Payers, legislators, and regulators are intensifying their efforts to stop out-of-network hospitals and physicians from charging whatever they want for medical services.
Like Joanne Woodward's character in the 1957 film "The Three Faces of Eve," the healthcare industry is in desperate need of a good psychotherapist.
In this country, healthcare has multiple personalities – payers, providers and pharmaceutical manufacturers to name just a few. Like a patient afflicted with the internal turmoil of dissociative identity disorder, these sectors have been locked in a struggle over the apportioning of spending for decades, breeding distrust and animosity.
One of the most contentious clashes between providers and payers is over billing for out-of-network medical services. This year, legislatures in at least seven states have considered creating laws to set firm ground rules for how much money physicians and hospitals can charge when they are not included in a payer's provider network. Charges above the in-network rate are called balance billing.
The sparks are flying furiously in New Jersey, where Hartford-based Aetna, Inc. has sued a half dozen out-of-network physicians in recent years, alleging gross over-charging for services. "New Jersey is our primary play," says Elena Butkus, head of state government affairs at Aetna. "They have the highest charges in the nation."
From Aetna's perspective, the commercial insurance carrier has an obligation to protect its beneficiaries from price gouging, particularly for out-of-network physicians who work at hospitals as emergency department doctors, anesthesiologists, pathologists, and radiologists, she says.
Lawrence Downs, JD
"They send the big bills. … The fundamental issue is greed and bad players in certain instances on the hospital-based physician side. Out-of-network physicians in those four specialties charge 300% to 400% of the Medicare rate."
Medicare as Gold Standard for Payment
Aetna is grossly overstating its case, according to Lawrence Downs, JD, who serves as CEO of the Medical Society of New Jersey. "If doctors don't sign an oppressive provider agreement, they're considered bad guys… They're labeled a bad actor or a crook by Aetna."
There is a fundamental economic reason behind out-of-network New Jersey physicians charging relatively high rates for their services, but it has nothing to do with greed, he says. "It's a very high-cost state to live in, whether you are buying groceries or healthcare."
Setting Medicare rates as the benchmark for medical service reimbursement is unfair to out-of-network hospitals and physicians, Downs says. "Payers act as if Medicare is the gold standard for payment. It's not. It's a government program that gets the best price for every procedure."
Commercial payers that use Medicare as a reimbursement benchmark are standing on firm ground, Butkus says. "We do believe Medicare is a good tool for two reasons," she says, noting that many commercial payers reimburse providers based on the Medicare fee schedule and Medicare rates are "comparable to actual costs."
On a national scale, Downs says commercial payers should bear their fair share of blame for balance billing as they rely more and more heavily on narrow networks as a cost-control mechanism. "A lot of payers complain about their higher out-of-network costs… They have actually created, with a lot of these narrow networks, more of an out-of-network problem."
Downs adds that patients with high-deductible health plans are at high risk for balance-billing costs. "A lot of this stuff is the 'Wild, Wild West' in terms of benefit design and network adequacy. From the healthcare consumer's perspective, understanding what you are buying in the healthcare marketplace is daunting. It's daunting for me, and I'm in the business. There needs to be much more transparency."
Consumer Protections
Butkus says the best solution to the out-of-network billing problem is nationwide adoption of key provisions found in an Illinois balance-billing law enacted in 2011. Those key provisions include arbitration for balance billing disputes and consumer protections for health plan beneficiaries who receive medical services at in-network hospitals and ambulatory surgery centers.
Specifically, the consumer protections in the Illinois law apply to out-of-network ED doctors, anesthesiologists, pathologists, radiologists and neonatologists who practice at in-network hospitals and ambulatory surgery centers. Those classes of physicians are barred from charging patients out-of-pocket costs that exceed in-network out-of-pocket costs.
Katherine Hempstead, PhD
A coalition of payers, business associations, and consumer groups is urging the National Association of Insurance Commissioners to adopt the provisions of the Illinois balance-billing law in the organization's "state model act" for network adequacy, Butkus says. "Payers, consumers and business groups have joined hands to help resolve billing disputes and take patients out of the middle." NAIC is expected to set new network adequacy guidelines this fall.
Katherine Hempstead, PhD, health insurance program director at the Princeton, NJ-based Robert Wood Johnson Foundation, says out-of-network physicians working in emergency departments are particularly problematic in balance-billing scenarios.
"There is a strong sense that patients should be held harmless in these situations, which would tend to leave the payers on the hook. Payers will want to incentivize hospitals to minimize the extent to which this happens, but of course, in many cases the hospital is a major beneficiary of the high charges, so their interests are not aligned with the payer. This is a situation in which the market power of both parties becomes extremely important; and in more rural areas, there can be the additional issue of specialist supply. These costs ultimately get baked into premiums and consumers pay them that way."
Although patients are poorly positioned to drive the debate over balance billing, consumers do have a measure of influence, she says.
"These out-of-network balance bills that end up in patients' mailboxes are basically the messy byproducts of the dysfunctional relationship between payers and providers, whose antipathy for each other outweighs their regard for their customers… There is much evidence that consumers are willing to make the tradeoff between provider availability and the cost of their health insurance."
Recommendations
Hempstead says, "Consumers are demanding that they be given better information about their options, and this is a more specific instance of that general issue. There is a movement to add information about network size in plan choice tools, because consumers want to better understand that tradeoff when shopping for insurance. With narrower networks, it sort of comes with the territory that the probability of unintentionally using an out-of-network provider will increase."
"There is no way to completely eliminate the unintentional use of out-of-network providers, especially as narrower networks become more prevalent" she says. "But what can happen through a variety of processes, including state regulation, are some common sense ground rules to protect consumers and eliminate surprises."
Hempstead lists several possibilities:
Setting a maximum charge, perhaps expressed as multiples of Medicare;
Requiring healthcare facilities to inform consumers when they are at risk of being treated by out-of-network providers;
Protecting consumers from these bills in cases of emergencies;
Allowing consumers to apply payments to their deductibles if [out-of-network services were provided] during a hospitalization and a substitution was not possible
Collective counseling to fix the dysfunctional relationship between providers and payers would help, too.
The next wave of telemedicine, in which providers are now making investments, will retool the entire healthcare industry, according to a trio of experts in the field.
As telehealth visits for patients are growing exponentially across the country, health systems and hospitals are gearing up for the broad application of telemedicine technology across the entire care continuum.
Dozens of initiatives are already underway in areas such as pharmacy, nursing, telestroke assessments, and the creation of "digital communities" centered on patients with specific conditions, according to Win Vaughan, acting president of virtual health services at Englewood, CO-based Catholic Health Initiatives.
Win Vaughan
"From a consumer-driven perspective, everybody in healthcare is going to have to offer these kinds of services," Vaughan says.
A virtual pharmacy program at CHI is paying off for the health system in several key metrics, including patient satisfaction and reduction of adverse medication incidents, and has tremendous potential in terms of cost avoidance such as readmission reductions, he says.
The virtual pharmacy model at CHI features pharmacists who process medication orders remotely. "We can have a pharmacist who works from home or from a centralized hub. They have remote access to electronic medical records… They just do order management. They don't get distracted with other activities."
The program has freed up time for hospital-based pharmacists to work closer with physicians and their patients, Vaughan says. "If you have pharmacists doing clinical activities with patients from admission to discharge, you avoid adverse reactions and pharmacists can make recommendations to the doctors who ordered the drugs."
CHI has begun assessing the financial impact of the virtual pharmacy program, and the early data is promising, he says. At a 65-bed hospital in the health system, CHI estimates it is saving at least $87,000 per month by having a virtual pharmacist review medication orders. "You have to make some assumptions about how much an adverse drug event costs the health system," he says.
Until payment reform catches up with telemedicine retooling in the healthcare industry, financing will be the main obstacle to growth, Vaughan says.
"We're trying to find ways to generate enough revenue from the virtual health programs that we can make them sustainable… That's the tricky part," he says, adding the virtual pharmacy program is a sustainable model but telehealth patient visits with specialists and "third-party" healthcare providers are financially problematic. "In telehealth visits, we are restricted to working with entities that have responsibility for total cost of care."
CHI expects its telemedicine retooling efforts, which include a budding initiative to have highly skilled nurses work remotely in a care management role, to generate significant returns on investment. "As people realize this is having a huge impact downstream, the payment piece will fall into place… We are trying to get experience in this space because we think it is going to keep on growing."
A Long-Term Perspective
The leadership team at Philadelphia-based Thomas Jefferson University Hospitals views telemedicine retooling as an essential investment in its future, according to Judd Hollander, MD, associate dean for strategic health initiatives.
Jefferson has spent about $20 million on a long-term strategy toward telemedicine-based initiatives over the past four years, he says. "We're going to lose money now because it is uncompensated care. We're going to make money later because it will be compensated care. We realize we are taking a financial hit now, but we're going to be ready when the reimbursement catches up."
Jefferson has a telehealth visit partnership with Boston-based American Well, which is bullish on telemedicine retooling, according to Chief Marketing Officer Mary Modahl. "The top areas where we see return for hospitals are: reducing readmissions and lowering the cost of post-surgical follow-up care; attracting new patients to the health system by offering the most convenient care; and, for those under ACO contracts or other quality- or population-based payment mechanisms, keeping patients within the system so they can coordinate all their care needs."
In addition to the American Well partnership, Jefferson has launched several telemedicine initiatives, including a virtual rounds program launched in November 2014, Hollander says. At Jefferson, virtual rounds feature a video link that allows family members to participate remotely when a physician or other caregiver meets with a patient at one of the health system's hospitals.
"Every hospital patient gets asked whether they have family members who they would like to be included in virtual rounds. We call the families to make sure they can download the technology on their computers. We've done 300 of those virtual rounds so far. … The patients love it."
Telemedicine retooling is an example of the kinds of long-term investments health systems and hospitals are making as the healthcare industry shifts from service volume to service value, Hollander says.
"I view telemedicine as an infrastructure cost, just like [electronic medical records]. You've got to invest in your infrastructure to take care of your patients five years from now… In the end, everybody is going to be doing telemedicine for some segment of their system of care. Over time, more and more patients will get comfortable with it. Telemedicine is high value at low cost, but we're not trying to push it on anybody. We're just trying to give people options to get care the way they want to get it.
'The Next Quantum Leap in Healthcare'
"The entire healthcare system, both in the United States and globally, is on the verge of a major transition," says Anita Goel, MD, PhD, chairman and scientific director at Nanobiosym in Cambridge, MA.
Goel, who has several academic and research organization affiliations such as serving as an associate of the Harvard University Department of Physics, is a pioneer in the field of nanobiophysics. She describes this new scientific discipline as the merging of physics, nanotechnology, and biomedicine.
Anita Goel, MD, PhD
"The next quantum leap in healthcare will come with the convergence of these silos, not through advancements in any one of these silos," she says.
At Nanobiosym, Goel has added a dash of information technology to nanobiophysics to develop Gene RADAR. The cloud-connected, mobile device is designed to give healthcare providers the ability to diagnose disease in real-time during a patient visit. Gene RADAR is 10 times cheaper to build than existing "bulky machines" weighing" several hundred pounds and requir[ing] costly infrastructure," she says. Each Gene RADAR diagnostic test costs one-tenth the price of tests conducted with existing technology, she says, adding that the device is on the verge receiving its first approval from the federal Food and Drug Administration.
"You save money, you save time, and you save logistical costs. The overall impact on the healthcare system is tremendous. When you wait longer to get into therapeutics… the greater the chance of advancement of illness and costly complications."
Gene RADAR is an example of how telemedicine and a shift to less costly medical technology can achieve monumental change in the delivery of healthcare services, Goel says. "The next generation of healthcare will be decentralized, mobilized, and personalized. Instead of the blunt instruments of the past, we will be giving patients more precise medications and therapies."
Healthcare providers need to act aggressively to address the multitude of challenges facing their organizations, say executives at this year's HealthLeaders Media CFO Exchange.
If you don't do it to yourself, someone else will do it to you.
Every time this witticism was uttered at the HealthLeaders Media CFO Exchange last week—I heard the quip or variations thereof many times—everyone within earshot nodded approvingly.
Among the four dozen healthcare provider finance leaders who attended the event, which was HealthLeaders’ fifth annual retreat for finance executives, outlooks on their organizations ranged from cautiously optimistic to nearly grim. There was certitude among the participants on a crucially important development for the entire healthcare industry: The transition from volume to value has taken hold and a wave of revolutionary change is inundating the vast majority of health systems and hospitals nationwide.
Dennis Dahlen, senior vice president of finance and CFO at Phoenix-based Banner Health, told his colleagues that boosting care coordination and population health management can require costly investments and unsettling changes. But he says the time has come to embrace change.
"Some of the work we're doing is counter-cultural and trying to keep people out of the hospital," he said of several population health initiatives underway at Banner Health. "We're piloting a lot of things that are scarily effective in keeping people out of the hospital."
Those initiatives include leveraging telemedicine capabilities across an ever broadening spectrum of the care continuum, including constant remote monitoring of ICU patients.
In addition to physicians, Banner has made several kinds of healthcare professionals accessible online to patients, including social workers, pharmacists, and "mobile teams" featuring home health nurses and health coaches. Even with the cost of technology figured in, Dahlen says telemedicine and other population health-oriented initiatives have generated significant benefits for Banner and the health system's patients, particularly among the 5% of the patient population with chronic conditions that drive the bulk of costs. Telemedicine "is successful in keeping people out of the hospital, and it's an attractor," he says. "Patients love it."
In 2014, Banner's care coordination and population health initiatives resulted in an estimated 1,890 lives saved, $109 million saved, and 45,861 fewer patient days in the health system's hospitals, Dahlen says.
John Grigson, senior vice president and CFO at Covenant Health, told CFO Exchange participants that the Lubbock, Texas-based health system is making progress in assuming more risk for cost of care.
Care coordination is a key factor in mitigating risk, particularly for the majority of patients who have moderate risk factors for disease, he says: "There is real money in keeping the risk group from moving into the 5% of high-risk patients."
As Covenant has taken on more risk for cost of care in payer contracting, the health system has been launching initiatives to limit exposure to risk, including creation of a narrow network of post-acute care providers. "The biggest cost overrun we were having was on post-acute care," Grigson says.
Covenant has also moved aggressively to encourage doctors to embrace population health-oriented contracting, he says: "We had to find a better way to influence our physicians."
Monthly and quarterly physician "report cards" have been an effective way to boost influence with the medical staff. "We show doctors the metrics and whether or not they are meeting the metrics," he said, adding that Covenant has begun to "unblind" physician data to show which doctors are delivering high quality at low cost. "The point is to get physicians to think about who they are referring patients to."
Although Covenant is in the early stages of assuming more risk for cost of care, so far gain-sharing contracts have generated about $5.2 million for the health system, Grigson says. "The good news is we saved $5.2 million. The bad news is that if we were at full-risk, we would have saved $10 million."
Several factors have driven the cost savings, including lower readmission rates and increases in diabetes patient compliance with care plans. "We're going to take the next step next year and move to full risk," he says.
Richard Rothberger, corporate executive vice president and CFO at Scripps Health, told peer participants that the San Diego-based health system is planning about $100 million annually in performance improvement initiatives to meet budget targets. "It takes a lot of work, and you have to pay attention to the details," he says.
Scripps is committed to meet performance improvement targets because nearly half of the health system's revenue is generated through serving Medicare patients, who are reimbursed at less than the full cost of care, and competitors are offering commercial services at lower cost through narrow networks. "The opportunity and imperative we have is lowering costs without lowering quality," he says.
Two of the most significant performance improvement initiatives at Scripps have been establishing a horizontal management structure and creating clinical care lines with physician co-management to standardize clinical processes in cardiology, oncology, orthopedics, and women's services, Rothberger says.
Over the past five years, Scripps' performance improvement initiatives have cut costs and generated revenue totaling $425 million. These efforts have enabled the health system to consistently post strong positive operating margins rather than posting low margins or just breaking even, Rothberger says.
After the CFO Exchange concluded, Edward "Ted" Dudley, executive vice president and CFO at Manchester, NH-based Catholic Medical Center, reflected that the event was a unique opportunity for top healthcare financial leaders to share ideas that can be applied at organizations across the country. "It provided me with insights into what initiatives large health systems are launching," he told me.
Dudley says two kinds of initiatives were particularly striking during the roundtable discussions at the CFO Exchange, which was held at the Broadmoor resort in Colorado Springs, CO.
First, squeezing the volume of hospital-based services to lower costs of care is a reality that healthcare providers need to face, he says. "It's not just talk. People are doing it now."
Second, developing technology for the future is an essential element for success. "Technology is not only going to redefine how healthcare is delivered but also who is delivering healthcare," Dudley says. Technology is enabling non-physicians such as registered nurse practitioners to perform many frontline healthcare services that doctors have provided in the past.
Since adoption of the Patient Protection and Affordable Care Act in 2010, uncertainty has been a hallmark of the healthcare industry. As CFOs and other healthcare finance leaders look to the near future, one thing is certain: adaptation is a necessity, not an option.
The nation's alarming obesity rates pose a grave threat to population health and to efforts to contain healthcare costs, a trio of experts says.
Obesity weighs heavily on American health and wealth.
Carrying extra pounds undermines several major weight-bearing pillars of value-based healthcare, including disease prevention, population health management, and cost control. In interviews and email exchanges over the past week, a trio of obesity experts helped me gauge the crisis and suggested ways to slash obesity rates.
Jay H. Shubrook Jr., DO, a diabetes specialist and professor at Touro University College of Osteopathic Medicine in Vallejo, CA, says the societal costs of obesity are becoming too great to bear.
Jay H. Shubrook, DO, FACOFP, FAAFP
"Our public health is at stake," he says. "We will not make meaningful headway on the prevention and treatment of chronic disease until we change the infrastructure that supports unhealthy habits. An immigrant from almost any other country who moves to the U.S. becomes at higher risk for diabetes once they live here. We have a sedentary lifestyle with an abundance of high caloric foods at our disposal."
Shubrook has been witnessing the impact of historically high obesity rates in his patients for nearly two decades.
Before moving to California this year, he served in several clinical, leadership, and academic positions at OhioHealth O'Bleness Hospital, a 132-bed acute care facility in Athens, Ohio. In 2013, O'Bleness identified obesity and poor dietary infrastructure in Athens County as "areas of concern" in the organization's Community Health Needs Assessment. In addition to pegging the adult obesity rate in Athens County at about 31%, the O'Bleness health needs assessment sounds an alarm over limited access to healthy foods in low-income areas and an overly high percentage of fast food restaurants among the area's eateries.
"Obesity is a crisis for two reasons," Shubrook says. "We are seeing lower life expectancy rates among our children, and we already know we can't handle the economic impact of diabetes. It will wipe out healthcare."
Otis Brawley, MD, chief medical officer at the American Cancer Society, says obesity is one of the top cancer risk factors in the United States.
"The combination of high caloric intake, obesity and lack of physical activity will surpass tobacco as the leading cause of cancer death within the next two decades. It is already a leading cause of heart disease, diabetes and orthopedic injury," he says.
Poor dietary habits and high obesity rates threaten to cripple the healthcare industry and the broader economy, Brawley says. "It is imperative that we reverse the trend, as healthcare costs associated with [the obesity] epidemic are already dragging our economy down and eventually will collapse our economy if it continues over the next several decades."
Justin Noble, a certified nutrition coach, children's book author and cofounder of MyBodyVillage.com, says the healthcare industry will be unable to "move the needle" on cost of services as long as obesity and other lifestyle-related health risk factors remain out of control.
Otis Brawley, MD
"The main issue with healthcare in America is that it is focused on treatment instead of prevention. Eighty-six percent of all healthcare spending in 2010 was for people with one or more chronic medical conditions. The gross majority of these conditions are brought about by lack of exercise, poor diet, stress, smoking, and alcohol consumption. In a nutshell, these ailments are brought on by the choices people make. If we put more effort into giving people the tools and the resources they need to make healthy choices, we will find ourselves paying less for the diseases associated with these poor choices. Until that happens, I only see the needle moving up."
The data demonstrating the dire health effects of obesity is distressing:
More than one third of adults and about 17% of youths are obese, the federal Centers for Disease Control and Prevention (CDC) reported in February 2014.
Obesity-related conditions include heart disease, stroke, Type 2 diabetes and several types of cancer, according the CDC's Division of Nutrition, Physical Activity, and Obesity website.
In 2008, the estimated annual medical cost to treat obesity-related diseases was $147 billion, the CDC reported.
Many peer-reviewed studies have identified obesity as a high-risk factor for diabetes. A study published in 2000 concluded size definitely matters in the relationship between obesity and diabetes: "Relative to overweight people with stable weight, each kilogram of weight gained annually over 10 years was associated with a 49% increase in risk of developing diabetes in the subsequent 10 years."
A half century ago, Americans rose to another public health-related crisis with immediate actions and a long-term commitment to change.
Beginning in the 1960s, polluted river infernos, overflowing landfills and other environmental calamities sparked a societal shift in American attitudes about natural resources. The country's collective nest had been fouled. A coalition of powerful institutions – including government agencies, public schools and the entertainment industry – teamed up with communities to protect the environment.
Counter marketing was part of the immediate response to environmental degradation, including one of the most memorable public service announcements of the 20th century, the Keep America Beautiful campaign "Crying Indian" ad in 1971.
Shubrook says similar public service announcements and high-shock-value communication techniques need to be deployed as soon as possible to help reduce obesity. He cites a spoofof Coca-Cola's polar bear ad campaign that features ursine cartoon characters becoming obese on sugary drinks, then developing several related health problems such as diabetes and erectile dysfunction.
"It takes the sexiness of commercials and puts out a different message," he says. "When I show this spoof ad to my medical students, they see the power of marketing. There has to be some counter marketing [to offset advertising of high-calorie foods]."
The American obesity crisis poses more challenges than the healthcare industry can address on its own, Shubrook says, urging the formation of community coalitions to promote healthier lifestyles. In Athens, OH, and surrounding towns, healthcare professionals, political leaders, and business owners have banded together, creating a "critical mass" of activism to reduce obesity in their communities. "In each community, that [coalition] is going to be different. In some cases, youth groups will be crucial. That's the trick: You have to identify the key mass."
Brawley and Nobles say education, particularly for children, will play a decisive role in whether the country can contain the obesity epidemic.
"I do have some hope that we can change our eating practices," Brawley says. "I have more hope for preventing obesity in younger generations. Very few obese adults over 50 are successful with weight loss. European patterns of obesity have not risen over the past forty years as American patterns have. This tells us that populations can eat responsibly. I believe an aggressive education effort can prevent obesity."
Health and nutrition education should be a top public health priority, Nobles says. "First and foremost, the easiest way to get us on the right track is to start at an early age. Healthy children make healthy adults, which make a healthy society. The earlier we teach children about making healthy choices the better. It's much easier to stop a bad habit before it starts than it is to break a bad habit."
Last week I reached out to these food industry companies and associations, but not receive responses to my requests for comment: the American Beverage Association, Coca-Cola, The Food Institute, and Little Caesar Enterprises Inc.
As narrow provider networks become more widespread, healthcare payers and regulators are focusing on the ground rules for out-of-network care payments. Chiropractic and telemedicine practitioners may benefit.
With exclusionary underwriting such as pre-existing condition culling outlawed under the Patient Protection and Affordable Care Act, provider network design has emerged as a key tool for payers to control the quality and cost of healthcare services.
The first stage in the evolution of these so-called narrow networks focused on the adequacy of provider networks, with regulators setting service accessibility standards for patients such as travel distance limits.
As state and federal officials finalize provider-network adequacy standards, billing for out-of-network healthcare services appears destined to dominate the next evolutionary stage of narrow networks.
Robin Gelburd, president of New York-based FAIR Health, says establishment of ground rules for out-of-network care should be a top transparency goal in the healthcare industry.
"Out-of-network care is squarely in the spotlight now, but there are two major prongs to that discussion—elective out-of-network care and 'the surprise bill.' In elective out-of-network care, there often is a unique issue or a pre-existing relationship with a physician who is no longer in the payer's network. When there is a lack of transparency in these elective out-of-network cases, there are unexpectedly high out-of-pocket costs for patients. If there is going to be cost-sharing for this care, it's better for patients to know that before they get a service," Gelburd told me recently.
"With the surprise bill, a patient thinks that a service is covered at the in-network rate, but the bill includes an unexpected out-of-network fee. This is the exacerbation of the times."
FAIR Health is a not-for-profit corporation founded in 2009 to gather and leverage payer claims information. The organization has taken a leading role in healthcare transparency efforts, including provision of data used to set pricing benchmarks for New York's recently adopted healthcare transparency law.
Gelburd says the Empire State's healthcare transparency law, which includes consumer protections for patients who seek out-of-network services, reflects a growing regulatory trend.
"We're starting to see ripple effects across the country, with states experimenting. Protective provisions are needed for consumers, and those protections will vary from state to state," she says, noting that Connecticut has established out-of-network billing standards for emergency care. "The New York law is becoming the national model. Connecticut, New Jersey, and Texas are all looking at regulating surprise bills. It's a necessary outflow of a changing marketplace."
Gelburd says healthcare industry stakeholders who resist the transparency trend are taking a high-risk gamble. "The consumers are not in the chorus line anymore. … They have been pushed into the spotlight, and they are asserting their voice."
New Jersey is another state on the front lines of clashes over billing for out-of-network care.
In a commissioned study that Horizon Blue Cross Blue Shield of New Jersey released in March, the Newark, NJ-based payer calls for limits on the prices that providers can charge for out-of-network care.
"Health plans build provider networks both to manage costs and to promote higher quality care for their members. These relationships are also critical building blocks needed to support evolving accountable and coordinated care structures that aim to promote and reward high-value patient-centered care rather than high-volume fee-for-service medicine," the study concludes. "Current New Jersey rules that apply when health plan members involuntarily utilize out-of-network providers, with no limit on what out-of-network providers can charge, create an incentive structure that is at odds with these goals."
Unreasonable billing for out-of-network services is costing Horizon BCBS hundreds of millions of dollars, the study finds. For out-of-network service claims in 2013, Horizon BCBS would have saved $497 million if the claims had been paid at 150% of the Medicare rate rather than paid at 100% of the out-of-network charge.
In November, Hartford, CT-based Aetna filed suit against a staff physician at Monmouth Medical Center in Lakewood, NJ. The lawsuit, which was filed in the Superior Court of New Jersey, claims the physician filed excessive claims for treatment of abdominal pain totaling $31,939. The doctor's bills exceeded the Medicare rate by nearly $30,000, according to Aetna. The suit also claims the doctor failed to inform his patient that he was not in Aetna's provider network.
Aetna's complaint in the lawsuit accuses the doctor of pricing gouging for out-of-network services: "After Aetna properly paid Defendant the fair value for his services and the accepted rate for similar services in the community by providers in Defendant's area of practice, Defendant sought to exploit and to gouge [the patient] by billing the member for the difference between his charges and what Aetna paid to him—a practice commonly referred to as 'balance billing'."
The patient was billed $10,635, according to Aetna's complaint.
The defendant in the case, Sanjay Bhagat, MD, says the lawsuit was dismissed. He declined to comment about details of the case.
Chiropractic, Telemedicine Could Benefit
While the out-of-network frontier is generating friction over billing for services, some physicians and their patients are mutually benefiting from the rigorous regulatory review of provider networks for adequacy and consumer protection.
A new interpretation of the PPACA by a trio of federal agencies—the departments of Labor, Treasury, and Health and Human Services—requires provider networks to include doctors of chiropractic medicine or coverage for chiropractic services at in-network rates.
"We are calling this a game-changer," John Falardeau, senior vice president of government relations at the American Chiropractic Association, told me recently. "We are thrilled these three agencies went back and gave a better take on guidance for payers. We saw a lot of confusion before."
He says chiropractic physicians have struggled for decades to be included in provider networks. "It's always been a challenge. It's certainly something that many of our providers have become so fed up with that they have gone to cash-only services."
The struggle for inclusion has generated positive results for chiropractors and their patients, Falardeau says. "Chiropractic care has become much more mainstream. You can find it in most health plans. For plans on the new [PPACA] exchanges, 90% of plans cover chiropractic."
Tyler Brannen, health policy analyst at the New Hampshire Insurance Department, says telemedicine could be the final out-of-network frontier for healthcare regulators.
"There is massive growth in telemedicine, which could create coverage issues. Is it covered as a telemedicine service or as a physician who is using telemedicine to provide a service? Is a telemedicine visit covered or is it out-of-network? How do you cover telemedicine services in the home?" he asks.
There may be a couple years of awkward puberty ahead, but provider networks and the rules that govern them are taking their final shape.
Long-term gains appear to outweigh short-term pains from adoption of bundled payments for hip and knee replacement procedures, a pair of healthcare payment experts says.
Healthcare providers experiencing high anxiety over Medicare's bundled payment initiative should calm their nerves with the sage advice of the Chinese philosopher Lao Tzu: "A journey of a thousand miles begins with a single step."
This month, the Centers for Medicare & Medicaid Services proposed mandatory bundled payments for hospital-based hip and knee replacement procedures. Mandatory is a scary word in nearly any healthcare reform scenario, and the proposed Comprehensive Care for Joint Replacement (CCJR) payment model has generated a significant measure of provider consternation, including fear over the financially punitive potential of assuming full risk for episodes of care for inpatient surgical procedures such as hip replacement.
On July 9, CMS officials released a fact sheet highlighting key features of the CCJR bundled payment model:
An episode of care for hip and knee replacements would begin at surgery and end 90 days later. Hospitals "would be accountable for the costs and quality of care."
Medicare would set quality metrics and pricing benchmarks for the joint-replacement episodes of care. "Depending on the hospital's quality and cost performance during the episode, the hospital would either earn a financial reward or be required to repay Medicare for a portion of the costs."
In addition to holding hospitals accountable for the cost and quality of care, the CCJR bundled payment model is designed to boost care coordination "with the goal of reducing avoidable hospitalizations and complications."
The public comment period for the CMS bundled payment proposal closes on Sept. 8.
T. Clifford Deveny, MD
Over the past week, I reached out to two healthcare payment experts for operational and theoretical perspectives on the CMS bundled payment model for hip and knee replacements. From their vantage points, there are no obvious alternate routes to the bundled payment course CMS is setting.
No Obvious Alternatives
Bundled payments encourage providers to deliver services cost-effectively without compromising quality, according to T. Clifford Deveny, MD, senior vice president for physician services and clinical integration at Catholic Health Initiatives. The Englewood, CO-based nonprofit health system operates more than 100 hospitals in 19 states.
"It's high time we start to create realistic boundaries between our expectations for healthcare and our resources," Deveny told me last week. "There is enough data now from the [CMS] pilot programs to show that bundled payments work, and orthopedics is probably an area where 'spend' is going to explode in Medicare."
He says the proposed bundled payment model for hip and knee replacements is an example of CMS playing a practical and essential role in the healthcare industry's journey toward value-based service delivery.
"The medical community does not adopt these things on its own. We talk about it academically, but it doesn't get adopted. We kind of have to force this to happen. Healthcare is an economic engine that is out of control. I applaud the largest payer in the United States saying 'enough is enough.'"
Since passage of the Patient Protection and Affordable Care Act in 2010, CHI has been trying to break through obstacles to early adoption of value-based care, with initiatives including bundled payments for joint replacement procedures and investment of more than $2.5 billion to upgrade electronic medical record capabilities across the health system.
Why Hips and Knees?
Deveny says hip and knee replacement procedures are a practical area for healthcare providers to start introducing bundled payments for three reasons:
Most are elective procedures, and bundled payments "create a box that the whole continuum of care can be put into" for relatively easy management clinically and financially.
Orthopedists are a "willing specialty" with professional associations such as the American Academy of Orthopaedic Surgeons taking an active role in educating doctors about the alternative payment model.
Joint replacement surgeries have "a very predictable disease process."
Harold Miller
In practice, CHI's leadership decided to account for human nature while holding orthopedists accountable for joint replacement episodes of care, Deveny says, noting that the organization has consistently emphasized the benefits of adopting bundled payments rather than the potential financial penalty. "We created a safe environment and an opportunity."
With some of the fear taken out of the value-based payment equation, CHI unleashed an unexpected driver of change in the health system's bundled payment initiative for joint replacements.
"Doctors are smart," he says. "They're top performers, and they don't want to lag behind. This allows them to measure themselves against their peers. It created a national competitiveness in the organization."
CMS is Not the Problem
Harold Miller, president and CEO of the Pittsburgh-based Center for Healthcare Quality and Payment Reform, is a master theoretician in the area of value-based payment for healthcare services. He points to the chasm separating the lofty value-based goals of CMS payment reform initiatives and the operational flaws in the agency's alternative payment programs. On several occasions since he and I first crossed paths nearly a year ago in Boston, Miller has passionately and convincingly contended that Medicare's shared savings programs are an overly timid step in the journey from fee-for-service medicine to value-based care.
From his perspective, the proposed Comprehensive Care for Joint Replacement payment model is deeply flawed.
Last week, Miller published an analysis of the CCJR payment model titled "Bundling Badly: The Problems with Medicare's Proposal for Comprehensive Care for Joint Replacement." Among his criticism is the contention that CCRJ is "primarily a plan to penalize hospitals when patients receive higher-than-average amounts of post-acute care services after knee or hip surgery."
From a practical perspective, Miller believes CMS is playing an indispensable— and relatively effective— role in guiding the healthcare industry toward value-based delivery of services.
"You may be surprised to hear me say this, but CMS is far more agile than private payers are," he told me Monday. "Just look at their Bundled Payments for Care Improvement initiative. They have four different payment models, three of which can be applied to 48 different patient conditions. That's 145 different payment models. No private health plan has come anywhere close to that. Most have a couple of bundled payment initiatives, if anything. What CMS has done isn't perfect by any means, but they've done far more than anybody else has.
"The biggest barrier keeping CMS from implementing better payment models isn't at CMS itself," he continues, "the problem is its Medicare Administrative Contractors. CMS doesn't actually pay claims itself, it pays claims through MACs, and the organizations with those contracts have not made the investments necessary to implement innovative payment models. Other health plans haven't either, so it's not clear that CMS could easily choose other contractors."
Despite the daunting obstacles ahead, at least the healthcare industry's "journey of a thousand miles" to value-based delivery of services has begun.
With health insurance markets highly concentrated at the state level from coast to coast, the proposed merger of Aetna and Humana will face intense scrutiny from federal regulators.
Political advocates of financing the healthcare industry through a publicly operated single payer often extol the societal benefits that scale and standardization could generate.
Market forces put a premium on scale and standardization, too.
This month's proposed $37 billion merger of Aetna and Humana is the latest move in a decades-long consolidation trend in the commercial health plan sector that has accelerated since passage of the Patient Protection and Affordable Care Act in 2010.
If the proposed merger passes Department of Justice muster, the combined new company would have more than 33 million health plan members and would post revenue this year estimated at $115 billion, according to a joint statement from Aetna and Humana.
UnitedHealthcare, a division of East Minnetonka, MN-based UnitedHealth Group, is the reigning king of health plan membership, serving more than 26 million members in the commercial group and individual markets alone.
Vivian Ho, PhD, a professor of economics at Rice University and professor of medicine at Baylor School of Medicine in Houston, says the proposed Aetna and Humana merger could be the end of the line for payer consolidation, with regulators stepping in to preserve the balance of negotiating power between healthcare providers and payers.
"It's fair to say the insurers are way ahead in the consolidation game. There have been studies that have shown that payers have market power," Ho told me last week. "There is definitely a lot of skepticism about this merger going through. The federal government is very sensitive to this."
Monopolistic Market Conditions
Skepticism? Healthcare providers are apoplectic at the prospect of payer consolidation.
Last fall, the Chicago-based American Medical Association released a payer consolidation report based on 2012 data that drew alarming conclusions. A key finding indicated monopolistic market conditions already in place in many states: 17 states reported having a single healthcare payer controlling at least 50% of the commercial market share, and 45 states reported having two payers controlling at least 50% of the commercial market share.
The authors of the AMA report, "Competition in Health Insurance: A Comprehensive Study of U.S. Markets," urged antitrust regulators to act aggressively. "We find that the majority of U.S. commercial health insurance markets are highly concentrated. These markets are ripe for the exercise of health insurer market power, which harms consumers and providers of care. Our findings should prompt federal and state antitrust authorities to vigorously examine the competitive effects of proposed mergers between health insurers in the future."
In a conference call last week with analysts from 10 financial institutions, including several investment banking behemoths such as Wall Street icon Goldman Sachs, top executives at Aetna and Humana said their merger deal is not only good for their businesses, but also good for the evolving healthcare industry.
Aetna Chairman and CEO Mark Bertollini said the proposed merger would generate a host of benefits inside and outside the combined company, mainly as a result of scale, adoption and standardization of best practices, and the combination of corporate cultures that are equally committed to the healthcare industry's shift from service volume to service value.
"The combination with Humana will create one of the nation's premier managed care companies. Additionally, the combination will increase Aetna's exposure to faster growing government programs, with government programs representing 56% of projected 2015 operating revenue on a combined basis…
"The acquisition of Humana will also strengthen our efforts to be a leader in the move to a more consumer-oriented healthcare marketplace. Humana's consumer strategy and investments to date are very much aligned with Aetna's vision of the future of healthcare delivery…
"A key component of our growth strategy is rooted in our efforts to lead the transformation of the provider model from one of episodic care to population health management. We have organized our provider enablement assets under the Healthagen banner to create an organization focused on enabling this transformation in the marketplace. Humana is also enabling providers in their transition to a population health model through the integration of its Certify and Anvita assets under the Transcend Insights banner…
"The acquisition of Humana will strengthen the care management capabilities we offer our customers by creating a comprehensive spectrum of provider solutions, including a robust offering of patient-centered provider services, clinical intelligence, data integration, and analytic solutions. The combination brings together two companies with long-standing commitments to promoting wellness, health and access to high-quality healthcare for everyone, while supporting the communities in which they serve. Finally, this transformational acquisition will further enhance our ability to generate capital to invest in our growth strategy, provide new and innovative products and drive additional shareholder value."
Federal Review
Only the passage of time and the granting of credit lines will prove whether the banking community has confidence in Bertollini's kinder, gentler vision of payer consolidation. The more immediate concern for Aetna and Humana is the Department of Justice's antitrust review of their proposed merger.
David Balto, a former trial attorney in the DOJ Antitrust Division and former policy director for the Federal Trade Commission Bureau of Competition, says the merger deal is a longshot.
"The Antitrust Division is getting more aggressive on healthcare mergers, and they know they can go to court and win," the Washington, DC-based private attorney told me last week. "Increased payer concentration has reached a tipping point. With these numbers, losing even one large insurer to a merger is terrible. Research shows mergers lead to higher prices. When health insurers become more concentrated, there are fewer options [for patients and providers]."
Professor Ho says healthcare providers would be the biggest losers if the proposed Aetna and Humana merger is finalized. "The greatest impact is going to be felt by the hospitals and the physicians. They're not going to be able to negotiate the reimbursement rates they were before."
It also is far from certain that the proposed merger will fatten patient wallets, she says. "I'm not sure there is enough market competition out there among health plans to drive down premiums… A public alternative insurer was discussed during the [Patient Protection] and Affordable Care Act debates. Leaving that public alternative out of the law may have been a mistake."
The Patient Protection and Affordable Care Act appears firmly in place as long as President Obama remains in office. But affordability remains the Achilles heel of the healthcare reform law, observers say.
Certainty is one of the most solid and sought after building blocks for any market.
Last week's Supreme Court decision upholding subsidies for health plans purchased on federally operated insurance exchanges provides a measure of certainty to the health insurance market. For the foreseeable future, the highest court in the land has signaled emphatically that it will not overturn the Patient Protection and Affordable Care Act. And for the next two years, President Obama is certain to protect and build out the PPACA, his signature domestic policy.
Theda Skocpol
After last week's ruling, Theda Skocpol, a professor of government and sociology at Harvard University in Cambridge, MA, co-authored a New York Times opinion piece that cast the King v. Burwell decision as a PPACA turning point.
"The new framework being put in place by the Affordable Care Act is taking hold—this thing moved rapidly," Skocpol told me this week. "The court ruling makes it impossible to undo it."
The president has gained an edge in PPACA politics, she says. "There's going to be a lot of chest thumping from Republicans. House Republicans are going to hold more hearings. Barack Obama is not signing off on any of that."
For the second time since passage of the PPACA in 2010, Chief Justice John Roberts wrote the majority opinion in a case that could have disrupted or derailed the healthcare reform law. For the second time, the Supreme Court upheld a key element of the PPACA, and further existential challenges to the healthcare reform law in the highest court in the land appear unlikely.
Roberts, who is widely viewed as a conservative on the court and who wrote the minority opinion in last week's landmark decision legalizing gay marriage, has sent a pro-PPACA signal to the Republican Party, Skocpol says.
"Roberts is saying, 'Forget it guys, this is here.' He kept control of this case. He sided with the business wing of the Republican Party… The thing to remember about this law is it's a huge leap forward. Remember what was here before. People were losing their insurance policies when they got sick. Deductibles were increasing. All those things were going on and the system was under enormous stress. It's not a leap to 100% coverage, but it's a leap to 90% coverage."
She says Roberts began his ruling with a telling passage, linking the PPACA to its GOP-forged prototype in Massachusetts, under the guidance of former Republican Gov. Mitt Romney. "This is their own plan. This is Romneycare. That part of Roberts' decision was fascinating," Skocpol says.
Chief Justice John Roberts
The Affordability Gap Remains
Harold Bishop, a senior writer analyst at New York-based Wolters Kluwer Law and Business, says the ruling is a clear victory for President Obama, but it leaves Democrats dealing with their principal PPACA problem: making the healthcare reform law work. "[Presidential candidate] Hillary Clinton and the rest of the Dems must now defend the ACA: with its high premiums, deductibles, co-insurance, and co-pays; the loss of plans and providers that the enrollees encounter; and the unpopular individual and employer mandates."
Plugging the PPACA's affordability gap for the middle class must be a priority for proponents of the healthcare reform law, Bishop says.
"The middle class taxpayer, who currently has insurance either through his employer, other private coverage, or through an exchange, where he probably does not qualify for a subsidy, will not only have to continue paying for the millions of new Medicaid recipients but also for millions of subsidized exchange enrollees… For example, about a year ago, I accessed the Illinois exchange and checked out the cost of the BlueCross BlueShield PPO that I presently have through my employer and found that if I had to go through the exchange, my premium would double, mainly because my employer would no longer be contributing. My deductible would triple, from $500 to $1,500, my annual coinsurance maximum would increase from $1,500 to $3,500, and my office visit copays would go from $25 to $60 per visit. This could cost me an additional $6,000-plus per year. In addition, I might lose some doctors and hospitals from my network."
Affordability is the Achilles heel of the healthcare reform law, he says. "The data certainly seems to support the claim that the high cost of the ACA exchange health plans is a major problem with the law. According to the LA Times, a recent survey in California shows that 44% of ACA policy holders find it difficult paying their monthly premiums. In addition, a similar percentage of uninsured Californians say the high cost of coverage is the main reason they go without health insurance."
Katherine Hempstead, health insurance director at the Robert Wood Johnson Foundation in Princeton, NJ, says Medicaid expansion under the PPACA is now the last hot battlefront in the partisan struggle over the healthcare reform law. Medicaid expansion also presents an opportunity for health insurance carriers, she says.
"This ruling will really put the heat back on the Medicaid expansion discussions that are going on in a number of states, some of which had been sidelined due to concerns about King. This ruling will embolden advocates of 'alt-Medicaid' ideas that take a private-option approach, since these markets are now on a firmer footing. Since Medicaid enrollment has been very healthy in states that have expanded versus [exchange] enrollment, which has been a little light in some places, carriers that have Medicaid business are in a good position to grow."
She says the ruling in King v. Burwell is likely to reinforce a market strategy that could become one of the enduring legacies of the PPACA: consolidation. "The interest we have seen from national carriers in growing larger and entering more state markets will only be strengthened by this decision."
The CEO of Aetna's ACO business unit discusses how the insurer is working with healthcare providers to retool their organizations in order to deliver services based on value rather than volume.
Aetna is taking a leadership role in accountable care contracting.
The Hartford, CT-based commercial insurance carrier has established dozens of accountable care collaborations with healthcare providers across the country, and an internal business unit, Accountable Care Solutions from Aetna, is working with providers who want to assume greater risk in delivery of services.
Daniel Finke, MBA, became CEO of ACS last September. Finke and I recently talked about how ACS is helping healthcare providers retool their organizations to deliver services based on value rather than volume.
HLM: What are the main ways ACS is helping healthcare providers assume risk in care delivery?
Daniel Finke, MBA
Finke: The bottom line of this is that we have 160 years of experience in managing risk, and we're using those assets to give providers help in assuming risk themselves. We offer optimal risk contracting to meet the providers where they are in readiness to assume risk, with a range of risk options as well as medium- and long-range solutions.
There are simple models where there is only upside risk and concentration on cost of care. There are models with upside and downside risk, bundled payments, and ACO contracts that have both upside and downside risk.
We're working with providers to put them in the insurance business. We provide a wide variety of risk-based solutions. It's not one-size-fits-all. That's for sure.
HLM: How do you build an optimal infrastructure for value-based care and patient engagement?
Finke: There are three focuses: Contracting at the right level of risk for the provider, establishing the right infrastructure for data and technology, and [determining] the right mix of clinical services for care management at the local level and point of care. We also use things like benefit design and tiering to pull the patient into the care as well.
HLM: How do you align providers' financial incentives with value-based care?
Finke: About 30% of Aetna's overall payments are in some form of value-based model. It's about $20 billion [annually]. The key factor is making sure the risk contract is right and to help make sure providers have a good contract experience.
HLM: How do you get payers, providers and patients on the same team?
Finke: We can align payer and provider risk, but we have to have the patient involved as well. You have to have a network of providers focused on quality and clinical outcomes. You need to provide most of the services [health plan] members want and make arrangements for services that are not in the provider network. You need consumer engagement tools to help ensure success… Web-based tools give members the ability to check their deductible status and support care management.
HLM: How do you assess the readiness of a healthcare provider to adopt value-based care?
Finke: Most of our providers are asking for help in assessing their readiness. Our ACS consulting group looks at providers' capabilities for managing risk. They ask a lot of questions. When it comes to IT, are all the physicians in an organization on the same electronic health record system? What services can they provide members and where would they secure out-of-network services?
There are at least a half-dozen assessments, and a consultant works on-site. There is a wide variety of readiness. It's a cultural question within most provider organizations. It's also market-driven, with Medicare pushing value-based payment models.
HLM: How can technology unlock the power of evidence-based care and preventive care?
Finke: Integrating clinical and claims data is a key capability, and integrating data collection into workflows at health systems is really important.
HLM: Do healthcare providers have to establish a minimal level of digital capabilities to succeed in accountable care contracting? If they do, what is in the minimal set of digital capabilities such as electronic patient health records, digital billing processes, and analytics?
Finke: Paper records would be challenging. You have to have some sort of electronic health record. Having the ability to share data is critically important. Ideally, providers should have an online capability to interact with their patients. It allows things to happen more timely.
What we're trying to do is provide care at the right time and the right place. When it comes to patient engagement, providers are more effective than payers. Provider care managers connect with [health plan] members better than payer care managers. Patients are more inclined to listen to them…
We can provide a variety of solutions to a provider's IT needs. There are some minimal analytics and clinical reports that can help providers grab the low-hanging fruit of value-based care."
HLM: How do you simultaneously decrease service volumes while maintaining high quality and cost-effectiveness in care delivery?
Finke: The key to this question is coordination of care. If you have coordinated providers and apply precision medicine whenever possible, then over time, the unnecessary utilization is kicked out of the system.
HLM: Which incentives and value-based payment models are best-suited for the healthcare industry?
Finke: There's no one perfect payment model. Joint ventures have a lot of promise, but the market will determine which are the best models.
At the annual Healthcare Financial Management Association National Institute conference, healthcare leaders are responding to a long list of pain points by linking information systems to financial performance and revenue cycle processes to patient experience.
Fittingly for Florida in June, healthcare finance executives are feeling the heat.
With commercial insurance carriers and Medicare squeezing payment rates in the ongoing drive to reward providers for value rather than volume in the delivery of medical services, healthcare finance executives are scrambling to identify their weaknesses and retool their organizations for value-based care.
The stakes for the bottom line are high, according to one of the featured speakers during Monday's kickoff of the annual Healthcare Financial Management Association National Institute conference in Orlando, FL, which has more than 5,000 registered participants.
Yvonne Chase, section head for patient access and business solutions at Mayo Clinic Arizona in Phoenix, said data collected at Mayo Clinic indicates that 93% of patients who are satisfied with the health system's billing practices are also satisfied with their clinical experience. But only 63% of patients are satisfied with their clinical experience when the billing experience is negative.
"If the patient does not have a good experience, we know they will go elsewhere," Chase said.
One of Monday's morning workshops focused on using health information management (HIM) as a transformative agent at health systems and hospitals. During a quick round of introductions and "pain point" sharing on the shift to value-based care, the audience of about four dozen healthcare finance professionals unleashed a copious number of concerns and initiatives designed to address them:
Clinical documentation improvement (CDI)
Computer-assisted coding
Improving the patient experience
Establishing revenue cycle best practices
Converting paper-based record systems to electronic health records
Managing queries from coders to physicians
Managing coding query responses from physicians
Integrating physician electronic health records with revenue cycle systems
Speeding up cash flow
Providing timely data to frontline healthcare finance and clinical staff
The importance of information systems to financial performance
One of the HIM workshop speakers, George Semko, administrative director of revenue cycle at Fishersville, VA-based Augusta Health, said HIM is a critical component of any effort to optimize revenue cycle operations at health systems and hospitals. "First, you have patients coming in the door, and you help craft that experience. Then at the end, you're getting the bills collected. The golden nugget in the middle is HIM," he said.
CDI is a key element of optimizing the revenue cycle function on several fronts, Semko said, noting the importance of "opening up lines of communication between the clinicians and the revenue cycle administrators." Accurate clinical documentation has a significant financial impact on healthcare providers, playing a fundamental role in the claims reconciliation process and cash flow levels.
Bottom line: If clinical documentation is done poorly, health systems and hospitals do not get paid on a timely basis, or not at all.
At Augusta Health, Semko said senior nurses have performed well in CDI roles working with physicians because there is "earned respect by both parties." August Health monitors several key performance indicators to boost the quality of clinical documentation, including the physician responsiveness rate to coder queries, physician-by-physician query responsive rate comparisons, coding accuracy, and average per query financial benefit. "We're never going to have 100% agreement around queries, but at least we have people responding to them."
Augusta Health has been able to achieve a 95% rate of physician responsiveness to coder queries, against an industry benchmark rate of about 85%, Semko said.
Another presenter at the HIM workshop, Sandy Wood, director of revenue cycle at Naples, FL-based NCH Healthcare System, said designing and implementing a new approach to revenue cycle operations has improved the health system's financial performance.
Mainly due to increased pressure from competitors, NCH's market share fell from 80% to 69% from 2010 to 2013, which prompted the health system to revamp revenue cycle administration, Wood said. In addition to CDI efforts, NCH financial administrators concentrated on leveraging HIM capabilities to "get information out to our folks," she said.
An electronic dashboard was established to circulate key clinical and financial metrics to all NCH department heads, including daily inpatient census, daily emergency room visits, and daily cash collection. NCH also started monitoring about a dozen revenue cycle metrics, including bad debt as percentage of gross revenue, cash collection, cost to collect, billing net days in accounts receivable, and final claims denial rate.
The financial turnaround has been dramatic, she said. In 2010, NCH was on track to lose $6 million. In the first quarter of 2014, the health system posted a 6% margin for revenue over costs.
Wood said NCH investment in HIM has impacted revenue cycle in several ways, including improved electronic medical record development and oversight, more effective claims denial management, better electronic records training for physicians, and replacement of paper processes with digitization. "All the documentation in our system is electronic," Wood said.
Linking revenue cycle processes to patient experience
Mayo Clinic has been investing time, energy, and money to improve the health system's patient experience performance, which has been both more complicated and gainful than many executives in the organization had anticipated, Chase said. "We want to talk about a partnership with patients. I want them to know that their finances are also my concern."
The entire revenue cycle lifespan presents opportunities to boost patient experience. "Pre-services communication sets the tone for the entire encounter," she said of Mayo Clinic outreach efforts before a patient arrives for services, which includes collecting the correct information, scheduling patients appropriately with the right doctor, and ensuring that services are covered and reimbursed at the highest possible level for patients. "We need to give the patient at least a 'guesstimation' of how much it's going to cost out of pocket."
While patients are receiving medical services, it is the healthcare provider's responsibility to work proactively and manage patient expectations, Chase said. "Gone are the days when we could say, 'It's their insurance and they should know their benefits.’ Patients want to be knowledgeable about the cost of service. They want to know whether they have coverage. … They don't want to be surprised. They want to be educated patients. They're thirsting for it."
Mayo Clinic has generated significant bang from the bucks that the health system has invested in several initiatives to improve patient experience, such as recording most phone calls to make sure patients are getting the information they need to understand the financing of their care. "Recording calls allows for root-cause analysis," Chase said.
The patient experience gains at Mayo Clinic are measurable, she said, noting that pre-service communications with patients has helped increase point-of-service collections 12%. And streamlining of the health system's referral process has cut appointment wait times by about one third. "We were at six days, and now we're down to four," Chase said.
To thrive in straitened circumstances, she said, healthcare providers need to learn from each other, share their success stories, and brace for the hard work of organizational change. "We can't get enough new tools."
