Hospitals are weighing their options on whether to accept settlement deals on Medicare claim denial appeals as the Oct. 31 deadline nears.
The heat is on.
In the weeks approaching the Oct. 31 deadline for hospitals to cut settlement deals on Medicare claim appeals estimated to total more than a billion dollars, there has been a burst of activity among providers.
Officials at the Centers for Medicare & Medicaid Services were peppered with questions after a conference call presentation Oct. 9 on the proposed settlement deal, which offers hospitals 68 cents on the dollar to resolve disputed claims. It was the second of two presentations on the topic.
A handful of thorny questions stumped the four-member panel of CMS officials, who promised to post new information on the federal agency's settlement offer web page or to call hospital officials individually with responses. But the panel was able to provide clarity on several issues.
A couple of callers raised issues related to the potential for two rounds of settlement review and payment.
Under CMS's settlement offer, hospitals are required to submit spreadsheets that list all of their pending appeals, which are then matched to CMS records. "If everything is in agreement, there won't be a second round," said Melanie Combs-Dyer, director of the Provider Compliance Group in the CMS Office of Financial Management.
If the records do not match, the CMS panel advised the callers about issues related to settlement payment and patient privacy. If there is a second round in a hospital's settlement process, the hospital would receive two lump-sum payments to settle its claims instead of one.
On the privacy front, hospitals were advised that there is no need to encrypt the electronic files containing their spreadsheets and other settlement initiation documents. If a second round to a hospital's settlement process is necessary, however, any supporting documents that contain confidential patient information should be encrypted, Combs-Dyer said.
She also advised hospitals on the legibility of their claims agreement documents and spreadsheets.
"We really need to be able to read the settlement agreement, particularly the name of your hospital," she said, noting an early version of the CMS settlement agreement form cuts off long hospital names and an updated version of the form should be used.
Combs-Dyer also urged hospital officials "to complete the spreadsheet in its entirety," noting failure to fill out the header fields at the top of the CMS spreadsheet form could lead to rejection of a settlement deal. She said hospitals can use their own spreadsheet forms, but noted that doing so would lead to processing delays.
No Help with Third-Party Payers
The panel also answered questions about the impact hospital settlement deals will have on related claims involving third-party payers such as commercial insurers. Hospitals apparently will have to fend for themselves.
"The claims will remain as 'denied' in the Medicare system," said Mark Korpela, acting deputy director of the Financial Service Group at the CMS Office of Financial Management. "We will not be advising other payers on how to process claims."
Appeals Backlog CaseStill in Court
AHA et al. v. Burwell, filed against the federal Department of Health and Human Services, claims "unlawful delays" in the adjudication of Medicare claims appeals. Filed in May, it seeks a court order that would compel HHS to clear the Medicare appeals backlog.
In a US District Court legal motion filed Oct. 2, the American Hospital Association asks the court to deny HHS's motion to dismiss the case and seeks summary judgment in favor of the hospital association and several co-plaintiff healthcare providers.
"HHS's failure to adjudicate appeals timely has led to an immense backlog of close to a million appeals of claim denials worth more than a billion dollars in Medicare reimbursement. As a result, the system is broken," the AHA motion states.
The hospital association casts the federal government's response the lawsuit in a dim light.
"...Has responded to this lawsuit by throwing up its hands, denying blame, and asking for forgiveness based on two central arguments: First, that the ninety-day deadlines for deciding claims at the ALJ and DAB levels are not, in fact, deadlines that can be enforced; and, second, that 'this action does not involve the sort of delays that are so egregious as to warrant exercise of the Court's discretion to enter the extraordinary remedy of [ordering HHS to clear the backlog].
CMS officials did not respond to a request for comment on the AHA legal motion.
Fuming Over RAC Fees
In a Sept. 25 letter to CMS Administrator Marilyn Tavenner, the AHA raises a red flag over federal Recovery Audit Contractor contingency fees paid for previously denied claims that are eligible to be included in the Medicare appeals settlement deal.
"Specifically, we are inquiring about whether the RACs will be required to forfeit any of the contingency fee they received for those denials," AHA Executive VP Rick Pollack wrote. "As you are aware, when a hospital prevails in its appeal of a denied claim, the RAC must return the entire fee paid for that denial."
A "Frequently Asked Questions" document posted on the CMS website, says: "Recovery Auditor contingency fees are governed by contract requirements and will be handled accordingly."
A CMS spokesman, responding to a request for comment, said that the agency is engaged in an open dialogue with providers about the proposed settlement deal. "CMS has made extensive outreach efforts regarding this settlement offer, including posting detailed information on its website. CMS has also established a mailbox to facilitate communication with the healthcare provider community. Questions submitted to the mailbox are responded to and posted to CMS' website."
Ronald Hirsch, MD, VP of the regulations and education group at Chicago-based Accretive Health, says RACs are a festering sore point for hospital officials across the country.
"The RAC fee is important to hospitals because they consider the audit process where everything is in favor of the RAC and the government to be patently unfair," he says. "If a hospital misses a deadline, there is no recourse, but yet the [qualified independent contractors] and ALJs have been allowed to miss their deadlines by weeks, months and years without as much as an apology."
Increasing access to primary care services in poor and rural communities means approaching the issue on multiple fronts, including telemedicine, patient engagement, and coordinated care, a payer's report suggests.
Rural and economically disadvantaged areas of the country pose a daunting challenge to boosting primary care services, a recent UnitedHealth Group study has found. But there is no single pathway toward expanding access and capacity, it suggests.
"Approximately 50 million Americans live in areas with an under-supply of primary care physicians. Most of these areas are rural," says the report, "Advancing Primary Care Delivery: Practical, Proven, and Scalable Approaches."
"Increased roles for nurse practitioners and physician assistants would add to the system's overall primary care capacity, and could help target capacity to areas where there are fewer primary care physicians," the report suggests.
But to improve primary care services in communities, increasing the number of physicians in the country will not be enough, the report concludes.
Richard Migliori, MD, executive VP of medical affairs and chief medical officer of UnitedHealth Group, said in a statement: "This research shows the value of improving primary care capacity, not only in terms of improving patients' health but also in catching problems early and avoiding unnecessary and costly hospital services."
In addition to the findings on primary care in rural and economically disadvantaged areas, UHG also reported that:
Primary care office visits represent 55% of the 1 billion office visits annually nationwide. Full implementation of the federal Patient Protection and Affordable Care Act could add 25 million primary care office visits annually.
High rates of avoidable emergency room visits and avoidable hospitalizations indicate many patients could be treated more cost effectively at primary care facilities.
Payment policy is a "significant barrier" to improving primary care services. Medicare and Medicaid often pay less when NPs and PAs deliver a service compared to when a physician delivers the same service, the study said.
Building multi-disciplinary teams is effective at helping primary care practices leverage available resources to see more patients.
Electronic health records and data exchanges help primary care practices improve care coordination, elevate quality, and reduce costs.
Rural California Experience
Earl Ferguson, MD, PhD, a cardiologist who practices in rural areas of California, said his experience mirrors many of the UHG report's findings.
In his experience, the biggest problems with primary care services in rural areas are:
Earl Ferguson, MD, PhD
"The failure of some primary care providers to concentrate on comprehensive care coordination that must involve a network of all the specialists necessary for providing care
"The lack of the health information technologies needed to coordinate that care."
"We need to recognize that primary care can't do everything alone. Primary care providers must be the coordinators of comprehensive care, but specialty care is essential to assist them in the ongoing management of many of their patients," says Ferguson.
To boost primary care services in rural and economically disadvantaged areas, it is critically important to leverage human and technological resources, Ferguson said.
He has been doing cardiology and general medicine consults in a rural health clinic of less than 2,000 people 80 miles from his hospital via telemedicine for more than a decade.
"With readily available assistance, the primary care nurse practitioners have markedly improved their capability to handle patients with congestive heart failure, hypertension, diabetes, and other conditions. They have learned to handle the routine care of some complex diseases without my direct supervision and know when they need a consult and assistance. Compared to other consults I'm asked to provide for other providers, the PCNPs from this community are almost always appropriate, and my review of their records confirms that they are managing these patients well," he reports.
Lee Barron, MBA, serves as CEO, CFO and COO of the Southern Inyo Hospital District, which operates the small rural health clinic in Lone Pine, CA, where Ferguson has been providing consulting services. Lone Pine is nestled in a valley between the Sequoia and Death Valley national parks.
"We have found with many of our highly complicated patients that have multiple diseases that their quality of life is not impacted unless we address the 'whole' patient," Barron says.
"Many times, their biggest worry or hurdle to care is the fact that they might not have adequate transportation, or that they do not have access to appropriate food, or they are depressed or concerned about their family's welfare, and a very long list of other issues that directly impact their health and well-being."
In rural areas of the country, a concerted effort is needed for primary care providers to effectively manage care coordination, she says.
"With care coordination, we are addressing all of their issues. Through the first interview-visit process, we identify along with the patient what their primary concerns are, which may have nothing to do with their diagnoses, and then we follow-up with resources and support."
"Once we have been able to address their other issues," she says, compliance rates "[have] soared with medication and treatment."
Bigger Picture
Ferguson, who works as a cardiologist and director of cardiovascular imaging at Ridgecrest Regional Hospital, says the primary care lessons he has learned in rural settings can be applied at community hospitals that bridge the gap between rural and urban areas of the country.
Ridgecrest, CA, has a population of slightly more than 28,000 and is located about 150 miles north of Los Angeles. The nearest larger city and larger hospital is 80 miles away.
"We have now set up a similar coordinated cardiovascular care program in our hospital's rural health clinic," Ferguson said. "Our program is coordinated by a PCNP who is available every weekday, makes decisions on what studies and consultations are necessary, and arranges consultations with specialists that rotate through our Cardiovascular Care Clinic."
For complicated cardiac cases, Ridgecrest Regional Hospital has established contracts with a cardiology group and large hospital in the Los Angeles metropolitan area, he said.
Efforts to create a sustainable value-based healthcare delivery system face financial, social, and political barriers.
Talking about healthcare innovation is a hopeful exercise. Tackling obstacles to innovation is hard work.
Anita Goel, MD, PhD
Chairman and CEO of Nanobiosym
I recently attended a conference in Boston that focused on innovation in the healthcare industry. The news story I wrote about the conference delved into the exciting innovative work the forum participants discussed. You are now reading the untold story I have been itching to write for nearly a month.
I reached out to three of the forum's participants to pick their brains about obstacles to change in healthcare: Harold Miller, president and CEO of the Center for Healthcare Quality and Payment Reform, a research and advocacy group in Pittsburgh; Anita Goel, MD, PhD, chair and CEO of Nanobiosym, based in Cambridge, MA; and David Hare, chief executive of National Health Service Partners Network in the United Kingdom.
Miller commented on financial barriers to innovation. Hospitals and physicians are floundering under the weight of ill-advised and uncompensated fixed costs—a trend that will worsen with the advent of population health management, unless addressed by new payment systems.
"We want hospitals to have emergency rooms, operating suites, and cardiac catheterization labs ready to go 24/7 when we have an accident or heart attack, but we don't pay hospitals for standby services, we only pay them when they have admissions and do procedures. It's not just hospitals that have this problem; physician practices also have significant fixed costs to cover, but they are only paid for office visits and procedures," Miller says. "That means that when a hospital has fewer admissions and readmissions and when a physician practice helps its patients stay healthier, their revenues will decrease faster than their costs."
Harold Miller
President and CEO,
Center for Healthcare Quality
and Payment Reform
Payment reforms are crucial to clearing the financial obstacles blocking value-based healthcare innovation, he told me.
"You can't solve that problem by adding small bonuses or penalties on top of the existing fee-for-service system. That's the weakness with most shared savings programs, and it's why many high-quality healthcare organizations have been exiting Medicare's Pioneer ACO program," Miller says. "Providers need completely different payment systems—such as bundled payments, warrantied payments, condition-based payments, and global payments—that give them the flexibility to redesign care in a way that reduces overall spending for payers in a way that is financially feasible for the providers."
The hard work of innovation comes with a payoff, he says. "The good news is that better payment systems can enable win-win-win solutions: Patients can get better care, payers can spend less than they do today, and providers can actually improve their operating margins."
Patience goes with the toil. "This can't happen overnight, though. There will need to be a transition, and healthcare providers and purchasers-payers will need to work together to achieve win-win-win results through that transition."
David Hare,
Chief Executive,
National Health Service
Partners Network
Goel talked about how consciousness is acting as a barrier to healthcare innovation on several fronts.
Nanobiosym has developed a mobile device platform that enables low-cost but highly sensitive and accurate diagnostics in real time. Goel's vision for developing nanobiophysics technology at a low cost is a potentially revolutionary approach to patient care, one which is the polar opposite of the prevailing notion that equates medical technology with multimillion-dollar equipment such as advanced imaging and radiography machinery.
"I believe we should promote the consciousness that high-technology innovation can help to reduce prices and increase access to a particular commodity. Google, for example, decentralized access to information and made it more affordable for the masses. Likewise, cellular technology enabled vastly larger numbers of people to have access to telecommunications. In our case, I believe that our nanobiophysics solutions will help to democratize access to healthcare on a global scale," Goel told me.
She says the U.S. healthcare system is ripe for disruption.
"Our consciousness in the healthcare industry is very much rooted in a centralized paradigm dating back to the Industrial Revolution of the 1700s," Goel says. "Just like Google disrupted the information industry and a country like India went from a few hundred thousand land lines a little over a decade ago to over 900 million cell phones today, I believe we are at the tipping point of a similar impending disruption in the healthcare industry."
She believes a change of consciousness will be required to achieve the kind of financial reforms Miller is advocating in healthcare.
"The consciousness in the financing industry is not always aligned with what the broader stakeholders of the healthcare ecosystem want," Goel told me, noting the widespread focus on maximizing return on investment in the shortest amount of time.
The financial obsession over ROI is "a consciousness that undermines the commercialization of disruptive innovations that threaten traditional revenue streams and requires extra time to establish niche markets in the midst of legacy infrastructure and entrenched business models. … Often the best way to maximize ROI is to sell out to the competitors, who will pay the highest price just to avoid disruption of their revenue stream," she says.
Lastly, I asked Hare to shine light on the tangled political webs in democratic societies that snare healthcare innovation.
"The party political divide in the U.K. over the future of the National Health Service is very real but it is not as acute as in the U.S.," he told me. "This is because reform in the NHS has actually been incredibly slow and has allowed politicians to cluster around a general outlook whilst disagreeing at the margins. In the U.S., how healthcare is paid for and delivered has opened up a much deeper fault line, and the consequences of that will play out for some time."
Hare made a bold statement at the Boston forum that will resonate with U.S. healthcare provider leaders: "The hospital is the symbol of healthcare, and we need to change that." Apparently, the United Kingdom and its former crown jewel colony across the Atlantic are charting similarly perilous political courses.
"One of the biggest challenges facing policymakers in healthcare is to shift thinking from the institution to the citizen. Institutions treat patients, but for people to live healthier lives healthcare systems need to adapt to support and inform greater self-care and management of long-term conditions. This will entail using resources differently and de-commissioning services that are no longer fit for purpose," he told me. "Here, local politics can be a bigger barrier than national politics, and finding a way through the politics of these changes is going to be one of the biggest issues healthcare leaders face in the coming years."
Lawmakers and the courts have been drawn into the controversy over the complicated distinction between observation status and a hospital admission, which carries a high cost differential.
Several states are adopting or studying laws to alert hospital patients about the potential financial consequences of observation vs. admission status.
Victoria Veltri, JD
This month, a new Connecticut law requires hospital staff to inform patients in writing about the nuances of observation status, which include exposure to out-of-pocket expenses.
Under the law, a written notice provided to patients must indicate "that observation status may affect the patient's Medicare, Medicaid, or private insurance coverage for (A) hospital services, including medications and pharmaceutical supplies, or (B) home or community-based care or care at a skilled nursing facility upon the patient's discharge."
The written notice must also recommend "that the patient contact his or her health insurance provider or the Office of the Healthcare Advocate to better understand the implications of placement in observation status."
Victoria Veltri, JD, who leads Connecticut's Office of the Healthcare Advocate, says her agency is monitoring the new law. "We will be watching the implementation of this bill closely, tracking the calls that come in on this bill, and may intervene, when warranted, on the behalf of an individual consumer to challenge observation status," she says.
Early Adopters
According to the Connecticut Health I-Team, Connecticut, Maryland, and New York are the first states to adopt observation status notification laws, with Massachusetts, New Jersey, and Pennsylvania considering similar legislation.
Officials at the Maryland Hospital Association said that state's observation status law is helping patients navigate the complicated distinction between observation and admission.
"The state and MHA worked with hospitals on a standardized communication template that provides this information to patients, in addition to sharing best practices for hospitals to tailor to their individual situations," the hospital association officials said in a prepared statement.
MHA officials say the Maryland law is adequately crafted to ensure patients are informed about the consequences of being listed in observation status.
"Since the move to observation status was strongly encouraged by the state rate setting commission, federal government, and commercial insurance companies to cut costs by shifting them from insurance companies to patients, patients have understandably been confused when they [have] found themselves in a hospital bed but categorized as outpatients and responsible for the accompanying extra out-of-pocket costs," the MHA said. "We think the law and hospitals' response to it will help patients."
The "standardized communication template" recommended for use at Maryland hospitals starts with this advisory: "When a patient is at the hospital the doctor caring for you must determine whether you require care as an inpatient or an outpatient. Your doctor has assigned your status as an outpatient in observation. You have not been admitted as an inpatient to the hospital."
The Maryland communication template lists information targeted specifically at holders of commercial health insurance and Medicare coverage.
Financial Liabilities
One of the biggest financial liabilities Medicare patients face when designated for observation status is paying a high share of the bill if they are transferred to a nursing home or other skilled nursing facility. The Maryland communication template includes an advisory to patients about this potential cost.
'A Burden on Top of a Burden'
Hartford Hospital, an 819-bed acute care facility in Connecticut, says its state's new law, which is similar to Maryland's, places an undue burden on medical staff.
Maureen Zukauska, RN, is the nurse manager who leads the Hartford Hospital Case Coordination Department, which is charged with advising patients about outpatient status. "Our focus is supposed to be caring for the patient, and it's very prickly to get into conversations about finances," she said.
Mitchell McClure, MD, director of the Hartford facility's Division of Hospital Medicine, says the new observation status law puts doctors in a difficult position. "Physicians have certainly talked about this with patients before, but not in a formal way," he said. "It is an issue that has been contentious with patients, and I understand that. We're in the middle of this conversation."
McClure says hospital staff members were already feeling pressure to comply with a dizzying array of rules and regulations before the new law was enacted. "It's a burden on top of a burden that was already there," he says.
Ajay Kumar, MD, chief of the Hartford Hospital Department of Medicine, says officials at the Centers for Medicare & Medicaid Services who have been the driving force behind patient admission status reform need to take more responsibility for educating the public.
Ajay Kumar, MD
"I have found that very little has been done by CMS and Congress to inform the public," he says. "We do not find that the beneficiaries are well-educated."
Placing the educational onus on hospitals requires a burdensome amount of time to train staff members, he says. "It is an enormous amount of undertaking for us. We're educating a lot of staff in a short period of time."
CMS officials did not respond to a request for comment about Connecticut's new law or about a federal lawsuit linked to observation status. The federal agency does have information online that clarifies the differences between hospital observation status and admission.
Pressing the Feds
In 2011, the Willimantic, CT-based Center for Medicare Advocacy filed a class action lawsuit against the federal government on behalf of Medicare beneficiaries who were placed on observation status at hospitals and then paid thousands of dollars for post-hospital skilled nursing facility care because they had not been admitted to hospitals for at least three days.
"The case challenged Medicare's use of observation status, as well as the lack of an appeal mechanism for beneficiaries to challenge the classification," Alice Bers, an attorney at CMA, said last week.
"In September 2013, the court dismissed the case. We have appealed to the U.S. Court of Appeals for Second Circuit, but limited the appeal to the issue of the right to an effective notice and appeal process for beneficiaries placed on observation status."
Oral arguments on the class action lawsuit appeal have been scheduled for later this month.
Terry Berthelot, senior attorney at CMA, says there is a pressing need for federal legislation to help clear up confusion about the difference between observation status and admission.
"There should be federal legislation requiring both notice and expedited appeal rights for Medicare beneficiaries admitted to the hospital as outpatients," she says. "Whether a patient requires an inpatient level of care is a factual issue. When the hospital and the patient disagree as to whether the patient needs to be hospitalized or could be treated in an outpatient setting, a third party arbiter should step in and review the case. A meaningful appeal process would ensure that Medicare beneficiaries receive the kind of care they need without having to spend large sums of money out-of-pocket."
Pending Bill
Berthelot says federal legislation sponsored by U.S. Rep. Joe Courtney, (D-CT), and U.S. Sen. Sherrod Brown, (D-OH), would help clear up the controversy. "If Medicare counts time on observation status toward the three-day qualifying hospital stay required for Medicare coverage of subsequent care in a nursing home, the observation status problem would largely go away," she said.
A panel of distinguished academics gathered at Harvard University last week gave federally driven healthcare reform efforts high marks, but cautioned that several daunting hurdles remain.
Theda Skocpol, PhD, a Harvard professor and director of the Scholars Strategy Network, which co-sponsored the "Taking Stock of Health Reform" forum, delivered a stirring defense of the Patient Protection and Affordable Care Act.
Skocpol highlighted three areas where she believes the PPACA has made tremendous strides:
Creating "new rules of the game" for insurance companies that improve quality of care and reduce costs;
Boosting subsidized care through mechanisms such as Medicaid expansion to ensure health insurance coverage becomes more affordable;
Launching exchanges that serve as marketplaces where people can compare health insurance products.
"It is surprisingly successful. It didn't look that way a year ago," she said.
Lawrence Jacobs, PhD, a political science professor at the University of Minnesota, pointed to polling data indicating that Americans are supportive of the core elements of the PPACA. They like the healthcare reform law more as they learn more about it, he added.
"The reality is, there's quite a bit of support for it," he said, citing polling data collected at Stamford University in California. "As knowledge increases, support for the Affordable Care Act rises to about 88 percent among Democrats. Even among Republicans, support rises to about 40 percent… Support for the law rises as people actually experience the benefits of the law."
In a brief interview after the forum, Jacobs noted that public support for the PPACA mirrors the historical experience with other major pieces of social legislation. "We find that the knowledge about Social Security is greatest among people who are in the program," he said.
Linda Blumberg, PhD
Senior fellow, The Urban Institute
Linda Blumberg, PhD, a senior fellow at The Urban Institute, noted that the PPACA has generated major improvements in the health insurance marketplace over a relatively short period of time.
"There has been significant reduction of the uninsured relative to the expected trend," she said, noting that millions of previously uninsured Americans have gained health insurance coverage through Medicaid expansion and the PPACA-spawned exchanges.
"We've also seen increasingly competitive insurance markets, particularly in the non-group markets… These are all very good signs."
PPACA Obstacles
The forum participants identified several impediments to the successful implementation of the PPACA, including political, financial, operational, and legal hurdles.
"The politics remain rancorous and poisonous," Skocpol said, noting that an appetite for repeal of the PPACA is "still on the table" for many of its political foes. "That reacts with a media that over-hypes the possibility of repeal."
Just two days before the Oct. 2nd forum on the Harvard campus, U.S. Rep. Kevin Brady, (R-TX), released a statement peppering the PPACA with harsh criticism.
"Today, Americans were supposed to be able to enroll in an Affordable Care Act plan for the second year, but the opening of 2015 enrollment was delayed [until] after the mid-term elections to avoid consumers finding out that much of the backend of healthcare.gov still doesn't work, and that they may face higher premiums and a more narrow network," the chairman of the House Ways and Means health subcommittee wrote on Oct. 1.
"While this poorly written law has helped some, it has hurt many, many more," Brady wrote. "One year later, too many families have had the plans they liked cancelled and can no longer see the local doctor they trusted. That is not the healthcare reform they were promised."
Jonathan Gruber, PhD
Professor, MIT
Skocpol places responsibility for the troubled political prospects of the PPACA squarely on the Democratic Party. It has done a poor job of explaining the law to the public, she says. "Most Americans still don't know what is in this law; so it's wrong to conclude that if they did know, they wouldn't like it."
Blumberg said the prevalence of cost sharing seen as high-deductible health plans on the new exchanges has emerged as a key financial stumbling block to offering affordable healthcare coverage to all Americans. "The cost sharing can be very high relative to their income," she said.
Katherine Swartz, PhD, a professor of health policy and economics at Harvard, said the PPACA stopped insurance carriers from denying coverage due to pre-existing conditions, but she noted that risk selection remains a threat to healthcare access.
Carriers have cast a wary eye on the least profitable markets and public exchanges and "they could stay out of certain marketplaces," Swartz said.
Narrow Networks
In response to a question from the forum's audience of about 75 people, Blumberg said "price gouging" of patients who seek medical care outside of narrow networks is a concern in many states. "We're at the beginning of what is going to be a very tension-filled conversation," she said of the simmering debate over network adequacy.
Blumberg said operational problems, such as last fall's nearly disastrous rollout of healthcare.gov, are likely to be a perennial. "What we had before was a very patchwork kind of system," Now, she said, "You've got more patches on the patches."
She believes the struggle to optimize healthcare.govreflects the PPACA's byzantine set of regulations. "The policy we have created has complex operational needs," she said. "What we don't recognize is that it's the policy that drives the complexity of this system."
Timothy Jost, JD, a professor of law at Washington and Lee University in Virginia, said court challenges seeking to eliminate health coverage subsidies in federally administered insurance exchanges could have disastrous consequences for the PPACA. If those challenges reach the U.S. Supreme Court and are successful, he said, they "will not only gut the federal exchanges but also gut the non-group market."
"I don't think the judges really understand that," Jost said.
Educating the public
One of the most challenging obstacles to effective implementation of the PPACA is the woeful status of healthcare literacy among Americans, several forum participants argued.
"We have a conglomeration of media and political parties that make fact-based evaluation [of healthcare by] regular citizens all but impossible," Jacobs said, noting the shift from the "Cronkite era" when there were limited sources of information on public policy to the prevalence of media outlets today that package news to fit viewers' preconceived notions. "There's a business and political reward to feeding that hunger."
Jonathan Gruber, PhD, a professor of economics at the Massachusetts Institute of Technology in Cambridge, and an architect of the healthcare reform law, stressed the need "to try lots of different mediums" to improve healthcare literacy.
"It's not a lack of material. It's a lack of getting people to be interested in it," he said of matching the vast amount healthcare reform information linked to the PPACA with individual members of the public.
Blumberg suggested that the need for healthcare literacy education is greatest among Americans who were previously uninsured and are now shopping for insurance coverage on the new public exchanges. "When you look at the specific target population in the exchanges… about half of them don't know what a premium is," she said. "What we need is a lot more hand-holding."
The healthcare landscape is dotted with new health plan ventures, including a bevy of opportunities to make money in federally sponsored insurance products.
Government-sponsored healthcare is the new black.
Thousands of Americans are newly eligible to enroll in Medicare every day, while millions of previously uninsured citizens have gained healthcare coverage through the new public exchanges as well as expansion of Medicaid in more than two dozen states.
One of the most attractive government business lines in the health insurance marketplace is Medicare Advantage, a value-based alternative to traditional fee-for-service Medicare.
Blue Cross Blue Shield of Michigan has embraced Medicare Advantage, scoring among the MA leaders in the federal government's 5-star system that rewards health plans for achieving high quality standards. "We're one of the few plans that leaves zero dollars on the table," Julie Smith, VP of federal business at BCBSM, told me last week.
She says there are several keys to success when operating an MA plan: managing quality to attain at least 4-Star ratings, reducing "retrospective coding" to ensure providers accurately document patient health status during visits, investing in the expertise needed to operate government-sponsored health plans, playing close heed to compliance, and building strong relationships with healthcare providers.
Smith says insurers expose themselves to grave risks if they view operating MA health plans or other government-sponsored health insurance products as an extension of their commercial business: "If you make a mistake, it can take years to turn it around," she says. "Treat it differently. Make sure you have dedicated resources. The mistake people make is they believe you can do this with the same people and technology you used in the past."
BCBSM did just that by bringing in new people and technology to achieve government-sponsored healthcare success through a partnership with Southboro, MA-based ikaSystems Corp.
"Two years ago, Blue Cross Blue Shield of Michigan switched to a new platform from their legacy platform," Joseph Marabito, president and CEO of ikaSystems, told me last week. "In the process, they halved their administrative costs. They avoid having to process manually 3.2 million claims annually."
Marabito says expertise and the ability to scale operations are critical factors to succeeding in government-sponsored healthcare markets. "You need to know what you're doing in the government business. If you do it poorly, you can really lose a lot of money," he says.
"Most health plans are regional plans; most are not national… How are you going to be competitive with a plan ten times your size? You need to be on a new platform [with] technology [that] scales better than a legacy platform."
In addition to expertise and the ability to scale up operations, Smith says BCBSM looks for a "proactive management infrastructure" when selecting partners in government-sponsored healthcare ventures. "I need my partners to be out there ahead of what the market trends," she says.
Marabito says he also carefully gauges the management of his company's health plan partners.
"I assess how committed they are to the [government-sponsored] business and how realistic they are. I look for people who are collaborative, people who are open-minded. Most health plans have been around for a long time. With that can come practices that are hard to change."
Marabito and Smith both say that insight about the inner workings of Washington and flexibility to adapt to regulatory changes are critically important when operating a government business line.
"The fact is, the rules change every day," Marabito says. "You just don't always understand what's going to happen. You have to be flexible."
Smith says the Medicare Advantage 5-Star quality program is a great example of the vagaries involved in government-sponsored healthcare.
"I plan for change, and I plan for surprises all the time because I know I'm going to have them," she says. "We are always striving to be ahead of what the expectations are of the government—high quality, members knowledgeable about the product. You have to pivot, and you have to have leadership that is willing to work in an abstract world."
The decision to shutter a proton beam therapy center in Indiana is shining light on the precarious financing of the costly facilities used to treat some cancers.
The planned closure of the Indiana University Health Proton Therapy Center early next year is unlikely to derail investments in the costly cancer-fighting technology across the country, according to officials at the university and the National Association for Proton Therapy.
IU officials announced the decision to close the Bloomington facility for financial reasons last month based on the recommendation of an independent review panel.
The IU Health Proton Therapy Center, which is the third-oldest proton beam facility for tumor treatment in the country, has been spilling red ink on the university's balance sheet since it opened in 2004. IU has already lost $20 million on the facility and could lose as much as $15 million more, university officials said in the prepared statement announcing the closure decision.
Earlier this week, a university official said the IU Health Proton Therapy Center faces insurmountable financial pressure.
"This center was one of the first of its kind in the United States, but the competition has increased significantly in the last several years, which has affected patient volumes," said Mark Land, associate VP of public affairs and government relations at IU.
"The facility, which is a bit unusual in that it is not located in a hospital, but rather is a free-standing facility that was created to make additional use of the proton beam at the IU Cyclotron, has operated at a financial loss for most of its existence. It would take a significant investment to make the facility cost competitive with new centers with no reasonable hope that such an investment would ever be recouped," he said.
Land describes the circumstances involved in the development and operation of the IU Health Proton Therapy Center that placed the facility at a competitive disadvantage. "As I understand it, proton therapy centers today are being constructed primarily within hospitals and for specific purposes. In our case, we had an existing proton beam and used that as an opportunity to provide patient care. While that allowed us to get into the field, it's not the way you'd build it today."
Construction costs for PBT centers range as high as $200 million for facilities with multiple treatment rooms from about $30 million for "compact machines" with a single treatment room, says Leonard Arzt, executive director of the National Association for Proton Therapy in Silver Spring, MD.
He contends that the impending closure of the IU Health facility is not a bad omen for PBT in the United States.
"The Indiana proton center faced financial challenges from the beginning when it opened about a decade ago. It started with a very old cyclotron in a physics research facility that eventually needed costly upgrading and maintenance," Arzt said.
"The closure will have minimal to no impact on the proton community outside of Indiana. There are currently 14 operating centers across the United States, with a dozen more currently in development. … We are confident proton facilities are here to stay for the long-term treatment and benefit of cancer patients worldwide."
Not Aging Gracefully
Whether or not the closure of the IU Health Proton Therapy Center is the beginning of a negative trend, the findings of the review panel that examined the facility's viability tell a cautionary tale.
The panel found that the oldest U.S. proton beam therapy facilities face financial and technological challenges. "This facility is outdated and requires significant investment to continue to operate. Because of both the expense of these investments and the high operating costs of an aging facility, it does not appear that IUHPTC can ever achieve a positive margin," the review panel members wrote in their report.
The panel asserted that the IU Health Proton Therapy Center is at a significant disadvantage compared to newer facilities. "Although the replacement of the cyclotron would permit the facility to continue to function, it would not permit the development of state-of-the-art technology, which would require multiple other components," the review panel members wrote.
The oldest proton therapy center for cancer treatment opened in California at Loma Linda University Medical Center in 1991. Massachusetts General Hospital has the nation's second-oldest proton therapy center, with its facility opening in 2000.
A Proton 'Bubble?'
In terms of technology, the review panel found PBT is facing stiff competition from refinement of older technologies and from development of new radiation therapies.
The panel noted that historically standard radiation therapy based on photon physics "has closed the gap with proton beam to an unanticipated degree." The panel also noted the development of potentially superior technologies such as carbon ion beam facilities.
Based in part on these finding, the panel drew a disturbing conclusion about the country's oldest and most debt-ridden proton therapy centers. "It is, therefore, quite possible that we are on the verge of a 'proton bubble' with the more indebted centers or those without a strong patient supply line closing. Those with less or no debt, or those built around academic institutions, will likely survive," the report says.
The Cost-effectiveness Debate
The IU Health Proton Therapy Center review panel noted that cost-effectiveness and efficacy remains an open question and high-risk proposition for proton beam cancer treatment.
"The fact that any proton facility costs 10 to 100 times as much as the next most expensive medical device has placed it in the center of the debate about value-based medicine and some insurers are starting to balk at the cost and to decline coverage."
PBT advocates say it should be the standard of care for isolated tumors, particularly in children, because proton beams can be focused on cancerous tissue while sparing adjacent healthy tissue.
There are no U.S. randomized clinical studies demonstrating "proof in principle" that proton beam therapy is superior to other forms of cancer treatment, the panel concluded.
PBT advocates believe randomized studies currently underway in the U.S. will show the technology is cost-effective.
A study published in May in the International Journal of Radiation Oncologysuggests that for head and neck tumors, "early clinical outcomes are encouraging and warrant further investigation of proton therapy in prospective clinical trials."
Medicare Advantage health plans are slated for a modest premium hike next year, but uncertainty remains over the long-term prospects of the value-based insurance program.
Federal officials released data last week forecasting an average 4% increase in Medicare Advantage health plan premiums in 2015.
Marilyn Tavenner
Marilyn Tavenner, administrator of the U.S. Centers for Medicare & Medicaid Services, said in a prepared statement that the Medicare Advantage program has been thriving since the adoption of the Patient Protection and Affordable Care Act in 2010.
"Since the Affordable Care Act was enacted, enrollment in Medicare Advantage plans is now at an all-time high, and premiums have fallen," Tavenner said.
Between 2010 and 2015, enrollment in MA health plans is forecast to increase 42%, with premiums declining 6%, CMS reported last week. This year, the average monthly premium for an MA health plan is $30.96, according to CMS.
Quality Improvements
The federal agency also reported quality improvement in MA health plans. CMS ranks MA health plan quality on a scale of one to five stars. About 40% of MA health plan contracts are set to receive quality rankings of at least four stars in 2015, an increase of approximately 6% from this year, according to CMS.
MA health plan quality has steadily increased since 2012, the federal agency reported: "About 60 % of MA enrollees are currently enrolled in plans with four or more stars for 2015, an increase of approximately 31% compared to the percentage in four or five star plans based on 2012 ratings."
America's Health Insurance Plans, the Washington, DC-based organization that represents commercial health insurance carriers, reacted cautiously to the CMS announcement.
14 Medicare Advantage Plans Earned 5 Stars in 2013
"The growing number of seniors choosing to enroll in Medicare Advantage is a testament to the value the program provides for beneficiaries," Brendan Buck, AHIP's VP of communications, said in a prepared statement.
"At the same time, the data show that certain areas are feeling the impact of payment cuts to the program. With the majority of cuts still looming, there is potential for further disruption to beneficiaries in the future. That's why the 1.6 million seniors who make up the Coalition for Medicare Choices and more than 270 members of Congress recently came together to protect this program and the millions who rely on it."
On Friday, Sunnyvale, CA-based HealthPocket released an analysis of the 2015 CMS data on the Medicare Advantage program. The company ranks and compares health plans across the country.
HealthPocket is pegging the average MA health plan premium increase for 2015 at less than 2%, rising from $61.69 monthly to $62.69. Company officials stated that their figures for monthly health plan premiums are nearly twice as high as the CMS figures because "the government weighted their average by projected plan enrollment rather than averaging premiums across all options available in the market."
While HealthPocket is painting a rosier picture for the percentage increase in MA health plan premiums next year, the company reported the number of $0 MA health plan premiums in 2015 is set to decline 19%.
Kevin Coleman, head of research and data at HealthPocket, says the modest average MA premium increase forecast for next year has to be balanced against the decline in the number of MA health plans with zero-cost premiums.
"The importance of stable Medicare Advantage premiums to the plans that offer them is that premium increases that are perceived as too high are among the two biggest risks for member attrition. The other being poor customer service experiences," he said. "A 2% premium increase is clearly stable. However, this must also be viewed in light of the decline in availability of $0 premium plans."
Coleman says the MA health plan data CMS released last week is unlikely to calm the shrill political debate over the future of Medicare Advantage.
"The jury is still out regarding the long-term prospects of the Medicare Advantage program because there are outstanding questions regarding the funding cuts Medicare Advantage will experience. For example, cuts were scheduled for 2015 and then reversed," he said.
The development and dispersion of cost-effective medical technologies that promise to boost wellness, prevention, and precision care are pivotal to the transformation of healthcare, experts say.
A tsunami of healthcare innovation is sweeping the globe, according to three dozen experts who gathered this week in Boston for a forum organized by The Economist.
"We are in an amazing time. The transformation that is going on in the United States and around the world is unprecedented," Walter Capone, president of the Multiple Myeloma Research Foundation, told forum attendees.
Several of speakers said the biggest global change in healthcare is a growing realization in both developed and developing countries that boosting wellness, prevention, palliative care, and outpatient services are essential elements of establishing sustainable healthcare systems.
"[Developing countries] simply can't replicate the kind of health system we see in the United States," said Peter Berman, DPH, a professor at the Harvard School of Public Health in Boston. "They will not be able to afford in the near-term treating heart disease and cancer the way we have in the West… It really will be more about creating a health system with emphasis on outpatient care and prevention."
Bruce Broussard, president and CEO of the Louisville, KY-based payer, Humana, cited Medicare Advantage as a prime example of an insurance business line that places a premium on prevention. "If we can eliminate the need for care in the first place, we can cut costs," he said.
Humana has deployed about 8,000 nurses who visit health plan members' homes on a daily basis to help them stay healthy, Broussard said. "We help people move furniture, build ramps," he said. "Those little steps have a big impact."
To promote wellness at an early age, Humana has helped build 50 playgrounds across the country. "We've set the goal of improving the health of the communities we serve… and to do that we have to partner with communities," Broussard said. "We're actually improving the community overall."
R. Sean Morrison, MD, professor of geriatrics and palliative medicine at the Icahn School of Medicine at Mount Sinai in New York, advocated for palliative care as part of the solution to treating the world's aging population.
"One of the greatest challenges we face as a country and globally is the [population] growth of older adults," Morrison said. He believes palliative care improves quality, lowers healthcare costs, and increases patient survival rates when combined with interventional treatments such as surgery.
Morrison, in an interview after the event, elaborated on that message, describing palliative care as one of the best examples of a patient-centered approach to medicine.
"In palliative care, we meet with patients and families. We discuss and outline their goals for medical care, and we match our treatments to those goals," he said.
"When goals are unrealistic, for example living for an additional five years with advanced pancreatic cancer, we work with patients and families over time to help them establish more realistic goals while always preserving hope."
Anita Goel, MD, PhD
Chairman and CEO of Nanobiosym
Technology to the Rescue
Beyond the bedside, the development and dispersion of cost-effective technology is playing a key role in transforming healthcare, several forum speakers said.
Anita Goel, MD, PhD, chairman and CEO of Cambridge, MA-based Nanobiosym, spoke about the convergence of several technological developments including the Internet, mobile devices, and emerging communications platforms having the potential to revolutionize healthcare on a global scale.
"I see this whole new generation of infrastructure that's going to usher in a whole new era of healthcare, not just in the developed world, but also in the developing world," she said.
Technology, she says, has become a driving force for decentralization and personalization in the medical field. "Anyone, anywhere, any time can have access to information about their healthcare."
Albert Bourla, group president of vaccines, oncology, and consumer healthcare at the pharmaceutical giant, Pfizer Inc., told attendees of the forum that the biopharmaceutical industry is in the vanguard of technology-driven change in healthcare.
"Cancer is the area where science will develop the most meaningful treatments in the years to come," he said.
The Pfizer executive said biopharma is a leader in precision medicine. "We are developing products that are relevant to a small part of the population, but the effects will be profound," Bourla said. Worldwide, there are about 2,000 cancer drugs currently in development.
"We can't wait ten years for medication; we need it today," said Capone. His organization, the Multiple Myeloma Research Foundation, is working with biopharma companies, regulators, academic centers and other top stakeholders involved in producing medications to shorten development time lines and reduce costs.
Seeing the Light
Transparency was another hot topic at the event.
"The idea that we're going to push data out and make it available to people is revolutionary," said Mitch Rothschild, CEO of Lyndhurst, NJ-based Vitals. "A few years from now, it will be viewed as madness not to know how much a doctor is going to cost before we go."
Harold Miller, president and CEO of the Pittsburgh-based Center for Healthcare Quality and Payment Reform, said it is critically important to boost transparency in a meaningful and methodical manner. "Price transparency is a critical element to improving healthcare," he said. But, he cautioned, "price transparency alone could actually be a bad thing."
Miller said price transparency will help drive beneficial change in healthcare as long as it is crafted alongside payment reform efforts.
In addition to publicizing healthcare prices, he said it is necessary for transparency efforts to be paired with paying for healthcare in a different way than has been done in the past.
"Today, it's very difficult for people to know what the total cost will be," Miller said of patient billing. "We pay for healthcare in a fragmented way. We pay for everything separately… Typically, patients don't pay anything near the total cost of care."
The key to making price transparency an effective agent of change in healthcare is getting patients to be "price-sensitive," he said. Miller cited the California Public Employees' Retirement System (CALPERS) requiring patients to pay out-of-pocket for the difference between a low-cost hip replacement physician and higher-cost doctors.
The result? "The expensive healthcare providers changed their costs," he said.
Catholic Health Initiatives is ramping up to offer health insurance products in 18 states by 2016. The nonprofit is determined to avoid pitfalls that have bedeviled other providers hoping to gain entry into the health plans business.
As they seek to boost their bottom lines and population health management capabilities, some healthcare providers are launching their own health plans.
"Some health systems imagine they will be able to get the rates they've always wanted from the Blue plans but couldn't," Juan Serrano, senior VP of payer strategy and operations at Englewood, CO-based Catholic Health Initiatives, told me last week.
Building a health plan from scratch is not as easy or as profitable as it may appear.
Serrano says "getting the math right" is among a host of challenges providers face when they open an insurance business line: "That has been the downfall of many a health plan."
CHI is taking a "methodical approach" in its quest to establish health plans in all 18 states where it operates, he says. "It can take three, four, five years for a health plan to get large enough to break even on its capital development expense. We've given ourselves two or three years… to get to a scale where we are breaking even."
CHI officials believe they have the ability to "shorten that cycle" because the health system has acquired a pair of health plans over the past two years: Soundpath Health in Washington State and QualChoice in Arkansas. "We looked to acquire some of the infrastructure rather than to build it all ourselves," Serrano said.
Juan Serrano
Senior VP of Payer Strategy and Operations,
Catholic Health Initiatives
The acquisitions have allowed CHI to establish toe-holds in two lines of health insurance: Soundpath has experience marketing Medicare Advantage policies and QualChoice has a track record offering commercial health insurance policies.
Acquisitions and consultants are helpful when a health system decides to go into the insurance business, but there is no substitute for having a capable health plan team internally, according to Serrano.
CHI has launched a wholly owned subsidiary, Prominence Health, to build out a portfolio of health insurance products. Fully staffing Prominence has been a top priority, beginning with a skeleton crew of a couple dozen workers in 2012 and employing about 300 people this year.
"We didn't only hire people to start a health plan," Serrano says. Prominence employees include not only underwriters and actuaries, but also experts in population health management and data analytics.
"These types of skills are essential, and all too often people try to outsource these skills to consultants," he says. "Having people within the health plan who understand the risks deeply enough is essential. Ultimately, somebody within the organization has to make business decisions… The consultants are going to stop short of giving a recommendation. They will only give guidance."
In addition to establishing a health plan infrastructure, one of the initial strategic goals for CHI was deciding which health insurance products to offer. The Medicare Advantage program was determined to be an attractive starting point because value-based plans provide an opportunity "to establish deep alignment" between a health system and its new insurance business line, Serrano said.
CHI is choosing its Medicare Advantage markets carefully with a county-by-county analysis in the states where the health system operates. "The first scan is a financial scan of the market," he said. Another key step is conducting actuarial assessments to make sure competitive premiums can be established to cover claims in a way that is stable over time. "The second part of the discernment process is determining the readiness of our hospital or health system from a network perspective. In all cases, we have to round out the network to provide all the services required."
The final steps in assessing a Medicare Advantage market involve answering some tricky questions, Serrano says. "How saturated is the market with competitors? What percentage of the market is Medicare Advantage versus fee-for-service Medicare? How attractive is the market? It starts to get a little more complicated," he says.
"It circles back to having the right team in place. We're careful to counsel folks; some markets are tougher than others, and it's important to understand that."
Based on CHI's experience, building a health plan business from the ground up is not for the financially faint of heart. "It takes a fair amount of capital expense and a long-range view of when that investment will realize a return," Serrano says. "There's a fairly large economic hurdle to doing this and doing it right."
Health plan startup expenses include assembling an infrastructure through acquisitions or internal investments, hiring staff to operate the plan, legal service fees for licensure, and obtaining reinsurance coverage to protect against large unexpected expenses.
Assuming those startup costs are handled properly, Serrano says another set of expenses is needed to operationalize a new health plan. One of them is carrying enough reserves for unexpected claims as well as "run-out costs" in case a health plan is forced to close and claims keep coming in.
"Parking that cash in reserve has to be clearly understood," says. There are also high marketing costs associated with launching a health plan. "Winning the business from employers requires a sizeable outlay of dollars in marketing."
CHI has set an ambitious trajectory for its health plan expansion. With help from its partners at Soundpath and QualChoice, CHI is offering health plans this year in the Pacific Northwest and Arkansas. Next year it plans to offer Medicare Advantage plans in four more states as well as offering more commercial plans. In 2016, the expectation is to have "Medicare Advantage or commercial or exchange plans in virtually all of our markets."
CHI officials have a high degree of confidence in their methodical approach to building health plans, Serrano says. "We think our strategy is a strategy that strengthens the probability of success for our health plans. There are different ways of being in this space," he says. "We think this is a strong model for us."
