Individual hospital performance accounts for less than half of the variation in pooled readmission rates across the United States, researchers find.
County-based data collected from across the country show hospitals are far from solely responsible for readmission rates.
An analysis of the data, which is slated for publication this month in the journal Health Services Research, features information collected from 4,000 hospitals for patients with three conditions: acute myocardial infarction, heart failure, and pneumonia. The key finding of the study, "Community Factors and Hospital Readmission Rates," is that 58% of the variation in readmission rates was related to community characteristics outside a hospital's control.
Jeph Herrin, PhD, lead author, says several elements of a community's health capabilities that are not under hospital control help drive readmissions. "The health system outside the hospital, independent of any socioeconomic status characteristics, is important to understanding geographic differences in readmission rates," Herrin said in an interview.
"Our results indicate that at least some of the accountability should be shifted away from hospitals," he says.
The study comes as hospitals are facing growing financial penalties over readmissions. The Centers for Medicare & Medicaid Services' the Hospital Readmissions Reduction Program cuts a hospital's aggregate Medicare reimbursement if a facility reports higher-than-expected 30-day, risk-adjusted readmission rates for patients 65 years and older. The penalties were phased in, starting with up to a 1% Medicare reimbursement cut starting Oct. 1, 2012, and rising to up to 3%, effective Oct. 1, 2014.
Herrin and his co-authors examined county data for three types of community characteristics:
"Sociodemographic" factors such as living alone and educational levels
Access-to-care measures including general practitioners per capita
The number and quality of nursing homes in a county
More than half, "58% of the total variation in publicly reported hospital 30-day readmission rates was attributable to the county where the hospital was located. Expressed differently, the results suggest that individual hospital performance accounts for only 42% of the variation in pooled readmission rates across the United States," the study says.
While socioeconomic status (SES) factors such as educational level were associated with hospital readmission rates, nursing home density and quality were found to be more significant factors.
CMS is planning to roll out a readmissions reduction program that targets skilled nursing facilities. The Protecting Access to Medical Care Act of 2014, last year's congressional patch of Medicare's reviled Sustainable Growth Rate formula for physician reimbursement, includes a value-based purchasing (VBP) program for skilled nursing facilities.
Beginning in October 2018, under the VBP program, CMS is expected to hold skilled nursing facilities accountable for hospital readmissions through financial incentives such as linking Medicare payment rates to performance standards.
Spreading Responsibility for Hospital Readmissions
The Los Angeles-based physician who wrote an editorial to accompany Herrin's readmissions study says the analysis breaks new ground. "It's the first study that I've seen that really has done a rigorous and in-depth look at the factors happening outside the hospital," Teryl Nuckols, MD, a hospitalist and director of the Cedar-Sinai Medical Center Division of General Medicine, said in an interview.
She says the research Herrin and his team conducted shows the necessity to hold more parties accountable for hospital readmission rates. "There's definitely a need for greater coordination of care. There's a need for increased collaboration between the in-patient and out-patient settings. What the [HRRP] policy does is it makes the hospitals accountable for all of it," Nuckols says. "The readmissions penalties for hospitals are meaningful. They have created an incentive [to reduce readmissions]."
Future research on the impact of SES on readmission rates should focus on rural and inner-city areas. "It really warrants additional study," Nuckols said.
A CMS spokesman says the agency is gauging its hospital readmission reduction efforts carefully: "We are establishing a detailed plan to comprehensively analyze the impact of SES factors for Medicare payment systems and programs, and investigating data sources that would enable accurate measurement of SES."
No 'Magic Answer' to Hospital Readmission Puzzle
The lead author of another recent study on readmissions that cast doubt on the effectiveness of readmission reduction programs says the research Herrin and his team conducted accurately reflects the challenge.
"If you have a well-greased community, readmissions are a manageable problem," says Ariel Linden, DPH. "Providers are humming along; there's outpatient coordination. You don't need to be as concerned about readmissions. People are going to fall through the cracks, but not as much [as in communities with fragmented healthcare services or low socioeconomic status.]"
He says future research is likely to show a direct correlation between hospital readmission rates and the level of economic distress in a community. "In a disadvantaged community, you have Medicaid patients and the uninsured. Doctors don't want to see them because reimbursement rates are low," Linden said. "These patients are the high-fliers in the emergency room; and when they get out of the ER, there's nothing for them out in the community to keep them on track."
As Herrin's research implies, a broad and flexible approach is needed to reduce hospital readmission rates, Linden said.
"I don't think there's a magic answer here," said Linden, an adjunct associate professor at the University of Michigan's School of Public Health in Ann Arbor and president of Linden Consulting Group. "Reaching individual patients through nurses or other readmission reduction programs takes a tremendous amount of resources to make a dent at the population-health level."
To achieve significant reductions in hospital readmissions, he says the healthcare industry has to find a way to deploy a broad set of solutions.
"We need more doctors. We need to pay doctors to see patients who don't have insurance. We need to reimburse higher for Medicaid patients. We need more coordinated care. The key is doing all of it. I don't think doing any one thing is going to solve much."
Health Services Research is a publication of AcademyHealth. A grant from The Commonwealth Fund, a private foundation based in Washington, DC, financed Herrin's research.
One of the fledgling insurance cooperatives developed under the healthcare reform law has taken a financially fatal turn in Iowa. Now the repayment of solvency and start-up loans to CMS may be in peril.
With a liquidation petition filed last week, the Des Moines, IA-based health insurance carrier is destined to become the first financial failure among the nearly two dozen cooperatives launched simultaneously last year with the Patient Protection and Affordable Care Act exchanges.
In a statement announcing the liquidation petition, Iowa Insurance Division (IID) officials said CoOportunity is insolvent and beyond rehabilitation. Iowa Commissioner Nick Gerhart, who obtained a court order placing the company into rehabilitation in late December, concluded that "further efforts to rehabilitate the company would be futile."
CoOportunity's demise could cost taxpayers at least $145.3 million, money the Centers for Medicare & Medicaid Services gave the cooperative in start-up loans beginning in 2012 and a $32.7 million "solvency funding" loan awarded on Sept. 26, according to federal records.
CMS also provided $15.4 million last year to help cover the cash-starved cooperative's operational costs, according to the petition for rehabilitationfiled in December.
Operational losses are continuing at CoOportunity, and liabilities exceed assets by at least $48 million. "It is difficult to predict if there will be sufficient funds to repay solvency and start-up loans from CMS," IID officials said via email on Friday.
In addition to CoOportunity, five other PPACA cooperatives received solvency loans in the fall, according to CMS:
Cooperatives Weathering Start-Up Storm
Officials at three of the five cooperatives that received solvency loans say their organizations are now financially sound. Officials at the Kentucky Health Cooperative did not respond in time for publication.
HealthyCT CEO Ken Lalime said HCT applied for solvency funding in the summer to ensure the cooperative had adequate reserves. "HealthyCT took advantage of the opportunity to acquire an additional solvency funding of $48 million to further strengthen our financial position and to reduce the risk of not meeting established requirements. As a new entrant in the Connecticut health insurance market, the fund fortifies our capital position and ensures that adequate capital is on hand in the remote chance that losses could jeopardize HCT's financial stability," Lalime said Sunday.
Kevin Lewis, CEO of Maine Community Health Options, said MCHO applied for solvency funding in June to help finance reserves and expenses linked to beneficiary growth.
"MCHO received an additional solvency award to support our growth as well as expansion into New Hampshire… Health insurers need to maintain a risk-based capital (RBC) ratio with plenty of reserves to cover unexpected liabilities arising from the membership… CO-OPs are held to an even higher standard, with an RBC requirement set by CMS at 500% as opposed to 300% in most states… This solvency funding is for upcoming growth, not present need," Lewis said Saturday.
Melissa Duffy, chief strategy officer at Common Ground Healthcare Cooperative, said CGHC has faced challenges but is highly unlikely to follow CoOportunity into the financial abyss.
"The CO-OP program always envisioned additional loans and adjustments in light of updated business plans and [actuarial] projections. Unfortunately, quite a bit of funding was cut from the program after [start-up] loans were granted, which made this more difficult. CGHC has exceeded its projections, not dramatically like Iowa, but enough that it was prudent for us to request additional solvency," Duffy said Saturday.
Health Republic officials say they are confident about the cooperative's finances. "With decades of experience in the health insurance industry, Health Republic's executive leadership has made prudent business decisions along every step of the way, including negotiating lower-cost services, diversifying our commercial business lines, and securing affordable rates that allow us to maintain solid financial footing," they said in an email Sunday.
Utilization Costs, Accounting Switch Crush Cooperative
IID officials say a pair of factors collapsed CoOportunity's finances: higher-than-expected beneficiary utilization of healthcare services and an act of Congress that changed the accounting standards for HIX risk corridors, which is part of a CMS program that protects carriers from risks associated with operating on the exchanges.
Last year, CoOportunity sustained a net loss of $45.7 million between Jan. 1 and Oct. 31, according to court records. IID officials say a preliminary examination of CoOportunity's healthcare service claims indicates that several factors drove utilization costs beyond the limits of the cooperative's actuarial projections.
"While we are still investigating the cause, some items we have noticed are high incidence of HIV/AIDS patients enrolled with CoOportunity Health, with very high medical costs due to high-cost medications and frequency of other conditions, including hepatitis C. Sovaldi as a course of treatment for hepatitis C costs approximately $85,000," the IID officials said, adding there was also a "high incidence of transplants, which are very high-cost procedures."
IID says CoOportunity appears to have been over exposed to one of the primary risks that face insurance carriers operating on the new exchanges: "Pent up demand for services for people who had not had insurance coverage."
An act of Congress in early December pushed CoOportunity over the financial edge, according to the liquidation petition filed last week: "The [PPACA] provides three risk-spreading mechanisms to address risk pool issues by limiting the amount an insurance company can lose by participating in the [PPACA exchanges].
These mechanisms are
Risk corridors
Risk adjustment
Reinsurance
Payments from the Three R's have been treated as assets of CoOportunity. However, on December 13, 2014, when Congress adopted the Consolidated and Further Continuing Appropriations Act of 2015, a provision of the Act placed in jeopardy the projected risk corridor asset. CoOportunity estimates the potential loss of assets attributable to the risk corridors to be approximately $81 million dollars."
The risk-corridor accounting switch prompted the rapid unraveling of CoOportunity's finances, according to IID and court records. On Dec. 16, CMS advised CoOportunity and Gerhart that the federal agency would not be providing further financial assistance. That day, Gerhart declared the cooperative in a "hazardous financial condition" and placed CoOportunity under a supervision order.
A week later, the insurance commissioner petitioned for rehabilitation. The petition to liquidate the cooperative was filed less than two months after the risk-corridor accounting switch in Congress.
To avoid an interruption in services, the cooperative's 96,000 beneficiaries in Iowa and Nebraska have until Feb. 28 to enroll in a new HIX health plan, according to IID. A special enrollment period for CoOportunity beneficiaries also has been set for March 1 to April 29.
John Hunter, a lawyer for Brown, Winick, Graves, Gross, Baskerville and Schoenebaum PLC, the Des Moines-based law firm representing CoOportunity, declined to comment for this report.
Commercial insurance data for the third quarter of 2014 shows an ongoing rise in healthcare service utilization in the individual market and utilization rates dropping in the group market.
One of the great mysteries of federally driven healthcare reform and value-oriented changes in commercial health plans is unraveling.
National Association of Insurance Commissioners data collected from state insurance departments across the country is providing insight about the impact these historic changes are having on medical service utilization rates.
In the third quarter of 2014, healthcare service utilization spiked in the individual insurance market, but declined significantly in the group market, according to an analysis of NAIC's commercial insurance data conducted by the Princeton, NJ-based Robert Wood Johnson Foundation.
"It shows two trends that are really significant," Katherine Hempstead, team director and senior program officer at RWJF, told me last week.
Utilization Gaps
Hempstead analyzed NAIC data for the third quarter of 2014, which shows a 9.5% year-over-year increase in ambulatory care utilization in the individual insurance market and a 4% decline for ambulatory care utilization in the group market.
The utilization pattern gap is even wider for hospital admissions, with year-over-year admission rates spiking by nearly one-third in the individual market and falling 7% in the group market.
Hempstead noted a couple of caveats about the NAIC statistics, particularly for the group market. She says the data does not include every state, most notably California, and also excludes self-insured employers.
Hempstead says medical underwriting reforms under the Patient Protection and Affordable Care Act, such as disallowing pre-existing conditions as a factor in health plan eligibility, have transformed the individual market.
"In the non-group market, you find a big change in the population linked to medical underwriting. It will be interesting to see whether there is a leveling off of utilization. It's not a surprise that health costs are going to rise in the individual market because a lot of sick people couldn't get insurance before the ACA."
She also noted there could be "pent up demand" for medical services among low-income people who delayed receiving necessary care until obtaining healthcare coverage through the PPACA-spawned exchanges and expansion of Medicaid to more adults in two dozen states.
Assessing the decline in healthcare service utilization rates in the group insurance market is tricky. There was a 5% decrease in group market enrollment in the third quarter of last year. "With the group market, you have a combination of different care management and migration, so it's difficult to determine how the group market is playing out," Hempstead says.
Widespread benefit design changes and increased cost sharing with patients are exerting downward pressure on healthcare utilization rates for all health plan beneficiaries. "All insured populations are under different care management, which is driving down utilization."
The healthcare researcher says commercial payers and benefit managers at large businesses should find the NAIC group market utilization data heartening. "There have been a number of studies now that show when people have more responsibility for healthcare they are more sensitive to the price of care and use less care. Providers are also being incentivized to have their patients use care differently [such as by using more cost-effective settings]."
Insights from the NAIC healthcare utilization data are "sobering," Hempstead says.
'A Wild Ride' "This definitely has implications for premiums. The primary factor pushing premiums upward is [that] the ACA allowed more people into the non-group market who are low-income, and you can expect people with lower incomes to be less healthy." The next key trend to watch, she says, is whether the downward pressures on utilization in the group market can be replicated in the individual market.
"The same factors are at work as in the group market: high-deductible plans and provider-side innovations like ACOs that incentivize providers to give care more efficiently. The individual market is experiencing the same benefit design and care management techniques as the group market. Right now, we're on a wild ride."
With a pinch of economic logic added to the mix, extrapolating from Hempstead's analysis to predict long-term healthcare utilization trends in the commercial insurance market generates a bright forecast.
In the group market, there are indications that strong downward pressure on healthcare utilization rates will continue. From the health-plan and self-insured-employer perspectives, efforts have just begun to deploy benefit design changes, narrow networks, and cost sharing to promote better health outcomes while simultaneously containing costs.
From the consumer perspective, tremendous potential remains to lower utilization rates through care delivery innovations such as retail clinics and urgent care centers that match a patient's medical condition to the most cost-effective setting.
In the individual market, Hempstead and others have already raised the key utilization question: Will there be a leveling off?
As long as value-based healthcare industry reforms continue and employers keep squeezing value out of their health plans, an eventual utilization slowdown in the individual market is likely.
Low-income people who have gained health coverage through the PPACA exchanges and Medicaid expansion are almost undoubtedly in poor health relative to their more affluent fellow citizens.
In the logic of healthcare reform, the early utilization spike in the post-PPACA individual insurance market should level off over time. As more low-income Americans gain affordable access to medical services, the overall health of this population should improve. In addition, as Hempstead noted, the individual market is experiencing the same benefit design and cost sharing changes that have driven down utilization rates in the group market.
Payment and delivery reform is taking the healthcare industry on a wild ride, and the destination is starting to come into view.
Accelerating Medicare's drive to value-based payment and delivery models would boost care quality and generate enough cost savings to pay for "doc fix" reform, advocates say.
The perennial problem in Congress over how Medicare reimburses physicians is providing an opportunity for the foes of fee-for-service medicine.
Over the past dozen years, Congress has repeatedly patched Medicare's widely despised Sustainable Growth Rate formula for physician reimbursement. The temporary SGR fixes have featured a cast of usual suspects of Medicare budget offsets: cuts to provider payments or offsets affecting Medicare beneficiaries such as cost-sharing through deductibles.
A bipartisan and bicameral 10-year deal on a so-called "doc fix" for Medicare fell apart last winter over the politically daunting offset obstacle. Now the Congressional Budget Office estimates that the cost of implementing last winter's $128 billion SGR repeal-and-replace deal has risen to $144 billion.
The current SGR patch expires March 31.
The "pay-for" problem was on parade last week in Congress during a two-day hearing of the House Energy & Commerce Committee's health panel. Republican members of the health subcommittee appeared unified on the necessity to find budget offsets for any long-term replacement of SGR.
For those members of Congress contemplating SGR legislation without offsets, the health subcommittee's chairman issued a warning rooted in realpolitik during the opening session of the hearing Wednesday: "Think of what your goals are. The danger is, and it's a high risk, nothing is going to happen," said Rep. Joe Pitts, (R-PA), evoking the specter of another SGR patch.
A six-member panel of witnesses appeared before the House lawmakers on Thursday, and unanimously opposed offsets drawn from their constituencies.
Robert Umbdenstock, president and CEO of the Washington, DC-based American Hospital Association, opened Thursday's witness testimony with a flat-out rejection of any solution that requires offsets from healthcare providers. "The AHA cannot support any proposal to fix the physician payment problem at the expense of funding for services provided by other caregivers. Offsets should not come from other providers, including hospitals," he testified.
Eric Schneidewind, president-elect of the DC-based American Association of Retired Persons, testified that seniors cannot shoulder any SGR repeal offset burden. "The typical Medicare beneficiary cannot afford to pay more out of pocket," he said.
Umbdenstock and Schneidewind were the only witnesses to propose specific SGR repeal offsets during the health subcommittee hearing Thursday.
Offsetting SGR Repeal With Medicare Reform Windfall
Accelerating value-based healthcare payment and delivery reforms could not only pay for replacing SGR but also improve quality of care and reduce long-term Medicare spending, according to reform advocates and some members of the E&C Committee's health panel.
Alice Rivlin, PhD, director of the Engelberg Center for Health Reform at The Brookings Institution in DC, acknowledged during the hearing the political necessity of finding offsets, but urged lawmakers to launch a wave of value-based reforms in Medicare.
"Replacing the SGR can advance payment reform," she testified. "It can move the healthcare delivery system away from fee-for-service, which is still very prevalent in Medicare, which rewards volume rather than value, and move it toward higher quality and less waste. And that's good for everybody, especially beneficiaries of Medicare."
While directing a question to Schneidewind, Rep. Doris Matsui, (D-CA), called for Medicare reforms to be a prime component of any long-term SGR repeal deal. "New payment and delivery models incentivized in SGR repeal-and-replace policy can make Medicare services more effective and maybe even more efficient. This will save money, while improving care … and involve savings to the overall health system, not to mention the improvement in the quality of care that can have an invaluable effect on a patient's life," she said.
Matsui said improving Medicare's healthcare services is the best solution to the SGR problem: "A more holistic approach to patient care, including strong preventive care, saves costs and lives."
On Friday, a veteran of many SGR battles in Congress who serves on the E&C Committee's health panel said he was skeptical that value-based reforms in coming years can be the featured financing element for a doc fix now.
Rep. Michael Burgess, MD, (R-TX), said Medicare reforms will be accounted for in any long-term SGR repeal deal, but that more traditional offsets will be necessary. "[Reform] is going to be part of whatever group of offsets that's decided upon but I don't think there's enough offset there. It's a struggle to get that up to a number that's enough for a complete offset given the way the budget folks look at such things."
Burgess, who practiced medicine for nearly three decades in North Texas, said the CBO is unlikely to "score" the cost-savings from Medicare reforms high enough to pay for the doc fix. "If CBO would score things by what they save and not what they cost, we maybe could. That gets into the whole CBO scoring legislation that we have had for years," he said.
The Texas Republican also said it is unclear whether a majority of lawmakers in both houses of Congress can shun the historical approach to SGR offsets and bank on reforms to finance a repeal-and-replace deal. "That is to be determined. I just don't think there's any way we can answer that right now," he said.
Reformer Proposes Pain-Free Doc Fix
"The problem is, Congress has been led to believe the only way to deal with this is to cut something else," Harold Miller, president and CEO of the Pittsburgh-based Center for Healthcare Quality and Payment Reform, said after the hearing. "The way to get the offset is not by cutting someone else's fee, it's by redesigning care."
In a report released this month, CHQPR calls for a long-term SGR replacement deal financed with cost savings generated from accelerated and widely adopted accountable payment models. The report, which Miller authored, says Medicare officials have not gone far enough or fast enough in developing accountable payment models.
Miller said the Medicare Shared Savings Program, the government's most popular accountable care organization initiative, is "still fee-for-service " and does little to fundamentally shift providers from volume to value. He believes MSSP gain-sharing only offers an incentive to boost efficiency in fee-for-service operations, with providers grabbing a slice of the cost savings.
The CHQPR report calls for the Centers for Medicare & Medicaid Services to rapidly deploy three accountable payment models that have demonstrated effectiveness:
Bundled payments: Allowing providers flexibility to redesign care at reduced cost. "The CMS bundled payment initiative saved an enormous amount of money," Miller said. "The demonstration has already proved that it is going to work."
Warrantied payments: "It's the same idea as a warranty on anything else you buy. Now for infections and complications, we pay the doctors more to treat them, we don't pay doctors anything for preventing them… Providers make much more profit if you have an infection or complication."
Condition payments: "The orthopedists get paid a ton of money to perform a back surgery on you. But they get paid next to nothing to manage your pain or otherwise treat your condition."
Miller says marrying value-based healthcare delivery with value-based healthcare payments would lower Medicare spending more than the 0.5% annual reduction required to finance a 10-year, $144 billion doc fix. He also says having value-based reforms at the heart of an SGR replacement plan is feasible politically and administratively.
"Either the CBO can give it a score, or Congress can say that it will save money," he said, adding federal officials can move quickly to enact accountable payment models. "The [Diagnosis-Related Group codes] were implemented in 14 months starting in 1983. They can do it."
HHS officials highlight a three-year payment reform timeline, which calls for boosting fee-for-service Medicare reimbursements and increasing reimbursements linked to quality and value.
Federal officials have announced an accelerated effort to use payment reform as a mechanism to shift Medicare and the broader healthcare industry away from the fee-for-service model.
During a gathering in the nation's capital Monday, nearly two dozen healthcare industry stakeholders, including providers, commercial payers, and Department of Health and Human Services Secretary Sylvia Burwell, announced plans to ramp up Medicare payment reforms featuring alternative payment models and value-based payments.
"Whether you are a patient, a provider, a business, a health plan, or a taxpayer, it is in our common interest to build a healthcare system that delivers better care, spends healthcare dollars more wisely and results in healthier people," Burwell said. "We believe these goals can drive transformative change, help us manage and track progress, and create accountability for measurable improvement."
In a statement released Monday morning, HHS officials said the payment reform initiative includes creation of a "learning and action network" to promote the development and promulgation of value-based payment models. "HHS will intensify its work with states and private payers to support adoption of alternative payments models through their own aligned work, sometimes even exceeding the goals set for Medicare. The Network will hold its first meeting in March."
3-Year Timeline
In a conference call Monday afternoon with members of the media, senior HHS officials highlighted a three-year payment reform timeline, which calls for boosting the percentage of fee-for-service Medicare reimbursements based on alternative payment models (APM) and increasing the percentage of all reimbursements linked to quality and value.
In the early phase of the payment reform initiative's implementation, APMs will be limited to three pathways: Medicare's existing accountable care organization efforts, the Pioneer ACO program and the Medicare Shared Savings Program; bundled payments; and payment models tied to patient-centered medical homes.
HHS officials said efforts are already under way to develop and implement more ambitious value-based payment models, including episode-of-care payment for chronic illnesses and oncology care that will require providers to shoulder a significant level of cost risk.
The reform initiative calls for Medicare fee-for-service payments through APMs to rise from the current 20% level to 30% by the end of 2016. The percentage is slated to rise to 50% by the end of 2018.
It additionally calls for the percentage of Medicare payments that are linked to quality and value to reach 85% by 2016 and 90% by 2018. Existing Medicare quality and value linked payment programs include the Hospital Value-Based Purchasing (VBP) program and the Hospital Readmission Reduction Program (HRRP).
One HHS official noted that the agency is showing an unprecedented level of commitment to move Medicare away from fee-for-service payments to value-based payments. "This is the first time in history that we have a date-certain. … This sets very clear goals."
Marrying Value-Based Care Delivery With Value-Based Payment
HHS officials started foreshadowing the Medicare payment reform initiative in the fall.
In November, the Centers for Medicare & Medicaid Services released details about developing and optimizing APMs, linking fee-for-service payments to quality and value, Medicare ACO and bundled payment projects, and PCMH models. The slideshow highlights several value-oriented Medicare payment reform strategies and potential benefits:
Establishing greater focus on better care, better health, and lower costs for patients
Engaging in accountable care and other alternative contracts based on achieving better outcomes at lower cost
Testing models to better coordinate care for people with multiple chronic conditions
"Relentless pursuit of improving health outcomes"
A primary goal of the Medicare payment reform initiative is to develop and enhance the alignment between value-based healthcare delivery and value-based healthcare payment models.
One HHS official said the Medicare payment reforms will "support care delivery reforms," noting that hospitals and other providers are "on the frontline" of the battle to create a value-based healthcare industry.
Payment reform "can only be accomplished with partnerships," one of the HHS officials noted. To successfully shift the entire healthcare industry from volume to value, providers, commercial payers, regulators and every other major stakeholder will have to be "all working at the table on this."
Healthcare Payment Reformer Cautiously Optimistic
Suzanne Delbanco, PhD, executive director of Catalyst for Payment Reform, a Berkeley, CA-based nonprofit, says the Medicare initiative is a big step in the right direction, but it is only a single step.
"CPR obviously welcomes great company in advocating for rapid payment reform. Medicare and Medicaid can change the face of healthcare," Delbanco said Monday after Burwell's announcement.
Federal officials, however, have a lot of work ahead to implement reforms and move beyond "tinkering with fee-for-service" payments. "It's not as simple as saying, 'Hurrah, we've arrived at a new delivery model and we're going to save a lot of money!'" Delbanco says. "Most of the reforms that CMS is talking about are working off a fee-for-service architecture… It takes a huge amount of infrastructure change to handle more than that. Changing will be hard for Medicare and for providers."
Noting the looming March 31 deadline to fix or patch Medicare's loathed fee-for-service physician payment system, the Sustainable Growth Rate, she says the time may be right for CMS to accelerate alternative payment models, as long as HHS proceeds carefully.
"We need to move forward boldly with experimentation, but we will have to be willing to make changes," Delbanco said. "We have to be sober about it. We have to look objectively at the results and make mid-course corrections as needed."
A federal Court of Appeals panel has rejected the Obama administration's contention that hospital admission-status decisions are mainly in the hands of physicians and beyond the authority of Medicare.
The U.S. Court of Appeals has sided partially with the plaintiffs in a hospital patient admission-status case with huge cost implications for some Medicare beneficiaries.
In an opinion released Thursday, the US Court of Appeals for the Second Circuit sent the case back to District Court, ordering the lower federal court to review whether Medicare beneficiary rights under the due process clause of the Constitution are being violated.
The case centers on Medicare payments for beneficiaries transferred from hospitals to skilled nursing facilities, where patients face paying the whole bill if they leave the hospital without spending at least three days (two midnights) designated as inpatients.
The plaintiffs in the case have argued that there should be federal rules for patient notification about whether they are classified as being under observation or as inpatients. The plaintiffs are also seeking an avenue to appeal admission-status decisions.
The three-judge Court of Appeals panel rejected the Obama administration's contention that hospital admission-status decisions are mainly in the hands of physicians and beyond the authority of Medicare:
"The District Court erred in concluding that plaintiffs lacked a property interest in being treated as 'inpatients,' because, in so concluding, the District Court accepted as true the [Department of Health and Human Services] Secretary's assertion that a hospital's decision to formally admit a patient is 'a complex medical judgment' left to the doctor's discretion. That conclusion, however, constituted an impermissible finding of fact, which in any event is inconsistent with the complaint's allegations that the decision to admit is, in practice, guided by fixed and objective criteria set forth in 'commercial screening guides' issued by the Centers for Medicare & Medicaid Services (CMS)."
The judges rejected the plaintiff's other main contention on appeal, finding the admission-status rules do not violate the Medicare statute.
In November 2011, seven Medicare beneficiaries or their estates filed a federal lawsuit against Kathleen Sebelius, who was then serving as secretary of HHS. The case, which was filed at the federal District Court in Connecticut, was originally titled Bagnall vs. Sebelius, but has since been renamed Lee Barrows, et al. vs. Sylvia Mathews Burwell, the current HHS secretary.
The Center for Medicare Advocacy is representing the plaintiffs in the case. On Thursday, CMA attorney Alice Bers said the Court of Appeals ruling could represent a significant victory for Medicare beneficiaries. "The court recognized that hospital patients in 'observation status' may have Medicare appeal rights protected by the Constitution," she said.
The legal process is far from over, Bers added. "Plaintiffs made plausible allegations that Medicare has not left this decision to doctors' discretion and has set criteria for whether or not someone should be admitted."
"The parties are now to go back to the District Court for discovery on the issue of whether, as a factual matter, the decision is actually in doctors' discretion as the secretary of HHS states, or, is being directed by Medicare as plaintiffs state. If plaintiffs can show [that] Medicare directs this decision, they can proceed on their due process claims. The District Court will still have to address other questions that are also part of the due process analysis."
Bers said "property interest" is a pivotal issue in the case. "Bottom line: The Second Circuit recognizes that Medicare beneficiaries may have a property interest in their Medicare Part A coverage as hospital inpatients that is protected by the due process clause of the Constitution."
She noted that "…under the two-midnight rule, it seems doctors have even less discretion than before about admissions decisions."
The Department of Justice attorney who represented HHS before the Court of Appeals, Jeffrey Clair, did not respond to a request for comment in time for publication.
Widespread agreement in Congress on the need to replace Medicare's payment system for physicians is offset by deep divisions over how to pay for a new reimbursement model.
With a two-day hearing being held this week in Congress, the annual scramble has begun to plug a gaping hole in the formula Medicare uses to calculate physician reimbursement.
In 1997, Congress crafted the Sustainable Growth Rate formula (SGR), which ties Medicare's payment rates for doctors to the projected growth of the national economy. But healthcare spending quickly outpaced economic growth, opening a multibillion-dollar gap in funding for Medicare payments to physicians.
Lawmakers placed the first temporary patch on SGR in 2003, and the quest for a permanent Medicare "doc fix" has become an annual ritual ever since. The latest SGR patch, which Congress adopted last winter after failing to agree on financing for a bipartisan SGR repeal-and-replacement deal at a cost of $128 billion, is set to expire on March 31.
On Wednesday, lawmakers and witnesses at a hearing of the House Committee on Energy and Commerce's health panel were unanimous in their desire to reach a long-term deal on Medicare's reimbursement system for physicians.
In his opening remarks, the chairman of the subcommittee, Joe Pitts, (R-PA), called finding a permanent replacement for SGR the paramount issue facing the health panel. "This subcommittee has made permanent repeal of the flawed Medicare Sustainable Growth Rate formula, or SGR, a top priority for the last four years. In 2014, we reached a bipartisan, bicameral agreement on a replacement policy that enjoys widespread support both in Congress and among the stakeholder community," he said.
In his opening remarks, Rep. Gene Green of Texas, the ranking Democrat on the health panel, noted that Congress has patched the SGR formula 17 times since 2003, at a total cost to taxpayers of about $169.5 billion.
In a report released this month, the Pittsburgh-based Center for Healthcare Quality and Payment Reform asserts an "urgent need" to repeal and replace the SGR. "The draconian 21% cut in Medicare payments to physicians that it requires would make it difficult for physician practices to survive, make it difficult for Medicare beneficiaries to get care, and shift Medicare costs to workers and businesses, while only reducing Medicare spending by 3%," the report states.
Paying for Replacement Remains Stumbling Block
Witnesses and lawmakers from both sides of the aisle called Wednesday for the resurrection of last winter's bipartisan deal, the SGR Repeal and Medicare Provider Payment Modernization Act. The 10-year replacement plan for SGR features a five-year period of stability in the Medicare payment system, with a 0.5% annual pay rate hike for doctors. In the last five years of the plan, the pay rate would be frozen and a series of reforms would be launched to help push Medicare physician reimbursement toward value-based models.
"After this hearing, we should wait no longer at rolling up our sleeves," said Rep. Frank J. Pallone Jr., (D-NJ). "We all agree the previous bill is a good compromise."
The first witness, former Sen. Joseph Lieberman (I) of Connecticut, said the lawmakers who crafted last winter's SGR repeal-and-replacement deal beat long political odds in an era of hyper-partisanship. "You've done something that's really been unheralded," he told the health subcommittee members. "You've come up not only with a fix, but a solution."
Despite widespread agreement on the need to repeal SGR and continued support for last year's bipartisan SGR repeal-and-replacement deal, deep divisions remain over how to pay for a Doc Fix.
Lieberman testified that lawmakers must offset the cost of repealing SGR to avoid hiking the country's national debt, which hit $18 trillion for the first time in December, according to the Department of the Treasury. "This is really unsustainable. It's sustainable only by placing an incredible taxation burden on our children and grandchildren," the former senator said, adding later that Congress must find a way to pay for replacing SGR. "I hope you offset the cost of the solution … because otherwise you are going to increase our national debt."
While posing questions to Lieberman after his testimony, Pitts said that any SGR repeal legislation will be doomed unless lawmakers can find spending cuts or Medicare beneficiary cost-sharing measures to offset the cost. "As a practical matter, the House leadership has said bills must be offset before they can be heard on the House floor," the health subcommittee chairman said.
Lieberman, who made an unsuccessful bid to overhaul Medicare in 2011 with former Sen. Tom Coburn of Oklahoma, strongly agreed with Pitts. "This extraordinary achievement … will not make it into reality unless there is an offset," Lieberman said.
Democrats on the health subcommittee were adamant that seniors not be saddled with the cost of a Medicare Doc Fix, and they called for tax increases to be included among the financing options.
After noting "this is the richest country on the face of the Earth," Rep. Jan Schakowsky said she is firmly opposed to asking seniors to pay higher Medicare premiums or deductibles. "I say shame on us that we can't provide healthcare to our seniors and people with disabilities. I find that repugnant and my hair is on fire."
Schakowsky added that reforms are slowing Medicare spending and have the potential to offset the cost of replacing SGR. "We are adding incredible savings as a result of the Affordable Care Act. I say, we have plenty of money," she said.
Payment Plan Proposal
Alice Rivlin, director of the Engelberg Center for Health Reform at The Brookings Institution in Washington, DC, testified that a combination of targeted cost-sharing for seniors and value-based reforms would be the best way to address the SGR challenge.
"You can replace the Medicare SGR; and, at the same time, you can begin phasing in reforms," said Rivkin, who served as director of the federal Office of Management and Budget under President Clinton.
Pitts asked Rivkin whether the slowdown of Medicare spending in recent years could justify not offsetting a doc fix. "Whether this slowdown continues depends on whether we make bolder moves," she replied, calling on lawmakers to press forward with payment reforms in Medicare such as bundled payments as well as efforts to foster accountable care contracting.
In the cost-sharing arena, Rivkin said carefully crafted measures would avoid placing an unfair or unsustainable burden on seniors and people with disabilities. "Means-testing of the premium—I think you can do that without hurting low-income people," she said.
Rivkin said deductibles could be added to Medicare in a way that would not result in seniors delaying necessary medical treatments. "You could have it not apply to physician visits," she said of new deductibles.
The health subcommittee's hearing is set to resume Thursday, with several witnesses including Richard Umbdenstock, president and CEO of the American Hospital Association.
In the effort to create a consumer-driven healthcare industry, innovations are needed to help individuals and families carry a hefty cost-sharing load.
With deductibles and copayments spiking, health plans and employers are pushing the bounds of consumer tolerance for out-of-pocket healthcare spending.
A pair of reports released this month by the Washington, DC-based Commonwealth Fund spotlight the delicate balancing act playing out in the elevation of consumers' economic role in the health insurance market.
On Jan. 8, CF released a report on employer-sponsored insurance (ESI) that showed a slowdown in health insurance premium hikes over the past decade has been accompanied by a sharp rise in consumer out-of-pocket spending for healthcare. The findings include data indicating consumer spending for premiums and deductibles nearly doubled from 5.3% of median household income in 2003 to 9.6% in 2013.
On Jan. 15, CF releaseda reportthat showed a significant drop in the uninsured population from 37 million people in 2010 to 29 million people in 2014 as well as improvement in affordability measures, but the report concluded that "excessive cost-sharing for Americans across all insurance types could jeopardize improvements in access to care and medical bill burdens."
I quizzed the lead authors of both studies about a healthcare reform quandary: In the push to create a consumer-driven market for medical services, how high can patient cost-sharing be elevated without prompting a consumer backlash?
Cathy Schoen, lead author of the ESI report and executive director of the private foundation's council of economic advisers, told me that consumers will ultimately draw the line on cost-sharing.
"Is there a limit to it? That's going to come from families and consumers themselves. We are clearly far higher in cost-sharing that anyone would have predicted five years ago. There is a question of how far this needs to go before employees are going to be cost-sensitive… and will look for alternative options for care," she says.
High Deductibles
Consumers are feeling the pinch of higher healthcare cost-sharing. "We're clearly at the point where the deductibles are over $1,000," Schoen says. "If there's a family plan, there are two deductibles. It's leaving less for everything else."
Sara Collins, PhD, lead author of the CF report on health insurance coverage levels and affordability, says that another CF consumer affordability study released in November showed high deductibles are a double-edged sword in the struggle to create a consumer-driven healthcare industry.
"People who had deductibles that were high relative to their income were much more likely than those with lower deductibles as a share of their income to say they had avoided or delayed needed care such as going to the doctor when they were sick or filling a prescription. While deductibles have been used in part as a way to reduce the use of unnecessary care, we find evidence that they also reduce the use of necessary care, particularly among people with middle to lower incomes."
To avoid making cost-sharing overly burdensome for consumers, Collins says several challenges must be addressed.
"Innovation in benefit design is needed to provide incentives to people to get timely care, rather than giving people incentives to delay care, which is what we are seeing in our surveys… as a response to ever growing deductibles."
"In addition, " she says, "system-wide efforts to address the underlying rate of healthcare cost growth—and we are seeing a great deal of innovation in the way care is organized and paid for across the country —will be the key to achieving affordable premiums and out-of-pocket costs in employer-based as well as individual marketplace insurance over time."
Slow Income Growth
"But the other major issue is slow income growth… Even though we see a slowdown in deductible growth in the past few years, median income hasn't grown much if at all in most states, so people with low and moderate incomes are still spending more as a share of their incomes."
Christine Riedl, director of national accounts strategy and product management at Hartford, CT-based Aetna, says that the shift to more value-based models of healthcare delivery is needed to cushion the cost-sharing blow on consumers.
Christine Riedl
"With the amount of waste in our healthcare system and the increasing costs, we have to join forces to move our healthcare system to one that focuses on better management of individuals and populations—where we pay for value delivered, not services rendered," she says.
"At Aetna, we are partnering with the providers, and by 2018, at least half of all our claims payments will be paid to doctors and providers who practice value-based care. Today, more than 3 million Aetna members receive care from doctors committed to the value-based approach."
Riedl cites several examples of Aetna embracing value-based care, including 2013 data from the carrier's accountable care collaboration with Phoenix-based Banner Health Network, which posted a 5% reduction in overall medical costs.
Health plans have to help consumers play an effective role as economic agents in value-based delivery of healthcare services, she says. "Individuals are overwhelmed with information on choosing the right plan, benefit and premium… so it's important to provide consumers with meaningful information at the right time, and in a manner that is relevant and preferable to them."
Engagement and Incentives
Riedl says Aetna is providing health plan members with a combination of consumer engagement tools and financial incentives to help boost informed decision making. Online resources include pre-enrollment and plan selection tools that give the complete picture of total costs as well as transparency tools that provide insight on cost and quality.
Financial incentives are crucial to helping guide consumers to finding the most cost-effective healthcare coverage, Riedl says. "Financial incentives are also an important element to any benefit and wellness strategy to encourage consumers to take action on their health; for example, for participation in wellness programs, to complete biometric testing or to obtain routine preventive care.
Incentives can not only help lower consumer costs today, they reward healthy behaviors that can prevent health complications—and higher costs—in the future."
Encouraging healthy behaviors is a fundamental building block of affordable healthcare, she says.
"One issue that deserves more attention is lifestyle and the growing burden of chronic diseases, which add significantly to escalating healthcare costs. We have to focus the system around wellness to stem the cost increases we're seeing from an aging population and obesity. The consumers have to take responsibility for improving their health through a focus on wellness. This is also a focus of the value-based care programs we're deploying with providers. They reach out to patients who may not step foot in their office for preventive care – so we identify and head off issues before they develop into chronic conditions," Riedl says.
With healthcare payers increasingly relying on narrow provider networks to contain costs and achieve quality, California regulators are pressing health plans to blunt out-of-network costs and maintain accurate provider directories.
California insurance officials are drawing the line on health plans with narrow provider networks.
Emergency regulations announced on Jan. 5 by Insurance Commissioner Dave Jones "are meant to address the deficiencies in the market we have been seeing," says Janice Rocco, deputy commissioner for health policy and reform at the state Department of Insurance.
"The department received more complaints in 2014 over access to in-network care than in previous years," says Rocco. In the prepared statement announcing those regulations, DOI officials detailed some of the consumer complaints:
Trouble getting appointments with doctors
Traveling long distances to receive in-network medical care
Seeking care from doctors who appeared in their health insurer's provider directory but who were not actually in the health insurer's medical provider network
In 2014, two of California's largest commercial health insurance carriers, Anthem Blue Cross and Blue Shield of California, offered narrow provider networks on The Golden State's new public exchange, Covered California. Both carriers drew fire over network adequacy, including a lawsuit 33 health plan members filed against Anthem in August 2014 and investigations launched by the state Department of Managed Health Care.
The DMHC, which is under the direct authority of the governor's administration, has regulatory oversight for most health coverage in California, including more than 9 million people covered through Medi-Cal and coverage purchased by individuals and their families through Covered California.
In November, the DMHC released the final report of a "Non-Routine Survey" of Blue Shield of California based on 2014 data that found significant inaccuracies in the provider director for the health plan's narrow network.
The report revealed that "a significant percentage (18.2%) of the physicians listed in the directory were not at the location listed in the Provider Directory and that a significant percentage (8.8%) were not willing to accept members enrolled in the Blue Shield's Covered California products, despite being listed on the website as doing so."
Through a spokesman, Blue Shield of California declined to comment. Anthem did not respond in time for publication.
Rocco say the emergency regulations, which will become effective after a state legal review is completed, feature several new consumer protections such as wait-time standards for a range of medical services appointments and requirements on payers to provide information on providers in their network.
Additionally, health plans must update provider directories on a weekly basis, and they must make provider information available to the public online and in "hard copy" upon consumer demand.
The emergency regulations also set a strict standard for out-of-network care. "If they don't have a provider in-network who is accessible, the health plans have to arrange for a provider out-of-network," Rocco says. And "the cost sharing has to be the same" to protect consumers from unexpected healthcare expenses.
State and federal regulators are working together in California to achieve "expansion of insurance," Rocco says. "Without access to care from doctors who are in the network, insurance coverage offers limited value."
When drawing the line on narrow networks, regulators have to consider patient need as paramount. "Patients have to have access in a timely manner to meet all of their healthcare needs," she says.
California a Sets Bar for Network Adequacy
Rodger Butler, spokesman for DMHC, says the agency has followed state laws for network adequacy that were in place before passage of the Patient Protection and Affordable Care Act in 2010.
"Health plans under DMHC oversight are required to provide enrollees access to primary care physicians within 15 miles or 30 minutes of their homes," he said via email. "There are some exceptions for rural areas; for example, when there isn't a hospital or doctor's office within 15 miles of a person's home. In these cases, the plan may request an alternate access plan."
Butler says there are also quantitative physician staffing standards for provider networks. "Plans are also required to have a PCP-to-enrollee ratio of 1 to 2,000 and an overall physician-to-enrollee ratio of 1 to 1,200. The number of enrollees a PCP may be eligible to oversee increases by 1,000 for each full-time physician assistant or nurse practitioner under the PCP's supervision."
Health plans are required to provide "reasonable access to specialists," Butler says. "The law does not establish specific time or distance requirements for specialists, as there are a wide variety of specialists and their availability varies based upon their rarity. If for some reason a health plan does not have a particular type of specialist that an enrollee needs to treat a condition, then the health plan is obligated to find such a provider and cover those services. Health plans are also required by law to meet the state timely access standards."
Narrow Networks 'Infinitely More Important Now'
Micah Weinberg, PhD, who was elevated this month from senior policy adviser to president at the San Francisco-based Bay Area Council Economic Institute, says narrow networks have emerged as a huge factor in California health insurance markets.
"It's not that it was unimportant before," he says. "It's just infinitely more important now… We've limited the things that health plans can do to design networks and benefits."
Weinberg says the California DOI's emergency regulations for network adequacy carry symbolic weight compared to the stronger watchdog role of the DMHC. "For total healthcare coverage oversight, we're talking about under 20% and shrinking under DOI." The state's insurance commissioner, he notes, is an elected official outside the direct authority of the governor.
The DMHC appears to be showing at least a measure of resolve on narrow networks. "The DMHC has conducted studies and issued some warnings to different health plans," Weinberg says. "They're not political the way the DOI is political. Dave Jones is on the short list to be the next governor."
With the PPACA-spawned exchanges expanding the individual health coverage market, Weinberg says health plans and regulators are under pressure to carve out standards for narrow networks. "The insurance companies are changing their business model for the individual market overnight," he says.
Despite changes designed to improve audits of medical service billings to Medicare, healthcare providers are still crying foul.
Change is coming to Medicare's Recovery Audit Contractors program this year, but healthcare providers do not expect the reforms to take hold for several months and say the claims review program is deeply flawed.
The Centers for Medicare & Medicaid Services is implementing a set of changes to the RAC program, with the agency marshaling the initiative on three fronts:
Reducing provider burden
Enhancing CMS oversight of audit contractors
Increasing program transparency
The reforms include a dozen measures designed to ease the administrative burden on providers such as requiring RACs to have a "contractor medical director" who is a physician.
"While we're pleased that CMS has acknowledged the administrative burden on providers, they're still tinkering around the margins," says Melissa Jackson, senior associate director for policy at the Washington, DC-based American Hospital Association. "Financial incentives drive RACs to make inappropriate denials of claims. Change won't come until RACs face financial penalties for poor performance."
RAC reforms are being implemented as part of new contracts CMS is awarding to the program's audit contractors. The originals were signed in 2008, and existing contracts are slated to expire in 2016.
The first new contract was awarded last month to Connolly LLC, a subsidiary of Atlanta, GA-based iHealth Technologies. Connolly will be serving as the RAC program auditor for durable medical equipment, home health, and hospice claims.
The bidding process for the other four RAC contracts, which correspond to geographic areas of the country, is stalled in federal court. The pending contracts include authority to review Medicare Part A and Part B claims—the bulk of Medicare spending.
In May 2014, the incumbent contractor for Medicare RAC Region B challenged the CMS bidding process at the US Court of Federal Claims in Washington, DC. CGI Federal Inc., based in Fairfax, VA, reviews Medicare claims in seven states: Illinois, Indiana, Kentucky, Michigan, Minnesota, Ohio, and Wisconsin.
In August 2014, Federal Claims Judge Mary Ellen Coster Williams rejected CGI's request for injunctive relief, ruling the CMS bidding process for RAC auditors did not violate federal law.
CGI had alleged the CMS "payment terms were inconsistent with customary commercial practice, unduly restrictive of competition, and violated the recovery audit program's enabling statute as well as prompt payment requirements," according to William's ruling.
The appellate court is set to hear oral arguments on the case early next month.
Jackson says providers are not expecting CMS to award more RAC contracts until the CGI case has been resolved in six to nine months.
CMS 'Beginning to Implement Improvements'
Last week, a CMS spokesman said the agency is committed to reforming the RAC program. In June, CMS announced the establishment of a provider relations coordinator to help increase program transparency and offer more efficient resolutions to providers affected by the medical review process.
"The provider relations coordinator serves as a point of contact for providers and associations regarding questions and concerns related to the medical review process and the recovery audit process that they are not able to resolve by contacting the Medicare administrative contractor or recovery auditor directly."
Hospital Associations Seek RAC Crackdown
CMS has taken some steps forward to reform the RAC program but a giant leap is required to address healthcare provider concerns, hospital association officials say.
In the new RAC contracts, Jackson says CMS has improved a vexing claim-review process linked to patient admission status. Designation of patient status has significant Medicare reimbursement implications, with inpatient services billed at Medicare Part A rates drawing higher reimbursement than outpatient services billed at Medicare Part B rates.
Jackson says CMS is making it easier to resolve one of the worst RAC scenarios for hospitals: claims for medical services that are billed at the Medicare Part A inpatient rate that RAC auditors deny because the claim should have been billed at the Medicare Part B outpatient rate.
CMS has shifted away from an all-or-nothing struggle through Medicare's five-level system for claims review and appeals, she says. "The hospital has been out the whole payment if it loses in appeal. Now, CMS is allowing us to rebill at the outpatient rate."
The reforms slated to be implemented in the new RAC contracts include a key provision for claims that RAC auditors contest over patient admission status.
Currently, auditors can look back three years to contest billing at inpatient rates, but providers only have one year after the first billing for a Medicare claim to switch billing to the outpatient rate. Under the new contracts, RACs will only be able to look back six months to review claims for patient admission status.
"They're trying to tweak things without revising that one-year billing requirement," Jackson says.
The AHA is skeptical about a RAC reform that is intended to speed the claims appeal process by shortening the amount of time RAC auditors have to make their determinations, she says. Under new RAC contracts, auditors will have 30 days to render claims determinations; the current contracts allow 60 days for determinations.
In December 2013, Chief Administrative Law Judge Nancy Griswold issued a memorandum that details the claims appeals backlog at the federal Office of Medicare Hearings and Appeals. She reported that the backlog had mushroomed over a period of less than two years, rising from 92,000 claims to 460,000 claims.
"Our concern is there is a low compliance rate now with the 60-day decision timeframe," Jackson says. "Hospitals face a financial penalty if they miss a deadline. We believe there should be similar penalties for RACs."
She says auditors have a strong financial incentive to deny claims, noting that RACs bank as much as 12.5% of the claims money they recover for Medicare. "The financial incentives are far and away the number one issue."
Basic Flaw Remains Ivy Baer, senior director and regulatory counsel at the Washington, DC-based Association of American Medical Colleges, said the financial incentives for RACs must be overhauled.
"The basic flaw in the program, which only Congress can fix, remains: RACs continue to be financially incentivized to find disallowances and are not subject to monetary penalties if those disallowances are appealed and overturned. CMS's changes appear to lessen that incentive, though not with direct financial penalties," she says. "RACs will not receive a contingency fee until after the second level of appeal is exhausted, but they still will not be penalized if the appeal is successful."
