Hospital associations and trade groups are lobbying federal officials to account for how "the disease of poverty" impacts the health of patients—and costs hospitals.
The Missouri Hospital Association (MHA) is in the vanguard of a lobbying campaign to convince Congress and the Centers for Medicare & Medicaid Services to risk adjust hospital readmissions penalties for the socioeconomic and sociodemographic status of patients.
MHA has developed an augmented version of the CMS risk-adjustment model for the Hospital Readmissions Reduction Program (HRRP) to give greater weight to factors associated with a patient's economic resources and the poverty level in a patient's neighborhood.
The MHA's augmented risk-adjustment model shows that 43% to 88% of variation in quality measures between Missouri hospitals is tied to Medicaid status and the communities where patients live.
The financial stakes are high.
Last year, the 30-day readmissions penalty totaled $420 million, with the Medicare reimbursement reduction spread across 2,592 hospitals.
Pressing CMS and Congress to change the risk-adjustment model for HRRP is a top priority at MHA this year, President and CEO Herb Kuhn says.
"When we launched this effort in February, we had letters of support for our initiative from the American Hospital Association, the Association of American Medical Colleges, the Catholic Health Association, and the Federation of American Hospitals."
Since that time, "we have had a number of really good conversations with a number of our colleagues at state hospital associations across the country who are looking very aggressively at this in their own states—states like Ohio, Pennsylvania, Massachusetts, Maryland and many others."
Modest Results So Far
On June 7, the House of Representatives passed the Helping Hospitals Improve Patient Care Act of 2016 (H.R. 5273). A section of the legislation gives the secretary of the Department of Health and Human Services authority to revise the CMS risk adjustment model for hospital readmission penalties.
"We view it as a good first step. It is not as robust as we would like it to be; but, finally, we are seeing a recognition in Congress that we have to move in this direction," Kuhn says.
Mat Reidhead, vice president of research and analytics at MHA, says the hospital association's augmented risk-adjustment model for HRRP gives a much more accurate reflection of the costs associated with treating economically disadvantaged patients.
"Our model differs from the CMS models in two key characteristics. First, in addition to all of the patient's clinical history, we also risk adjusted two sociodemographic factors: whether the patient qualifies for Medicaid and the poverty rate in the patient's neighborhood."
"The second key difference, is that we nest our model at the patient's neighborhood level in order to capture community-level effects that in most cases are far outside of a hospital's traditional sphere of influence."
"By doing this," Reidhead says, "we are attempting to capture effects that might influence the patient's risk of readmission that are attributable to their neighborhood, like whether the patient lives in a neighborhood with access to healthy food, whether there are social support systems available to the patient, whether there is reliable transportation for follow-up care and transitional care opportunities, and the list goes on and on."
Hospitals Penalized
HRRP is unfairly punishing hospitals, particularly safety net hospitals, Kuhn says.
"What we see, and what the growing body of evidence shows, is that hospitals are being penalized for treating and caring for socially complex patients. The risk models don't risk adjust for the patient's community or the disease of poverty."
Developing accurate risk-adjustment models is crucial to the success of shifting from fee-for-service delivery of medical services to value-based reimbursement, he says.
"The disease of poverty is real, and it has a real impact. As we continue to move more of our payment system to value-based payment, it is incumbent upon us to make sure that the risk-adjustment models are as accurate as they possibly can be."
"A lot of money is being put behind these programs. And with the era of transparency, we are creating impressions about good hospitals vs. bad hospitals. We've got to have risk adjustment as accurate as possible," Kuhn says.
Care coordination and bundled payments are cost-lowering drivers. "It's not savings to the hospital," says one executive. "It's avoided medical cost."
This article first appeared in the June 2016 issue of HealthLeaders magazine.
With prodding from federal officials and an industrywide shift toward delivering services based on value rather than volume, healthcare providers are making progress on reducing hospital readmission rates, federal statistics show.
From 2007 to 2011, the all-cause 30-day hospital readmission rate for Medicare fee-for-service beneficiaries held steady at about 19% to 19.5%, according to the Centers for Medicare & Medicaid Services. But those rates fell to 18.5% in 2012 and 17.5% in 2013, CMS reports.
"We've seen amazing results already," says Brian Holzer, MD, MBA, senior vice president for home and community services at Pittsburgh-based Allegheny Health Network, which has expanded postacute care services and partnerships dramatically over the past two years. In 2014, AHN—an integrated system that reports $2.4 billion in revenue and 82,000 annual discharges—purchased four companies to establish a full suite of home health services: nursing, home medical equipment, home infusion, and hospice. Compared to 2014, AHN posted a 5% decrease in all-cause hospital readmissions last year in the health system's home-health service line, mainly on the strength of its home-health business unit, Healthcare @ Home, and improved care coordination with skilled nursing facilities, he says. The estimated cost avoidance resulting from the lower readmissions rate among AHN's home-health patients last year is $4.5 million.
While cost avoidance for patients and payers is a step forward in value-based medicine, financial incentives aligned with the new care models that drive down hospital readmissions are needed to expand and sustain value-based delivery of services, he says. "This isn't savings to the hospital. This is avoided medical cost. Until we align the financial incentives, you can understand the complexity of a health system going all-in when they are not really all-in. We are doing the right thing for the world that we believe we will be in shortly."
For the fiscal year ending in December 2014, AHN reported an operating loss of $37 million, but the setback was a $365 million improvement over the previous year's bottom line. Highmark Health, AHN's corporate parent, posted total revenue for 2014 at $16.8 billion.
Since 2012, CMS has launched several initiatives that are targeted in full or in part at hospital readmission rates, including payment penalties for a handful of conditions such as heart failure and pneumonia in the Hospital Readmissions Reduction Program, the Partnerships for Patients care transitions program, and public reporting of readmission rates on Hospital Compare.
The HRRP penalties have spurred change, says Jeffrey Brenner, MD, executive director of the Camden Coalition of Healthcare Providers, a nonprofit organization working to improve population health and develop value-based care models in one of the most economically disadvantaged communities in New Jersey. "This is the most exciting moment of my career. Partly because of readmissions penalties, people are having discussions they have never had before," he says.
For the federal fiscal year ending this September, CMS estimates the total payment penalty for hospitals with high readmissions rates will be $420 million.
"When everything is said and done, the whole health system is going to look different," Brenner says of initiatives such as HRRP that are accelerating efforts among healthcare providers to build more seamless care continuums, improve care coordination, establish community partnerships, and engage patients to set and achieve their health goals.
Efforts to reduce avoidable hospital readmissions reflect the kinds of fundamental changes that are beginning to take hold in the healthcare industry, Brenner says, noting most care coordination models have nurses and social workers playing the role of quarterback for patients rather than doctors. "We're at step one of 10 steps; and by the time you get to step 10, step one won't even be recognizable. Steps one and two are going to be painful: New roles for staff, new ways of getting paid, and less prestige for doctors."
Bundled payments drive change
In Madison, Wisconsin, UnityPoint Health Meriter Hospital is using bundled payments for hip and knee procedures as a springboard to quicken the organization's adoption of value-based care and to reach beyond the hospital walls to establish better relationships with patients and community partners.
Meriter, a member of Iowa-based UnityPoint Health and 448-bed community hospital, started performing knee replacement procedures under bundled payments in 2012 and contracted with CMS to perform hip procedures through the agency's Bundled Payments for Care Improvement program in 2014.
For the fiscal year ending December 2014, UnityPoint Health posted net revenues at $557 million. Meriter was UnityPoint Health's strongest subsidiary in 2014, posting net revenue at $405 million.
Readmissions reduction is one of the primary goals in Meriter's approach to bundled payments, says Philip Swain, director of orthopedics and rehabilitation at the hospital. "Our bundled payment program would fail if we had high readmission rates. Our bundled payment program would fail if we had postacute care usage too high. Our readmission rates are down 60% since before we started bundles," he says of the drop in joint replacement procedure readmissions from 2012 to last year. "It's had a halo effect over all of our joint-replacement patients. The commercial payers have also seen [that we are achieving] reductions in readmissions."
Meriter's bundled payments model has key elements inside and outside the hospital.
At the hospital, care navigators play a crucial role for patients in the bundled payment program, Swain says. "They hold the hand of the patient all the way through the care continuum. They look proactively at risk factors. They start mitigating those risks before the patient even goes into surgery."
The care navigators are part of the patient discharge process and stay in touch with patients through phone calls after they leave the hospital. "They make sure the patient's medication is managed properly. They eliminate as many pitfalls as possible," he says.
Care navigators serve as an essential point of contact for patients before, during, and 90 days after a hip or knee replacement procedure, says Pamela Dahlke, RN, BSN, MBA, Meriter's director of care coordination. "We follow those patients through a more extended period of time."
Care navigators play a pivotal role in the postacute care setting, she says. "High success comes with connecting patients with providers who they can get to."
When care navigators began reaching out to community partners, Dahlke says local skilled nursing facilities were "skeptical at first," chafing in particular over the drive in bundled payment contracting to shorten length of stay at hospitals and postacute care facilities. "In this journey, we are all in it together; but when you talk about length of stay, it's a difficult conversation to have."
Meriter has established informal relationships with several SNFs and is working on creating formal partnerships in the near future, Swain says.
"Our approach is twofold. Our first priority was just to get out to our nursing homes and meet with them," he says, noting many local SNFs had never worked with bundled payments, which require lower lengths of stay, higher-quality care, and reduced readmission rates to be successful. "Our second goal is to develop more formalized relationships with skilled nursing facilities. We can't steer patients—they have choice. But you can share objective quality information with patients that can help them with their decision making. … Any relationship we make with a nursing home has to be a two-way street. We ask what we can do to help reduce length of stay. We ask how we can work together to meet goals."
A robust home-health capability also is an important component of Meriter's model for bundled payments. Home health nurses are the frontline staff members for the hospital's care transition program, which features home visits and an average of five check-in phone calls in the 30 days following hospital discharge, says Mandy McGowan, clinical manager at UnityPoint Health-Meriter in the home health unit in Madison. "We can help get patients out of the hospital and prevent readmissions. Keeping the care at home—safely—will drastically reduce cost of care to the system."
Meriter's integrated electronic medical record system includes home health nurses, which boosts care coordination and eases the hospital discharge transition, McGowan says. "The discharge goes much smoother. We have what we need. We work with discharge planners in the hospital. They speak with us several times per day."
The communication between hospital staff and home health nurses is a key to postacute care success when treating high-risk patients, she says. "We have built up the comfort level of discharge planners so they can talk with patients about postacute care options. All discharge planners spend at least one day training with home health."
Meriter's care transitions program involves an intense level of patient engagement, McGowan says. The home health staff calls patients in their hospital rooms the day of the discharge to outline the discharge process. Depending on the risk level for complications, home health nurses visit or call patients at home on the day after discharge to review care plans, check medications, urge follow-up visits with healthcare providers, and make sure patients are prepared to recover at home.
"We talk with them about their diagnosis and what happened during their acute episode. We ask them what they were feeling the day when they needed to go to the hospital, so they don't panic if that takes place again. They have a plan in place."
After the day of discharge, patients in the care transitions program receive a phone call three days later, then weekly for 30 days.
In terms of bottom-line calculations of cost and revenue, Meriter's home care transitions program is having a neutral financial impact on the organization, but the effort is clearly helping to avoid unnecessary medical spending, McGowan says. "We can avoid observation readmissions to the hospital. There are things we can do outside of the hospital at follow-up that can help keep patients at home rather than in a skilled nursing facility, which is a tremendous financial benefit to patients."
Demolishing silos and investing resources
Healthcare providers have developed several strategies to reduce hospital readmission rates, but integrating these new strategies across organizations and demolishing the walls that have divided sectors of the healthcare industry for decades remain huge challenges, says Mary Naylor, PhD, RN, a professor at the University of Pennsylvania School of Nursing.
"Transitional care will be effective if it is well-integrated into a whole delivery system. It has to be connected. It can't be outside. What we absolutely don't want is someone leaving the hospital and no one follows up with them. We need to make the journey for patients much more seamless. Transitional care shouldn't be a standalone. It should be a standard way of delivering value for all high-risk populations."
The transitional care model Naylor helped develop at UPenn features advanced practice nurses serving in the role of care-coordination quarterback. In California, Irvine-based Global Transitional Care began serving patients in July 2015 through Medicare to provide transitional care services using the UPenn model. As of April of this year, GTC had provided such services to 250 patients without a single avoidable hospital readmission, CEO Rani Khetarpal says, noting five GTC patients had experienced unavoidable hospital readmissions.
GTC is gathering 450 fields of data on each patient to determine the primary drivers of hospital readmissions, she says. "We are trying to determine why these patients go back to the hospital. So far, what we have seen is that there is no one answer to that question. It's a much more complex outcome than just preventing the readmission. There's just simply a lack of resources for most of these patients. Even with Medicare reimbursement, the patients who are being readmitted are the patients who can't get back to the doctor in seven to 10 days for their follow-up appointments."
As more resources are applied to building seamless continuums of care, more success in readmissions reductions and other value-based propositions should be expected, Khetarpal says. "We're not the only solution. We can't take every patient. But this is the norm now, not the exception."
The National Association of Accountable Care Organizations is generally disappointed with the final rule for the Medicare Shared Savings Program, but sees a couple of positive changes, the nonprofit said Friday.
The 2017 final rule "is a small step in the right direction, but there's still a long way to go in terms of improving the MSSP overall," says Allison Brennan, vice president of policy for NAACOS.
Highlights of the 2017 MSSP final rule, which was released last week, include significant changes to how the Centers for Medicare & Medicaid Services set the spending benchmark that draws the line for earning shared savings and inducements for ACOs to take on two-sided risk.
MSSP features three-year agreements between CMS and ACOs. Healthcare providers have the option to pick one of three tracks in the shared savings program.
Track 1, which has been the most popular option since MSSP was launched in 2012, has upside risk only. Track 2 and Track 3 have both upside and downside risk.
Brennan says one of the 2017 final rule's main inducements for ACOs to assume two-sided risk—allowing an ACO to stay in Track 1 for a fourth year before switching to Track 2 or Track 3—is underwhelming.
"I don't think the policy with the additional fourth year in Track 1 will have a significant impact in incentivizing the ACOs to take on two-sided risk. "
"The current two-sided risk models do not appeal to most ACOs," she says. "We see about 90% of ACOs remaining in Track 1. Also, it's important to keep in mind that ACOs that want to continue in Track 1 have the ability to do so for six years; so, by giving an ACO an additional fourth year, it's not really a needle-mover."
NAACOS had asked for CMS to "finalize a policy that would allow ACOs at the start of any performance year to enter into a new period agreement under a two-sided risk model," says Brennan.
"That's a better option because it allows for the same shift to two-side risk but it also allows for additional opportunities for ACOs who are in the middle of an agreement period."
She says the biggest step forward is in the way CMS will be rebasing the MSSP benchmark at the end of the three-year contracts to increasingly reflect regional spending trends rather than rebasing the benchmark exclusively on historical performance.
"The main positive element is the acknowledgement that… eventually, ACOs are not going to be able to always keep improving on their past performance."
Incorporating the regional expenditure data into the rebased benchmarks allows ACOs to be judged in part based on their historical performance, and increasingly relative to the other providers in their area.
"We're really pleased that they went in this direction, it's something we have been advocating for quite some time," Brennan says.
She is less pleased that CMS missed at least two opportunities to make significant improvements in MSSP.
"We had requested that for the regional reference population, CMS exclude ACO-assigned beneficiaries. And the reason we asked for that was that it allows for a cleaner comparison between the ACO and fee-for-service providers in its region."
The other change that NACCO asked for and did not get, "was for CMS to continue to account for savings from prior agreement periods when the agency rebases the benchmarks."
Essentially, that means that by not accounting for the savings that the ACO produced, their benchmark is lowered.
"Adding back the savings into the rebased benchmark essentially helps them by not continuing to penalize them for doing a good job in the past. It goes back to the diminishing law of returns; because every time they have significant savings, then their benchmark is reduced, so they have to keep beating that," Brennan says.
If CMS is going to achieve significantly higher MSSP enrollment in two-sided risk models, the agency is going to have to offer more inducements than are present in the 2017 final rule for the program, she says. NAACOS' position is more fully detailed here.
Memorial Healthcare System aims to offer an online consumer experience comparable to the experience they have come to expect in other sectors of the economy.
Florida adopted a hospital price transparency law in April, but one Sunshine State health system is well ahead of the price and quality transparency curve.
Memorial Healthcare System in Hollywood, FL, which includes five acute-care hospitals, launched an online price transparency tool for self-pay patients in December 2014.
Annual views of self-pay rates increased 421% from 4,574 to 23,840, and annual views of quality information increased 193% from 2,757 to 8,082, for the one-year period ending June 1, according to Matthew Muhart, executive vice president and chief administrative officer for MHS.
The tool currently displays information for inpatient services including colonoscopies, cardiac procedures, imaging studies, and lab work.
Quality information was added to the online transparency tool in April 2015. By early next year, the health system plans to roll out an expanded version of the transparency tool that also will include price and quality information for insured patients, he says.
"It will appropriately identify the out-of-pocket requirements, the up-to-the-minute deductible position the person is in, and then marry that up with our contracting system so that we know that we can quote the exact amount of prospective payment at time of service," Muhart says.
Approximating the Amazon.com Experience
The ultimate goal is for MHS to offer an online consumer experience for patients that is comparable to the experience that consumers have come to expect in other sectors of the economy, he says.
"The full product will offer as close to an Amazon.com experience as one could have in healthcare, where the consumer could identify the service they want to receive from a Memorial Healthcare System facility, would be able to verify their insurance is taken by Memorial, would be able to understand exactly what their out-of-pocket requirements are, would be able to schedule a procedure, would be able to pay for their out-of-pocket requirements online, and also would be able to rate their experience with Memorial."
The online transparency initiative has not impacted the volume or pricing of MHS services, and the primary return on investment is expected to be elevating the health system's transparency image relative to competitors, Muhart says.
"So many factors come into play when analyzing patient volume by payer, so we have no definitive insight into whether this initiative is driving volume. We expect, over the long run, we will differentiate ourselves from others and ultimately earn more business."
Including information that helps patients gauge the quality of services such as Press Ganey's Hospital Consumer Assessment of Healthcare Providers and Systems (HCAHPS) scores is a critically important element of the transparency initiative underway at MHS, says Stanley Marks, MD, FACS, senior vice president and CMO at the health system.
"We thought it was critical that we put out cost, price, and quality [information] because what people really want is not just about the dollar, it's really about what they are buying," Marks says, "you want to know that you are getting a high-quality service for what you are paying your good money for."
The transparency initiative at MHS started with self-pay patients and a limited set of services because the challenges were manageable, Muhart says. "It started out with two criteria: high volume and predictability of the service to be provided."
Expanding to Other Services
Now, MHS is examining a broader set of hospital services to include in the online transparency tool.
"We have spent quite a bit of time conducting some complex statistical analyses of outpatient surgical procedures—looking at an array of providers who perform those surgical procedures and the types of patients who receive those procedures—to try to identify with a high degree of certainty the right price to quote before an outpatient procedure," Muhart says.
MHS is not ready to disclose the results of those analyses. But outpatient surgical procedure pricing and quality information will be available for self-pay patients soon, Stanley says.
"In the very near future, we will roll out fixed pricing for outpatient surgical procedures that will allow us to offer what the consumer wants, which is predictability and certainty about what a procedure will cost, and at the same time making sure that we price it appropriately."
"Anyone who is going to get involved in doing this sort of project needs a very tight team, with finance, the clinical side of the house, and patient- or family-centered councils," Stanley says.
"It you don't have alignment of those three components, you won't be producing information that is useful to the consumer, and that is what this is all about."
Confusion persists over how government contractors should apply Medicare's regulations for determining inpatient status when a hospital stay spans less than two midnights.
A temporary suspension of initial reviews for Medicare reimbursement of short-term patient stays in hospitals could stretch through the end of July, a CMS spokesperson said Tuesday.
In the latest twist of the so-called two-midnight rule's course toward full implementation, the Centers for Medicare & Medicaid Services told government contractors early last month to suspend initial reviews of Medicare claims for inpatient stays shorter than a span of two midnights.
Under the rule, which has been in place since October 2013 and was significantly revised in October 2015, most hospital stays spanning a period of less than two midnights are considered inappropriate for designation as inpatient status and are ineligible for Medicare A reimbursement.
Last October, CMS announced that initial two-midnight rule reviews would be shifted from Recovery Audit Contractors to Beneficiary and Family Centered Care-Quality Improvement Organizations (BFCC-QIOs).
Two companies were contracted to conduct the reviews: Annapolis Junction, MD-based Livanta and Harrisburg, PA-based KEPRO.
'Temporary Pause' in Reviews of Denied Two-Midnight Rule Claims
On June 6, CMS posted a message on saying that it ordered BFCC-QIO contractors to reexamine "all claims they denied in their medical review process since October 2015 to make sure medical review decisions and subsequent provider education are consistent with current policy. The current 'pause' will allow time for the BFCC-QIOs to conduct these re-reviews."
Ronald Hirsh, MD, FACP, has been advising hospitals on how to comply with the two-midnight rule since its inception. The vice president of the revenue-cycle solutions provider Accretive Health's regulations and education group, says he expects "a very short suspension" of the QIO reviews.
Hirsch offers seven points for hospitals to know about the two-midnight rule:
The basics of the rule have not changed since it was introduced. Patients with an expectation of two medically necessary midnights in the hospital or who spend two medically necessary midnights in the hospital should be admitted as inpatients.
Determining medical necessity for hospital care involves physician judgment. Physicians should be documenting the factors that make treating patients in a doctor's office or at a nursing facility unsafe.
Medicare pays hospitals to provide services seven days a week. If hospitals keep patients an extra day because they do not offer a test or service on a weekend or holiday, that is not a medically necessary day.
Do not use the outcome of a case to retrospectively review a short stay. Hospitals should only use the information available at the time of the admission decision to determine whether the right status was chosen.
Every inpatient admission that spans less than two midnights—unless it was an inpatient-only surgery, death, or transfer—should be reviewed prior to billing to ensure the correct status was chosen.
Hospitals that aggressively admitted high-risk patients with an expected short stay prior to the two-midnight rule can now expect a markedly higher observation rate under the rule.
Do not leave patients on observation status for periods of time longer than two midnights. If patients have medical necessity for hospital care, admit them as inpatients. If they do not, send them home.
Data from the Commonwealth Fund shows that federal healthcare reforms are increasing access to affordable medical services for millions of Americans. But the uninsured rate has not changed since last year.
Access to medical services has widened since the Patient Protection and Affordable Care Act was enacted, but the pace has slowed.
A survey of adults aged 18 to 64 shows positive signs for previously uninsured people who have gained health coverage through insurance exchanges and Medicaid expansion programs established under the PPACA.
The Commonwealth Fund Affordable Care Act Tracking Survey was conducted this year from Feb. 2 to April 5. The survey is based on 15-minute phone interviews with 4,802 adults, 881 of whom had obtained new health coverage through HIX health plans or Medicaid expansion.
During a conference call with members of the media on Tuesday, officials from the Commonwealth Fund highlighted findings of the tracking survey, including gains in healthcare-service access as well as relatively high patient satisfaction with health coverage obtained through HIX health plans and Medicaid expansion.
"These findings show the Affordable Care Act is working as it was designed to do," said David Blumenthal, MD, president of the Commonwealth Fund.
The findings of the tracking survey show the PPACA has generated several positive results for the previously uninsured:
The uninsured rate for adults aged 18 to 64 has dropped significantly since the launch of the PPACA health insurance exchanges in 2014, falling from 19.9% in the third quarter of 2013 to 12.7% this year.
Nearly half of adults in HIX health plans and three of five adults enrolled in Medicaid were uninsured before they got their health coverage.
More than half of previously uninsured adults had been uninsured for more than two years before getting their new coverage.
The Commonwealth Fund tracking survey also found a significant gain in access to medical services linked to the PPACA health insurance exchanges and Medicaid expansion.
For survey respondents who had health insurance through a HIX health plan, 51% said they could obtain medical services that they could not have accessed and/or afforded before they obtained their new insurance.
For survey respondents who had gained health coverage through Medicaid expansion, 70% said they could obtain medical services that they could not have accessed and/or afforded before.
Hitting a Plateau
While the Commonwealth Fund tracking survey paints a generally bright picture of the PPACA's performance, there are some dark shades in the data:
For adults aged 18 to 64, the uninsured rate for this year is not statistically different from last year.
For adults with incomes below 138% of the federal poverty level, gains in uninsured rates have leveled off since 2014. "Many remain uninsured, especially those with low incomes," Sara Collins, the lead author of the tracking survey, said during Tuesday's conference call.
Although HIX health plan enrollees reported satisfaction with their health coverage on par with people insured through their employers, Collins said they may look for new coverage HIX insurance rates spike next year. "People were most satisfied with their choice of doctor and hospital. They were less satisfied with the cost of their plans," she said.
The data released Tuesday is from the fourth in a series of Commonwealth Fund surveys designed to gauge the impact of the PPACA. The first was conducted in 2013.
Despite a legacy of mistrust, leading organizations are working together and building trust by using benchmarking, bundling, and aligning their interests.
This article first appeared in the May 2016 issue of HealthLeaders magazine.
After decades of fee-for-service-fueled adversarial relations, healthcare providers and payers are learning how to work together cooperatively.
One blooming partnership between a prominent payer and physician groups is rooted in New Jersey.
"We see relationships with providers now that are nothing like anything we have seen in managed care before," says Lili Brillstein, director for episodes of care for Horizon Healthcare Innovations, a division of Newark-based Horizon Blue Cross Blue Shield of New Jersey. "We are so proud of what we have been able to accomplish."
In 2014, Horizon posted total revenue at $9.5 billion and capital reserves at $2.5 billion. The health plan serves about 3.8 million members.
As of February 2016, Horizon says it had more than 900 physicians participating in episodes of care programs for several medical conditions and procedures: hip and knee replacements; knee arthroscopy; coronary artery bypass grafting (CABG); maternity; hysterectomy; colonoscopy; breast, lung, and colon cancer; and congestive heart failure.
Other episodes of care are slated to be operational before the end of this year for conditions including Crohn's disease, lower back pain, and prostate cancer.
Excluding chronic-condition episodes of care such as heart failure, 8,400 Horizon beneficiaries completed a bundled-payment episode in 2014, with that figure rising to about 11,000 in 2015, Brillstein says, noting the health plan's target for this year is 16,000 completed episodes.
The main financial drivers of Horizon's successful growth strategy for the nonprofit health plan's episodes of care programs are retrospective performance benchmarking and an upside-only risk model, she says. "Providers get earned savings without downside risk."
"When you know someone and they know you, then you can understand what the challenges are on the other side."
Brillstein explains that Horizon's retrospective performance benchmarking is based on two years of historical data. In addition, the health plan's benchmarking process not only weeds out outliers to set realistic spending averages for physicians but also accounts for a practice's level of cost efficiency to avoid punishing doctors who spend healthcare dollars wisely, she says.
"We need to start where our providers are: High-cost providers wouldn't come into the program," she says, adding Horizon "simulates the episode" to ensure providers have an expectation of earning shared savings payments. The health plan also sets lenient performance benchmarks for extraordinarily lean physician practices, Brillstein says. "We don't want to punish the guys who are actually doing the right thing."
Stephen Zabinski, MD, an orthopedic surgeon at Somers Point–based Shore Orthopaedic University Associates, says Horizon's approach to performance benchmarking is attractive to most physician practices. "We now have a collaborative relationship between the payer and the doctors," he says.
Horizon has built all of the health plan's episodes of care with active participation from physicians at the earliest stage of a bundled-payment program's development, Zabinski says. "This started with us being part of a physician panel On setting up bundled payments for hip and knee replacement. That's a lesson from the sandbox. When you know someone and they know you, then you can understand what the challenges are on the other side."
Alignment of patient, provider, and payer interests is another prime factor driving the rapid growth of Horizon's episodes of care programs, he says, noting all of the parties have a shared interest in driving down costs for joint-replacement procedures. "Complications are the biggest driver of extra costs of care. When you cut down complications, it's great for the patients."
Horizon tracks customer satisfaction in all episodes of care, and joint replacement scores consistently post in the 90th percentile, Zabinski says.
John "Jack" Feltz, MD, president and CEO and practicing obstetrician and gynecologist at Morristown, New Jersey–based Lifeline Medical Associates, started participating in Horizon's maternity episode of care in 2014. "It allowed us to look at things the same way," he says of the health plan and his physician practice. "We are sharing information, which gives the provider point of view and the payer point of view. This is a patient-centered project rather than an organization-centered project. … The first thing is to align our missions: the best affordable healthcare possible. We have to have mutual respect for what each other's roles are and what each other's needs are."
Horizon understands the importance of bolstering the financial performance of the health plan's physician partners, Feltz says. "When you pay peanuts, you get monkeys."
Lifeline Medical serves 400,000 patients, with a provider staff featuring 90 doctors and 25 nurse practitioners. In 2014, 3,500 mothers received medical services through the Horizon bundled-payment program, and the practice expects to complete 4,000 of the episodes this year, he says.
Bundling the payments for all physicians involved in an episode of care also fosters physician alignment. Feltz says the standard obstetrician bill under the fee-for-service model accounts for about 20% of the cost, with other cost centers—such as laboratories and hospitals—sending out the other 80% of the bill. "This is a totally different way of thinking from five years ago, never mind 20 years ago. Historically, from the obstetrician's perspective, it didn't matter how much all that other care costs."
Physicians adopt a more global view of patient care when they participate in bundled payment contracts, Brillstein says. "There is collaboration across the care continuum. It allows them to see bigger."
Communication critical for provider-payer cooperation
Halfway across the country, Dallas-based Baylor Scott & White Health is investing resources and C-suite executive time in building cooperative relationships with the market's primary payers.
Since 2008, BSWH has been involved in a broad-based effort to communicate and cooperate with the primary commercial payers in central and northern Texas, including Blue Cross and Blue Shield of Texas, Cigna, Humana, and United HealthCare, says Gary Brock, executive vice president and chief integrated delivery network officer at BSWH. "We've been at this for quite some time," he says.
BSWH is an integrated health system featuring 48 hospitals and a health plan business unit that serves more than 290,000 members. For the fiscal year ending June 30, 2015, BSWH posted total operating revenue at $7.5 billion.
Quarterly meetings of the C-suite leadership teams from the payers and BSWH are the essential element of the outreach effort, Brock says of the catered luncheons. "They all know each other. This allows them to come onto neutral ground."
On the payer side, representatives at the quarterly meetings feature CEOs and chief medical officers. The BSWH representatives include President and CEO Joel Allison, CFO Fred Savelsbergh, Senior Vice President of Managed Care Dianne Grussendorf, and Brock. "There's nothing off the table, and the key people are in the room to deal with that," Brock says.
Discussion topics BSWH officials bring to the quarterly meetings are often related to growth and other strategic objectives such as patient-centered medical home development, technology investments, and legislative agendas, Grussendorf says.
The payers are always eager to talk about the annual "report cards" BSWH produces for all of the integrated health system's commercial payer partners, she says. Report card grading is based on several metrics, including contract performance measures such as claim denial rates and billing cycle timelines. "It tends to lead the operational meetings because the health plans are concerned about their performance," Grussendorf says of the report cards, which are partially blind to block carriers from gaining access to sensitive data at specific competitors.
In addition to the quarterly meetings, Grussendorf says she supervises production of a bimonthly newsletter that BSWH shares with its commercial payer partners. The newsletters, which generally focus on one topic in a single-page document, highlight research, medical services, and awards that demonstrate BSWH's commitment to provide high-quality care at low cost.
A sample of the newsletters drawn from 2012 to 2015 features a variety of topics: Baylor Research Institute's attempt to develop a blood-based test to detect colon cancer; BSWH's efforts to reduce medically inappropriate percutaneous coronary interventions; and Baylor University Medical Center's participation in research that found genomic sequencing beneficial in determining targeted therapies for metastatic triple-negative breast cancer, one of the most deadly forms of the disease.
Robust and regular communication with payers can generate direct financial benefits, Brock says, recalling the impact of a palliative care presentation during one of BSWH's quarterly meetings with commercial payers. The presentation by Robert L. Fine, MD, a BSWH palliative care specialist, was so impressive to the top executives of one managed care organization that they arranged to make a donation to support palliative care at the integrated health system.
Changing hearts and minds
To overcome their adversarial past, providers and payers need to do more than communicate and have aligned interests; they need to change their collective mindsets.
Horizon officials are drawing predictably befuddled inquiries from across the country about how the health plan has achieved amicable relations with hundreds of physicians in one of the highest-cost healthcare markets in the country, Brillstein says. "People ask me, 'Where's the stick?' But there is no stick. The goal is not to smack them but to work collaboratively to achieve success in the value-based model."
The top executives at New Jersey's Blue Cross Blue Shield affiliate have proven in words and deeds that they prefer cooperation over conflict, Feltz says. "Horizon's leadership recognizes that nobody wins a war when you battle—the casualties just go higher."
One of the challenges blocking widespread cooperation between providers and payers is the variable readiness for value-based care models at commercial payers, the OB-GYN specialist says, drawing an analogy from the Star Trek entertainment franchise. Just as civilizations on different planets in the Star Trek universe exist at variable stages of development, healthcare payers are at variable stages of preparedness for alternative payment models such as episodes of care, Feltz says.
"The different carriers are in different stages of evolution in value-based care," he says. "Contracting based on value needs to be universal across all payers in the same way it is for providers."
To make value-based contracts work effectively, physicians need to make the leap of faith that payers are trustworthy partners, Zabinski says. "Many doctors have a fee-for-service mentality that the insurers are the enemy. I hear it all the time: 'The government is out to get us. The insurers are out to get us.' "
BSWH is working hard to establish mutual respect and tight bonds with the major commercial payers in Texas, Brock says. "We're not out to take advantage of them. I don't want to be a doormat to be walked on, and I don't want them to be a doormat, either. … At the end of the day, it's all about trust and relationships."
Supplies are second only to labor among the highest costs for most healthcare providers. As health systems look for ways to increase value in the delivery of services, global sourcing of supplies is becoming an increasingly attractive option.
Supply chain executives at some of the country's largest health systems are searching worldwide for manufacturers that can help them cut costs while maintaining quality.
Particularly for high-volume supplies such as clinical gloves and gowns, global sourcing is emerging as a significant driver of boosting value at healthcare providers, says Marc Prisament, director of product development and global sourcing at the Manhattan-based NewYork-Presbyterian health system.
"This gives you another option. It's a great extra tool. It shows significant savings on a percentage basis, and it shows dollar savings," Prisament says.
Over the past three years, New York-Presbyterian's global sourcing program has grown from a dozen stock keeping units (SKUs) to more than 80, with an average cost savings of 25% to 30%, he says.
Sourcing high-volume supplies such as plastic basins, slipper-socks and tourniquets from low-cost manufacturers around the world including China has cut annual supply chain spending at New York-Presbyterian by about $1 million, Prisament says. "That's $1 million we wouldn't have otherwise."
NewYork-Presbyterian health system is organized in four divisions:
NewYork-Presbyterian Hospital has six campuses: two academic medical centers, two acute care hospitals, one children's hospital and one behavioral health hospital
NewYork-Presbyterian Regional Hospital Network features acute care hospitals in Bronxville, Cortlandt Manor and Flushing
NewYork-Presbyterian Physician Services features primary care and specialty care physician practices
NewYork-Presbyterian Community and Population Health includes NewYork Quality Care, an accountable care organization
For the year ending Dec. 31, 2014, NewYork-Presbyterian Hospital posted total revenue at $4.5 billion.
St. Louis-based Mercy Health has been pushing its global sourcing efforts aggressively for the past four years, says Joshua Sandler, director of business development at Resource Optimization & Innovation (ROi). Mercy incorporated ROi in 2002.
"Mercy created ROi. We are essentially their supply-chain arm," Sandler says.
Through global sourcing, ROi is projecting to save Mercy $2 million on high-volume supplies this year and $4 million next year, he says. "We typically see no less than a 15% cost savings for any [SKU] category. Health systems won't switch out [an SKU] for 5%."
Mercy operates 45 acute care and specialty hospitals in Arkansas, Kansas, Missouri and Oklahoma. For the year ending Dec. 31, 2015, Mercy posted patient service revenue at $4.3 billion.
The health system owns 90% of ROi. Baton Rouge, LA-based Franciscan Missionaries of Our Lady Health System owns the remaining 10% stake.
Keys for Achieving Global Sourcing Success
The primary guiding principles of global sourcing are relatively simple, Prisament says. "Global means going directly in the world marketplace to the manufacturers who make the product at the lowest cost without sacrificing quality."
For healthcare providers, picking which products to source on a global basis and getting those products to medical facilities is relatively complicated, he says. "You have to find items that can be readily sourced without sacrificing quality… It is as much an art as it is a science."
Both NewYork-Presbyterian and ROi have focused their global sourcing activity on low-cost, high-volume products. "Most of these products often get very little attention," Prisament says.
Volume is a key consideration when changing the source of low-cost products, Sandler says. "You're talking maybe a dollar of savings on a product; but when you're spending $2 million on a product such as a health system, you have significant opportunities for cost savings."
Engaging clinical end-users at the beginning of a sourcing change process is critically important. "You need to have clinical input. You don't want to bring in items and not be able to push them out to the clinical end users," Sandler says.
NewYork-Presbyterian has a "clinical improvement team" that participates in the decision-making process when the health system changes the sourcing for a product, which often results in significant win-win scenarios in terms of maximizing value and standardization, Prisament says.
This win-win scenario played out splendidly when NewYork-Presbyterian changed the sourcing for operating room jackets, he says, noting the preferences of the health system's OR clinicians.
"They didn't like the snaps. They didn't like the length." By leveraging their volume purchases with a new manufacturer, the health system was able to combine the preferences of OR clinicians from all of New-York Presbyterian Hospital's campuses. "There's only one product now to buy, stock, and distribute," Prisament says.
He says the OR jacket example illustrates another essential element of targeting products for global sourcing: the importance of picking products that are "patient and staff satisfiers."
"Is it something that's nice to have or something that we really want to have?" Prisament says.
Yet another prime consideration in global sourcing decision-making is assessing the total cost of switching to a new product rather than just focusing on the price that a manufacturer sets, he says.
"You need to look at fees such as handling—there may be an extra freight charge. We weigh those extra costs, then we come up with a number."
Rising to Global Sourcing Challenges
The main hurdle in global sourcing is getting products from Point A to Point B, particularly when the distance between those points is thousands of miles across international borders.
When working with manufacturers overseas, logistical challenges are significant, Prisament says, citing placement of orders, ensuring quality control, clearing products through customs regulators and warehousing.
"How do you get a product to the United States? How do you get it through customs? How do you warehouse this stuff?"
NewYork-Presbyterian and ROi have teamed up with Atlanta, GA-based ASP Global to help address these logistical challenges. "A good trading partner is your advocate," Prisament says.
Having a trading partner such as ASP Global is an unavoidable cost for most health systems engaged in global sourcing, Sandler says.
"It's very important. They're used to dealing with customs, bringing the products into the country, and distributing them. They have experience with that. Ideally, you would like to eliminated that added expense, but it's just too cost-prohibitive for us today."
Prisament expects NewYork-Presbyterian's global sourcing activity to grow—to a point. "We have a restriction where we can't self-distribute," he says, noting the limited amount of warehousing space that the health system has in New York City.
"I don't see this as doubling every year… I look at it as another tool in my toolbox. Will it become our total supply chain? No. We have 20,000 SKUs in play every day."
Sandler says ROi is planning to expand to new product categories and physician preference items such as surgical products. "We're trying to dabble in areas where we haven't been before," he says.
Health systems are boosting their level of investment in startup companies and new technologies.
Health systems have been hotbeds of innovation investment for two decades, but their interest in bankrolling startup companies and new technologies appears to be reaching a fever pitch.
"This is a very popular trend right now," says Paul Wallace, MBA, managing director for Heritage Group, a Nashville-based firm that has been investing in healthcare innovation for 30 years.
Market forces and regulatory pressure to launch reform efforts are compelling health systems nationwide to jump on the innovation investment bandwagon, Wallace says.
"They want to be seen by their market, their employees, their doctors, and their boards as innovative. As we move from volume to value, these organizations are going to be making significant changes in the ways they deliver care. They need to make sure they are leaders and not followers."
He says health systems have three primary innovation investment strategies: external funds such as Heritage Group, internal investment houses, and an "ad-hoc" approach. "There's been a proliferation of these multiple platforms over the past few years."
Earlier this month, Heritage Group announced it had closed its second nine-figure healthcare innovation investment fund at $220 million. Heritage Healthcare Innovation Fund II exceeds the value of Fund I by more than $50 million, Wallace says. "It's considerably larger."
Heritage Group has raised capital from more than a dozen health systems that operate more than 550 hospitals, including Adventist Health System, Intermountain Healthcare, Memorial Hermann Health System, Sutter Health, Tenet Health and UnityPoint Health.
"We're backed by strategic partners rather than financial partners," Wallace says. "All of my limited partners are interested in solutions for patients, increasing quality and delivering value… If we can't bring value to the table, we're going to look for other opportunities."
An Internal Approach to Innovation Investment
In the internal healthcare innovation investment category, there are several established health system players, with a handful matching or exceeding Heritage Group's level of committed capital:
Kaiser Permanente Ventures: More than 15 years of innovation investment experience, high-profile limited partner investors such as Tufts Health Plan, and about $400 million in committed capital
Partners HealthCare, Partners Innovation Fund (PIF): Established in 2007 with a commitment of $35 million from two of Partners HealthCare's hospitals, Brigham and Women's Hospital and Massachusetts General Hospital; focused on innovations in therapy, diagnostics, information technology, and medical devices. PIF has attracted more than $800 million in startup capital for the fund's investments
Cleveland Clinic Innovations: CCI has helped launch more than 75 companies; the investment house has more than 2,700 patent applications, with about 700 issued patents; and companies associated with CCI have drawn more than $910 million in equity investment
Yale-New Haven Health System, which has three hospital campuses in southern Connecticut, is one of the recent entrants in the internal healthcare innovation investment market.
In 2014, YNHHS and several Yale University partners such as the Yale School of Management launched the Center for Biomedical and Interventional Technology.
CBIT specializes in startup and gap funding as high as $50,000 per project. Yale's internal healthcare investment house has identified and supported more than 100 faculty- and student-driven medical device projects such as new technology for scoliosis braces.
At CBIT, developing innovative products that benefit patients and cut healthcare costs is just as important as generating return on investment, says Executive Director Christopher Loose, PhD.
"The funding projects we participate in, like Connecticut Innovations Pipeline, seek projects that are within 12 months of being ready to raise funding to develop new technology that has a solid business justification and can have huge patient impact. The best ideas both improve patient health and take costs out of the healthcare system," he says.
ROI is more of a practical goal than an investment imperative for CBIT, Loose says. "It is important that a new product concept has a favorable ROI that will justify the follow-on investment needed to take the product through development, approval and launch so that it reaches patients who need it."
During last month's National Symposium on Value Innovation at Yale, Yale-New Haven Hospital CMO Thomas Balcezak, MD, MPH, said the health system's participation in CBIT is patient-driven.
"We're not an investment company, but I do know we have problems we need to solve," he said. "Because this is not our core business, we need strategic partners that we can leverage to improve the clinical care that we deliver."
YNHHS, Balcezak said, is relying on CBIT to help answer a key innovation investment question: "Where do we need to partner with organizations that improve value at the bedside for our patients?"
CBIT focuses on patient need when targeting projects for financial support, Loose says. "CBIT looks to the size as well as the intensity of the unmet need in prioritizing projects. It often takes the same cost and effort to solve a small problem as a big problem with a new biomedical technology."
In North Carolina, WakeMed Health & Hospitals is seizing on a geographical advantage to engage in ad-hoc innovation investing, says Michael Browning, executive vice president and CFO of the Raleigh-based health system. "We are in the Research Triangle in North Carolina, where there is a lot of innovation that is amazing," he says.
"We are investing in companies that are developing technology that is aligned with healthcare. People are coming to us and asking, 'Will you help us put this together?'"
First, he says, "they need investment of financial resources to develop technology, but then they also need our assistance with piloting and supporting the product. One of these companies has the capability of providing very quick access to a primary care physician on your smartphone. This is available today."
"With today's younger generation," he continues, "they want immediate access to a physician and their smartphone is their tool of choice. It is important for us to be part of this innovative way to treat patients. It will be an avenue for us to align practitioners and patients with our organization. Being part of the Research Triangle has opened my eyes to how innovation and technology are an integral part of the future of healthcare."
WakeMed's senior leadership team is considering whether to advance from ad-hoc innovation investment to a more permanent internal approach, Browning says.
"In the near future, we will be assessing a proposal to allocate a portion of the investment portfolio to healthcare innovation."
Athenahealth's annual survey of health plans puts a premium on metrics that gauge healthcare providers' experiences with their payer partners.
For the first time, Cigna has earned the No. 1 ranking for overall performance in Athenahealth's annual PayerView Report of for-profit and nonprofit health plans.
The 11th edition of the EHR, practice management, and population health services company's PayerView Report ranked 215 health plans on eight performance metrics. Last year's report ranked 166 payers on nine metrics, with Bloomington, MN-based HealthPartners earning the No. 1 honor.
Healthcare providers' experiences with their payer partners looms large in the PayerView Reports and is a primary focal point at Cigna, says Julie Vayer, vice president of total health and network operations at the commercial payer.
"Cigna has thousands of people who work hard every day to do right by our customers, clients, and healthcare providers. This is particularly important to us since the experience providers have with us affects both customers' perceptions of Cigna and our ability to be providers' partner of choice in emerging value-based care models."
The Top 10
Blue Cross Blue Shield health plans dominated the rest of the Top 10 of the 2016 PayerView Report:
According to the report: "Three factors appear to be largely responsible for [BCBS] success:
Leveraging collaboration across the Blue Cross Blue Shield association and parent company;
Encouraging a focus on quality improvement efforts, including sharing of best practices; and
Centralizing guidance on key initiatives (e.g. ICD-10)
The Blues scored well on several performance metrics such as claims denial rate, posting a 6% average denial rate compared to a 9.2% average denial rate for all health plans that were surveyed.
Connecticut-based Cigna has about 37,000 employees in 30 countries, according to the company's 2014 Corporate Responsibility Report, which pegged total revenue at $34.9 billion in 2014. The company's large scale poses a challenge in terms of claims administration performance, Vayer says.
"Being a large national payer means we process a huge number of claims across multiple product lines and states. That makes our job enormously complex as we strive to process claims accurately and quickly."
Investing in technology, administrative capabilities and personnel have been critically important to rising to the scale challenge, she says.
"This includes specific investments to further improve claim accuracy, since we know how critical that is to providers. However, while technology is important, it's not the only factor that drives performance."
"We have also focused on embedding the right business logic into our systems so that administrative issues are minimized for customers and providers," says Vayer.
"And they can focus on getting and delivering the right care. And we've also invested in our people, because it takes well-trained people in addition to technology to get results we can all be happy with."
Methodology
The assessment methodology of the 2016 PayerView Report is based on nine measures of claims-handling proficiency:
Cigna scored well on all three of the metrics with the highest weights, Vayer says.
"Our goal is for providers to view us as being easy to do business with. We see our performance on several key metrics that account for 50% of the PayerView score—days in accounts receivable, first-pass resolve, and denial rate—as validation of our efforts. These metrics have the most weight because they're the ones that matter most to healthcare providers."
