledge and capabilities that must reside in the practice.
Alternative payment models are about much more than adding new forms to an EHR or capturing metrics to populate and submit new reports. At Augusta Oncology, we have had to develop skills and capabilities to answer fundamental questions that support patient safety:
Who is at the highest risk?
How can we better support their complete health and well-being, across all conditions and settings of care?
How can we most effectively guide them when they need it most?
4. Commit to Practice Transformation
Putting value-based care knowledge and capabilities into action requires assessing a practice and how to optimize it for the new healthcare landscape—then enacting a plan for change.
Implementing the principles of population health management has been core to Augusta Oncology's journey. Specifically, we have focused on:
Greater patient engagement and education;
Addressing disparities in access to care; and
Providing increased support for navigating the healthcare system, clinically and financially.
The OCM has been a wonderful first step in helping us to deliver on these [principles]. For other practices in oncology and across specialties, the takeaway is to expect nothing short of practice transformation to optimize the results from these new skills, clinical capabilities and operations.
5. Rethink Partners and Tools to Support
The technologies that supported community-based oncology practices in the fee-for-service era often focused on charting and billing patient visits. As our practice has adopted value-based care, we've needed to be thoughtful in assessing how best to operationalize entirely new needs.
That has meant starting with a comprehensive vision of how we want to holistically support our patients across all settings, then looking for new partners with deep, dedicated subject matter expertise and tools.
For example, on the OCM front, we have implemented purpose-built technologies for value-based care coordination and management, advanced analytics, and registry and regulatory reporting to take our practice to the next level.
Healthcare spending is expected to represent 19.9% of gross domestic product by 2025, according to government economists and actuaries. It accounted for 17.8% of GDP in 2015.
By 2025, healthcare spending is projected to account for one-fifth of the country's economic activity, according to an annual report based on federal data.
National health expenditures are projected to grow "at an average annual rate of 5.6% for 2016 – 2025 and represent 19.9% of gross domestic product by 2025," according to the report published online Wednesday by Health Affairs.
Healthcare spending accounted for 17.8% of GDP in 2015.
Data for the report, "National Health Expenditure Projections, 2016-25: Price Increases, Aging Push Sector to 20 Percent of Economy," was drawn from the Centers for Medicare & Medicaid Services and the Department of Commerce.
The findings are slightly more optimistic than the analysis of last year's national health expenditure projections. In last year's report, national healthcare spending was projected to grow at a 5.8% annual rate and account for 20.1% of GDP by 2025.
One of the reasons for the modestly rosier scenario is actual and projected slower growth in medical service prices, the lead author of this year's report said Wednesday during a conference call with members of the media.
"Growth in medical prices—especially for 2016, 2017, and 2018 were a little bit slower in this year's report than they were in last year's report," said Sean Keehan, an economist in the CMS Office of the Actuary, and the report's lead author.
Price Drivers
Two primary factors are expected to be the main drivers of increased healthcare spending over the next decade, medical prices and use and intensity of services, this year's report says. Two secondary factors cited are population growth and the population's age-sex mix.
Changes in overall medical-service prices are mainly the result of economy-wide inflation and "medical-specific price inflation," according to the report, which defines medical-specific price inflation as the variation between medical and economy-wide inflation.
Inflation's Effect
From 2014 to 2016, the annual average rate of medical-specific price inflation was -0.2%, the lowest rate since 1973.
Medical-specific price inflation is expected to be a key factor in overall medical-service prices from 2020 to 2025, increasing at an annual average rate of 0.5%.
The report projects the annual average rate of overall medical-service prices to increase steadily over the next decade:
1.6% this year
2.4% next year and 2019
2.7% from 2020 to 2025
The conclusions of the report highlight both regulatory uncertainty and continued pressure from payers to contain spending over the next decade.
Conclusions
The authors concede that their conclusions are based on continuation of the current regulatory framework, despite significant uncertainty about how regulatory changes such as repeal of the Patient Protection and Affordable Care Act could impact healthcare spending.
"This analysis finds that under current law and following the recent significant period of transition associated with coverage expansions, healthcare enrollment and spending trends are projected to revert to being fundamentally driven by changes in economics and demographics."
Regardless of any regulatory changes, the report concludes that pressure from payers to contain healthcare spending will continue over the next decade. "Employers, insurers, and other payers will continue to pursue strategies that seek to effectively manage the use and cost of healthcare goods and services."
Variations exist in the volume of hip and knee replacement procedures among hospitals that participated in a Medicare bundled payment program, but the program was not was responsible for those variations, researchers say.
Criticism leveled against a Medicare bundled payment program for lower extremity joint replacement procedures is unfounded, according to a study published by the Altarum Institute, a nonprofit research and consulting organization.
Elliott Fisher, MD, MPH, director of The Dartmouth Institute for Health Policy and Clinical Practice wrote the JAMA editorial. His primary criticism of BPCI was that bundled payments could perpetuate fee-for-service financial incentives that spur service volume.
Altarum researchers found variations in the volume of hip and knee replacement procedures among hospitals that participated in BPCI. They concluded, however, that the bundled payments program was not responsible for those volume variations.
Methodology
BPCI was launched in October 2013. The study used Medicare data on inpatient-service claims for hip and knee replacement procedures performed under BPCI's bundled payment model drawn from 47 hospitals between January 2014 and December 2015.
That data was compared to data on procedures performed at 2,592 non-participating hospitals between January 2011 and December 2013.
"The rate of increase in the volume of procedures was significantly lower than in the rest of the country" than in BPCI-participating hospitals, the Altarum study states.
"Our study shows that the initial group of BPCI participants, those that went into the program in October 2013 and January 2014, had a rate of [volume] increase between baseline and performance years that was significantly lower than the national rate. In fact, for that group, the volume of procedures in 2015 was lower than in 2014."
Drivers of Volume
The number of Medicare beneficiaries living in the area around BPCI-participating hospitals and the level of hospital competition in those markets were key drivers of service volume variation, the Altarum study says.
"Increasing volumes between 2011 and 2014 were associated with growth in the population of Medicare fee-for-service beneficiaries and the number of hospitals in a [Hospital Referral Region]."
Hospital consolidation and competition were additional key drivers of increased service volume is some marke
Payers and providers alike must adapt to leaner business models and patient populations that are older and frailer than a general patient population.
Medicare and commercial accountable care organization (ACO) models are not created alike.
MaineHealth ACO, which generated a Top 10 shared savings payment in the first performance year of the Medicare Shared Savings Program, has found that participating in MSSP is more financially challenging than commercial ACO contracts.
"From a financial perspective, our commercial payers are willing to help support the work that we do; so they see the value in our care management programs and the work that we do to integrate our physician practices," says Jen Moore, chief operating officer of MaineHealth ACO, based in Portland, ME.
"We do not get that kind of funding from the governmental programs," Moore says.
"All of the commercial payers are willing to pay a per-member-per-month fee to the ACO for doing care management, working to communicate within our care network and being the liaison between our providers and the payer. They see tremendous value in all of that."
Commercial accountable care contracts tend to have better financial incentives than MSSP offers for physician practices that participate in MaineHealth ACO, she says.
"For the physician practices, [commercial health plans] are willing to pay for pay-for-performance. So they will have a shared-savings arrangement; but many of them will also say, 'If you are also successful on quality metrics, then we are willing to pay you additional dollars for that success.' "
The leaders of ACOs must be prepared for tough contract negotiations with commercial payers. "It is not always rosy and we have to fight for that support. More and more payers are tying dollars to performance," says Moore.
"Though pay-for-performance is a reasonable approach, it doesn't recognize the upfront investments made by practices to do the work that is not paid for in our current fee-for-service environment."
Investing in ACOs
Aetna Inc. provides patient-centered medical home and paor-performance incentive payments to healthcare providers to help finance investments necessary to succeed in ACO contracts, says Paul McBride, MSPH, CEO of Accountable Care Solutions-Aetna, a business unit of the Hartford, CT-based commercial payer.
"Providers need to invest in primary care office staffing; information technology [such as] electronic medical record enhancements, a data warehouse and referral management tools; and a centralized support team," McBride says.
"The health plan will often help offset some of these upfront provider costs with medical home or population health payments."
If ACOs and the physicians who participate in them operate successfully, then health plans can generate financial gains. "At Aetna, depending on the ACO model, we have seen from $7 to $29 per-member-per-month savings," he says.
As of December, Aetna had established contracts with more than 280 ACOs, according to McBride.
To increase their odds of success in a Medicare ACO model, provider organizations need to gear up for an opportunity that has high risks and potentially high rewards, says Emily Brower, MBA, vice president of population health at Newton, MA-based Atrius Health.
"For this population, which has high-risk patients, there does seem to be a significant return on bringing care to the patient. You have to know which patients will benefit most from the highest-cost part of your delivery system," she says.
For the 2015 performance year, Atrius earned $4.4 million in shared savings in the Pioneer ACO, Medicare's first ACO model that requires healthcare providers to assume both upside and downside risk for the costs of patient care. The nonprofit organization earned $2.8 million in shared ACO savings in 2014.
"Sending care to one patient's home is expensive; but we were careful in identifying those patients, and so far that has had very positive ROI and the patient satisfaction is just incredible," Brower says.
Generating nonpatient service revenue such as grants and rental property income is key to keeping the black ink flowing, says the CFO of a two-hospital organization.
Patient services are the dominant source of operating revenue at the vast majority of health systems and hospitals, but academic studies and independent research have found that a small but significant portion of revenue comes from non-clinical sources.
At seven healthcare organizations contacted for an upcoming HealthLeaders magazine article, net patient service revenue as a percentage of total operating revenue ranged from 83% to 96% in recent years. All but two organizations posted net patient service revenue figures above 94%.
Kansas City, Missouri-based Truman Medical Centers, which operates two acute-care academic hospitals, posted a relatively low 83% figure for net patient service revenue as a percentage of net operating revenue in 2016 mainly because of its safety-net mission.
Last year, TMC generated $516 million in net operating revenue. Nonpatient operating revenue—a balance sheet category that accounts for revenue related to a health system's core mission—was 16% of net operating revenue.
The remaining 1% of TMC's net revenue was generated from financial activity unrelated to the health system's core mission.
At safety-net hospitals and other organizations that operate on thin margins, every source of revenue is precious, TMC CFO Allen Johnson says. "You have to look at opportunities that we probably have not taken advantage of before."
Strong Ties with Other Businesses
TMC has in recent years embraced partnerships with Walgreens pharmacies and U.S. Bank, which operate branches at TMC's pair of campuses. TMC also has a strong partnership with Cerner Corporation.
"Cerner is right in our backyard here in Kansas City, and we have a very close relationship... In fact, they use Truman as a client visit site. A lot of Cerner clients that come into a Truman facility look at our Cerner information technology products," says Johnson.
TMC does not receive direct revenue from Cerner for those client visits, but does receive credits against IT software expenses. "We are expanding that relationship now," says Johnson. "We want to get to the point where we are going to be Cerner's living lab."
Securing grant funding and charitable contributions are an essential element of financial success at safety-net health systems and hospitals, he says.
Grants and Philanthropy
"A major nonpatient revenue source for a safety net like TMC is grants and contributions. Because of mission-related financial challenges, TMC generates limited capital funding. TMC and its charitable foundation [have] developed strong relationships with both local and non-local foundations to fund capital projects."
TMC has recently drawn on grants and contributions to finance these capital projects:
An inpatient bed expansion and an inpatient mental health unit.
Funding source: A $4.5 million in grant from The Health Care Foundation of Greater Kansas City.
The purchase of a NanoKnife surgical system for the treatment of pancreatic cancer.
Funding source: A $500,000 grant from The Hall Family Foundation
The bottom line for safety-net health systems and hospitals is that every dollar of revenue is important to keep the organization financially sound, Johnson says. "We have all kinds of challenges here. So these other nonpatient revenue streams are very important for us to maintain our financial viability."
Using survey data provided by the American Hospital Association, a new report identifies benefits to hospital mergers and refutes the notion that consolidation raises prices.
Hospital mergers reduce operating costs with newfound efficiencies and economies of scale, according to a study paid for by the American Hospital Association.
"Hospital leaders consistently indicated in interviews that hospital mergers can result in substantial benefits, and their views are supported by our econometric analyses," wrote the report's authors, Monica Noether, PhD, and Sean May, PhD, vice presidents at Charles River Associates, a consulting firm that specializes in mergers and acquisitions, antitrust and regulatory support.
The report, based primarily on survey data provided by the AHA and supplemented by data compiled by Irving Levin Associates, identified three drivers in mergers and acquisitions that reduce operating costs:
Achieving economies of scale
Reducing capital costs
Boosting clinical standardization
"While these cost reductions most greatly benefit the acquired hospitals, the benefits of scale inure to the acquirers as well. These views are confirmed in our empirical analyses, which find a statistically significant 2.5% reduction in annual operating expenses per admission at acquired hospitals," the report says.
Economies of Scale
Achieving economies of scale comes from reducing fixed costs such as supply chain, business office administrative functions, and facility management, the report says.
"One hospital leader noted that his system operates about 70 imaging centers; outfitting all of them with standardized equipment reduces the costs associated with parts, maintenance, and staff training as well as enabling achievement of lower prices on the equipment purchases," the CRA study says.
Capital Expenses
Hospital mergers cut capital costs through two mechanisms, the report says.
"First, the costs to access capital in municipal bond markets are lower because larger systems typically receive higher ratings (and many smaller hospitals and systems are not rated at all)."
"Second, mergers can often allow capital expenditures to be avoided. Frequently, the acquiring hospital is highly utilized and faces capacity constraints. This is particularly the case when the acquirer is an academic medical center (AMC) with a well-established brand."
Hospital executives "universally indicated that some of the most significant savings that they have achieved through mergers result from the standardization of clinical processes," the report says.
The study cites multiple financial benefits from clinical standardization, such as fewer avoidable patient complications, reductions in supply and equipment costs, and lower staff training costs.
Notably, the study contradicts one of the most widely posed economic criticisms of hospital mergers—the contention that medical-service pricing usually increases after hospital mergers because the transactions boost the bargaining power of the merged hospital organization with payers.
In recent years, opponents of hospital mergers have cited the risk of higher medical-service pricing to successfully block M&A deals. In a 2015 Massachusetts Superior Court ruling against Partners Healthcare's attempt to acquire several hospitals in the Boston area, the ruling cited the likelihood of higher pricing as a main justification for scuttling the deal.
The report acknowledges that the Federal Trade Commission "has stated that it believes that most benefits can be achieved through looser affiliations that do not involve meaningful financial integration or joint contracting."
Post-Acquisition Price Spikes Refuted
The report concedes that its finding on the impact of hospital mergers on medical-service pricing is statistically limited, but they report a "statistically significant decline in revenue per admission following acquisition, which appears inconsistent with studies that link hospital consolidation with higher prices paid by managed care organizations."
As noted above, they found that hospital mergers reduced operating expense per admission 2.5% at acquired hospitals. They also found that hospital mergers decreased net patient revenue per admission 3.9% at acquired hospitals.
"Although these estimates suggest that mergers are associated with larger decreases in revenue than in costs, the precision of the estimates is such that the magnitudes of the reduction in costs and revenue are not statistically different from each other," the report said.
A campaign promise and market forces are placing mounting pressure on healthcare providers to give meaningful price and quality information to patients.
Boosting price transparency is one of the few specific healthcare reform proposals President Donald Trump made during the 2016 election campaign and healthcare finance executives are bracing for the challenge.
Now that he is in office, "transparency in healthcare is not going away. It is not a flavor of the month," says Amy Floria, CFO at Goshen Health in Indiana.
But efforts by individual states to advance price and quality transparency by providers have gained little traction across the country. Last summer, the vast majority of states received failing grades in a report card on transparency laws published by a pair of nonprofits—the Health Care Incentives Improvement Institute and Catalyst for Payment Reform (CPR).
There are compelling reasons to strive for price and quality transparency in the healthcare industry on a national level, says Suzanne Delbanco, PhD, executive director of CPR, which is based in Berkeley, CA.
"One is the impact that it can have on the healthcare marketplace, and the other is to provide practical information for individual consumers who need to make decisions."
On a national scale, she says, having a price and quality information tool "would allow us to see variation both across and between markets for quality and price. It would potentially support greater competition because it is possible that healthcare providers would no longer view competitors in their local market as the benchmark for pricing and look further afield."
'It Is Not Easy'
But the challenges involved in establishing price and quality transparency at healthcare providers are daunting.
"Number one," says Floria, "interpreting the information can be very difficult."
Two, I would love to know, when you go to some of these transparency websites, how many people actually know what their deductible is—what their maximum out-of-pocket cost is and whether they have met it?"
She says the accuracy of the information "is a huge complexity that providers need to figure out and overcome. It is not easy. If it [were] easy, more people would have figured it out by now."
Memorial Healthcare System has been figuring out how to provide price and quality transparency for its patients with a set of online tools for about three years. The Hollywood, FL-based health system launched an online cost estimator and quality assessment tool in December 2014, and it plans to have similar online capabilities available for insured patients by April.
Stanley Marks, MD, FACS, senior vice president and CMO at Memorial Healthcare, says the organization has solved many of the problems associated with healthcare transparency with a firm commitment to giving patients accurate and decipherable information about the price and quality of services.
"There was a time when I thought the cost equation was going to be much easier to project than the quality equation; but frankly, they are both extraordinarily difficult."
"The federal government has tried to standardize quality reporting using their [Centers for Medicare & Medicaid Services] metrics, and those are huge challenges," says Marks.
"The data that comes from the federal government is very complex and very difficult to understand—certainly for the average consumer. The data is hard enough for those of us who earn our livings understanding and producing this type of data."
Despite the obstacles involved in giving patients real-time information about the price and quality of its services, the leadership team at Memorial Healthcare has determined that the effort is essential to the organization's long-term success.
"If you are not showing and being transparent about both price and quality, you are not going to be able to practice healthcare. Those organizations that are in the forefront and are trying to provide transparency in a way that lends a level of clarity to both the quality and the price of services will clearly be the winners," Marks says.
Regulatory vs. Market-Oriented Approaches
While Trump favors increasing healthcare transparency, he has not said whether this goal should be achieved through regulation or market forces.
If the Trump administration and Congress embrace a regulatory approach, Floria says healthcare providers should be able to rise to the challenge if new regulations build upon successes achieved in states such as New Hampshire, which received an "A" grade for state price transparency laws in 2016.
"If President-elect Trump came out and said we have a year to figure out how to provide a cost estimate at time of service for out-of-pocket costs and the price that a patient's insurance is going to pay, healthcare providers would figure it out, as long as the language was to provide a reasonable estimate," she says.
"I am not someone who advocates for national regulation on pretty much anything; but if it came to pass, we would toe the line and figure out a way to do it just like every other regulation that has come down the pike in healthcare."
"National regulation may be what it takes to make transparency in healthcare widespread," says Floria.
"But before national regulation comes out, there needs to be a lot of conversation with providers in states where transparency is working well to see on a national level how we can have similar requirements, with some flexibility, too."
In addition to regulation, Floria says the federal government could take "carrot or stick" approaches to cajole or prod states to adopt healthcare transparency laws.
"One way the federal government could require states to pass transparency laws is to say they will not provide Medicaid funding if states do not meet the minimum requirements of price transparency. Another way to do it would be to increase Medicaid funding to states that pass transparency laws—that would be better," she says.
Matthew Muhart, executive vice president and chief administrative officer of Memorial Healthcare, says he is resigned to the inevitability of new regulations mandating healthcare transparency but asserts market forces can and should be the primary drivers of change.
"There will be regulatory approaches—regardless of whether they are good, bad or indifferent," he says. "The government realizes that the current methodology in terms of data reporting is not perfect. They will continue to try to improve that."
"The government also needs to listen to the industry. For those of us who have been making attempts at establishing transparency, the government needs to look at those attempts and incorporate them into whatever the regulatory schema will be in the future," Muhart says.
The thrusting of patients into a more active and financially committed role in their healthcare is unleashing market forces that are on the verge of making transparency an unavoidable feature of the way health systems, hospitals, and physician practices function, he says.
"I strongly believe that market forces are the greatest lever to moving transparency to a national scale. If, in fact, we are in an environment where more and more of the healthcare spend is not in the form of premium, per se, but more in the form of out-of-pocket spending at a transactional level, market forces will drive transparency across the country more than anything."
President Trump's pick for Health & Human Services secretary has suggested there are opportunities to advance healthcare reform efforts, but has offered few details as to how, a pair of healthcare policy experts say.
Two confirmation hearings for President Donald Trump's nominee to serve as Department of Health & Human Services secretary have generated more questions than answers about the future of healthcare reform, policy experts say.
Last week, Tom Price, MD, who has served as a Republican member of the House of Representatives since 2005, answered questions for nearly four hours during a hearing conducted by the Senate Committee on Health, Education, Labor & Pensions (HELP).
On Tuesday, he faced an additional four hours of questioning before the Senate Committee on Finance. [View video.]
"We have got to see the details," said Laura Wooster, MPH, interim senior vice president of public policy at the American Osteopathic Association.
"The senators have only seven minutes to have their speech, ask their questions, then give Dr. Price an opportunity to respond," Wooster said.
"We are getting very small soundbites, and it is very hard to determine whether his answers, on the face of them alone, are satisfying or not."
"Should Dr. Price be confirmed, we look forward to seeing more proposals of what he plans to do and how he plans to offer an opportunity for Americans to have access to affordable healthcare," she added.
During Tuesday's hearing, Price avoided providing detailed answers on a host of policy questions, repeatedly saying he would follow the lead of Congress on the setting of policy.
He repeatedly deferred to the will of Congress when questioned by GOP and Democratic lawmakers about:
The tools he would use to stabilize and improve the individual insurance market
Medicare reform proposals, including privatization of the program and raising the eligibility age
Maintaining the pre-existing condition provision of the Patient Protection and Affordable Care Act (PPACA)
The Trump administration's plan for replacing the PPACA after Republican lawmakers repeal President Barack Obama's most ambitious domestic policy initiative
Increasing research funding for treatment of Alzheimer's disease
Reforming the Indian Health Service
Repealing the so-called Cadillac Tax provision of the PPACA
Finding resources to maintain medical services in Puerto Rico, which faces a deepening financial crisis
Ensuring that all veterans have access to medical care
Price, an orthopedic surgeon, who before being elected to Congress served as medical director of the orthopedic clinic at Grady Memorial Hospital in Atlanta, did offer a handful of specific policy prescriptions during the Senate Committee on Finance hearing.
He said high-risk pools to provide patients with catastrophic coverage and the pooling of individuals under "the old Blue Cross Blue Shield model" could be components of replacing the PPACA health insurance exchanges.
He committed to extending the Children's Health Insurance Program for at least five years before CHIP expires in September. And he said that the country has been "missing the boat" on promoting telehealth opportunities in rural communities.
Price and several Republican senators signaled their preference for repealing the PPACA and replacing key elements of the healthcare law with market-based and state-directed reform measures.
In response to committee chairman Sen. Lamar Alexander's (R-TN) question about setting goals for repealing and replacing the PPACA, the Price expressed a strong preference for state-based reform efforts over federal efforts. "Folks at the state level, as you well know having served there, know their populations better than we can know them," he said.
In response to a question from Sen. Rand Paul, (R-KY), about the potential impact of legalizing more forms of insurance than were allowed under the PPACA, the Price said he favors offering patients more market-oriented choices for healthcare coverage.
"Choice is absolutely vital; and I know that if we have as a principal and as a goal having patients have those choices, then I believe that patients will select the kind of coverage they want. The choices that ought to be available to them are a full array of opportunities," including high-deductible and catastrophic-coverage plans, Price said.
'A Step Backwards'
Elliott Fisher, MD, MPH, director of the Dartmouth Institute for Health Policy and Clinical Practice, told HealthLeaders that he is highly skeptical of replacing health plans on the PPACA insurance exchanges with a suite of coverage options that includes health savings accounts (HSAs), high-deductible health plans and high-risk pools.
"They are a step backwards," he said after Tuesday's hearing.
"Half of the U.S. population has at least one chronic condition. In any one year, five percent of the U.S. population accounts for 50% of healthcare costs. HSAs are great for people who are not sick," said Fisher.
"HSAs have a serious limitation in terms of their equity. High-deductible health plans also have serious limitations. They discourage patients from seeking care when they need it; and then once people exceed their deductible, they have no incentive to choose care wisely," he said.
There are more promising individual insurance market models for the Trump administration to follow, Fisher said. "Carefully crafted benefit designs that provide minimal barriers to primary care, then offer financial incentives for patients to make wise choices about elective and expensive procedures—with their involvement in the decision about whether to get the service—makes complete sense."
Widespread adoption of California's state-administered PPACA insurance exchange, Covered California, could be the best approach to establishing a sustainable individual insurance market, Fisher said.
Covered California "does several things very effectively. We know that the key element to the success of the exchanges is having as many people as possible sign up—that broadens the risk pool and keeps premiums down." In addition, Fisher said, the California model:
Makes it "easy for patients to look at health plans."
Requires "health plans to have similar designs."
Is clear: "People are not hood-winked by fake insurance, which was an old problem and still is a problem on some of the exchanges—patients can't tell what the insurance product is, so they choose a low-cost product that does not meet their needs."
As for why the exchanges are failing, Fisher explained that "they were not marketed effectively, the only people who are in the exchanges are sick… [and] plans raise[d] their prices," causing patients to withdraw, and the exchanges to collapse. "Covered California is the opposite."
The Way Forward
Despite their reservations about Price's nomination, Fisher and Wooster are hopeful that the Trump administration and the Republican-controlled Congress can find opportunities to advance healthcare reform efforts across the country and engage key stakeholders in constructive dialogue.
Republicans "could and should support access to much better information," said Fisher. States are experimenting with delivery systems, "but right now, we are not doing enough to learn which of those models of care and which of those policies are really leading to better performance for the American public," he said.
Although the HELP committee hearing on Price's nomination was short on policy details, it was a step forward in the debate over the future course of healthcare reform efforts, Wooster said.
"We are getting a good snapshot. This hearing was kind of a de facto platform for a larger conversation about healthcare reform."
For primary care physicians frustrated with the financial challenges of operating practices that bill services to insurance carriers, a cash-only practices could be a viable option.
After operating an independent practice in St. Joseph, MI, for a decade, Alan Smiy, MD, accepted an offer in 2012 to work as an employed physician at Borgess Health in Kalamazoo.
He went to work and shuttered his "very healthy" practice.
"We had a lot of patients. We had a good staff. But the business model in today's world was just not sustainable," Smiy said recently.
When he closed the doors at his primary care practice, Smiy had a patient base of 7,000 patients, with more than 4,000 having active charts. Despite the volume, however, the financial numbers were weak.
"One thing we noticed was increasing costs in our overhead from the manpower required to handle the patient load," he said.
Then there were the delays in insurance payments. "We would experience everything from a 60- to 90-day delay; and in some cases, up to six months. You would send in a claim that you thought was clean, and the insurance carriers would find ways to hang it up."
"When you add it all up," Smiy said, "a small business can only tolerate so much of that."
Employment vs. Independence
"As an employed physician, you definitely lose some autonomy in the decision making of how the practice is run; however, you also have administrative support to manage the stress of the day-to-day operations," he said. "This allows more concentrated time to focus on patient care. Also, your cash flow is at a predictable, constant rate."
"As an independent physician, you seemingly have more autonomy, but one quickly realizes that there are several imposed limitations from third-party payers who offer more obstacles in the way of patient care. Sadly, they are also responsible for a good portion of the cash flow challenges within the private practices. In both cases, the level of total compensation achieved is directly proportional to the effort given."
In 2015, the shortage of primary care physicians in St. Joseph tugged at Smiy's conscience. "Over the couple of years that we were closed, a number of other physician offices closed and one physician retired, leaving the community short about four or five primary care physicians."
"You figure if every practice was serving four or five thousand patients, that's about 20,000 patients who did not have a doctor to go to. At the same time, we noted that Medicare was not being accepted at many of the offices. We were hearing from people in town that there was more need for physicians."
After consulting with his wife, conducting research on the cash-only business model, and "saying a few prayers," Smiy took a leap of faith and re-opened his independent practice, this time on a part-time basis.
He decided to open a cash-only practice with office hours in the evenings and Friday afternoons. The schedule allowed Smiy to continue working at Borgess Health, without any conflicts of interest, he said.
"We opened in November 2015, and it's been steady growth ever since. There's been more acceptance of the cash practice. The patient population is growing."
Currently, Smiy sees about six patients a day at his part-time cash practice, and he expects patient volume to double this summer during the vacation season. The greatest factors driving growth of patient volume have been word-of-mouth and the fact that the practice offers after-hours appointments. He promotes the practice using Facebook, radio, and printed flyers distributed at area pharmacies.
Staffing includes a nurse and front-office receptionist working part-time hours, and Smiy's wife acts as office manager. It is generating a positive operating margin, he says.
Smiy cites three factors that have contributed to the measure of cash-only practice success that he has achieved so far:
Passing on savings from lower overhead costs to his patients. "Our rates are about 40% lower than other offices."
Delivering above-par service. "For some offices, you can call for an appointment and may have to wait three to six months before you can walk in the door. If I have a patient call me today, I am going to get them in Monday or Tuesday of next week."
Spending more time with patients. "What I do at this practice is what I was trained to do, and it allows me to be the physician that I want to be versus working in an environment where you are driven by quotas and government numbers."
The financial mechanism of a cash-only physician practice is relatively simple and efficient, he says.
"A patient comes in for a level of service such as diabetes follow-up. The patient get seen, they pay cash for their visit upfront, then they are given a receipt and a pre-populated insurance form—the CMS 1500 form—at the end of the visit along with instructions on how to submit the form."
The patient is instructed to submit the receipt and the CMS insurance form to his insurance carrier, and then to wait for reimbursement from the carrier.
Medicare patients are being reimbursed in about three weeks, and usually get 80% of their money back, says Smiy.
"When I took Medicare patients at my old practice, I would wait six months for many of those claims, and the reimbursement would not be anywhere near 80%. On a typical $150 charge, we might get back $22 or $23 from Medicare."
