The American Medical Association is backing an effort in Congress to push Medicare toward a value-based reimbursement system, but doctors are demanding a seat at the table when rules are set for transparency and assessing providers' performance.
Physicians appear energized over a deal announced in Congress last week to repeal Medicare's fee-for-service payment system and replace it with a value-based model. But they say it is critically important for them to be involved in the process of crafting the new reimbursement scheme.
"The consensus is the fee-for-service system is unsustainable," said Peter Roman, MD, specialist medical director for Lowell General Hospital PHO in Massachusetts and a private practice orthopedic surgeon. "We need to move to a system that rewards value, with value defined as quality divided by cost."
On Thursday, members of Congress announced a bipartisan deal to repeal and replace the Sustainable Growth Rate formula, Medicare's current payment system for physicians. The pact calls for a five-year period of stability with a 0.5 percent annual pay rate hike for doctors. In the last five years of the plan, a series of reforms would be launched to push Medicare physician reimbursement to a value-based model.
Part of the SGR repeal deal calls for streamlining existing Medicare quality assessment programs for doctors and increasing transparency of medical care costs through mechanisms such as the Physician Compare service on Medicare's website.
If the SGR repeal deal becomes law, Roman says the transition to a value-based reimbursement system will be successful only if physicians are included on the panels that would design quality assessment programs and transparency rules for physicians. "You have to have some doctors involved if you want doctors to own it," he said.
Ardis Dee Hoven, MD, president of the AMA, told HealthLeaders on Monday that the reimbursement plan outlined in the SGR repeal deal "is a much better system than what currently is in place." But she insisted that doctors must play a role in determining rules for quality assessment and transparency. "We are the ones driving the bus on these quality issues," she said. "Physicians have led the drive for more accurate reporting."
While wary of the future course of Medicare quality assessment and transparency regulations, Hoven said the SGR repeal deal provides the framework to make significant improvements. "As a starting point, it's a reasonable place to start," she said.
'You're Going to Shop Around'
Physicians are crucial to moving the US healthcare industry to a value-based model because they understand the complexities of the field, says Anders Gilberg, senior vice president of governmental affairs at the Medical Group Management Association in Englewood, CO. "The challenge here is there's no one-size-fits-all program," he said.
The proposed SGR repeal deal leaves room for doctors and other stakeholders to influence how the new value-based system would be designed, Gilberg said, calling the pact a foundation for change. "We don't know how this is going to play out," he said. "So much is going to be left to the secretary [of Health and Human Services] to flesh out. … What this does is create a set of criteria."
When new standards for physician assessment are set, the selection of indicators to be measured will be a key factor in creating a value-based system, Roman said. "The measures that work are the measures that look at quality and outcomes. A measure should be meaningful and the physician should have the ability to control it."
To quantify value and promote transparency, Roman says reformers should focus on costs rather than physician fees, noting the fees that doctors can charge for their professional services are largely mandated. "We're all on the same fee schedule, but there are huge variations of cost."
Effective healthcare value measurements assess physician performance in areas of their fields where outcomes and costs differ from doctor to doctor, Roman said. "A good measure would be one where there is a high degree of variation," he said.
In orthopedics there is a wide cost gap between doctors who prescribe professional rehab for their patients and doctors who send their patients home with rehab instructions. Hip replacement with rehab can cost twice as much as sending a patient home, Roman says.
With more and more patients facing high deductibles and other out-of-pocket expenses, making cost figures public would help patients find their most affordable treatment options, the orthopedic surgeon said. "If you have a high deductible, you're going to shop around," he said.
The ACO Model
Earl Ferguson, MD, a California cardiologist and author of the recently released book "American Healthcare Reform," said physician reimbursement reform is needed, but any new rules should avoid imposing more administrative demands on physicians. "We need to incentivize efficiency, productivity and quality, and decrease costs," he said. "But it's getting so complex, it's taking physicians away from actual medicine."
Ferguson, who is medical director of the National Rural Accountable Care Organization, said ACOs are showing great promise as a mechanism to move toward improved provider assessment and transparency. "We're going to be able to analyze data not only for providers but also for each physician," he said.
NRACO, which is promoting "a sustainable model for rural healthcare," is planning to use data collected at its ACOs to highlight the best practices at top-performing providers and to help providers that are underperforming. "I think the ACOs are the best model," Ferguson said of the move to a value-based healthcare system. "They're more of a fee-for-value system."
If the SGR repeal deal becomes law and a Medicare-led drive to create a value-based system is successful, the change would be revolutionary, Roman believes. "In a system where you're rewarded for quality and outcomes, the savings would be substantial," he said, contrasting a value-based reimbursement system with the fee-for-service model. "You eliminate the volume incentive."
Congress has forged a long-awaited deal to push Medicare's payment system for physicians to a value-based model. But lawmakers have only seven weeks to agree on how to pay for it.
Analysts, providers, and Medicare patient advocates are cautiously optimistic that the Sustainable Growth Rate formula repeal deal announced Thursday in Congress is a stride forward in the quest to move U.S. healthcare from a fee-for-service model to value-based payment of doctors.
Figuring out how to pay for it may be a bigger challenge.
Put in place a decade ago, the formula for reducing fee-for-service payments to physicians have never taken effect. Instead, Congress has made postponed it year after year.
If a comprehensive deal or new patch is not adopted by March 31, when the most recent "doc fix" patch Congress passed in December is set to expire, the reimbursement rate for doctors is set to be slashed nearly 25 percent.
The bipartisan SGR repeal and replacement deal announced Thursday calls for a five-year period of stability in the Medicare payment system, with a 0.5 percent annual pay rate hike for doctors. In the last five years of the plan, a series of reforms would be launched to push Medicare physician reimbursement to a value-based model.
"This is a classic case of a system put in place and it didn't work; but every year it was not addressed, it became more expensive," said NH Rep. Tom Sherman, (D-Rye), a gastroenterologist at Exeter Hospital who has been championing healthcare reform in the state Legislature.
"The longer Congress didn't deal with it, the less palatable it became for doctors and other providers. A 25-percent pay cut would put most physicians out of practice, out of business… No business can absorb that kind of pay cut."
Rich Scheinblum, VP of fiscal services at Monadnock Community Hospital in Peterborough, NH, says it's critically important to end the uncertainty linked to the cycle of annual SGR extensions and threats of reimbursement cuts.
"Assuming it goes through, at least it will provide some sense of stability over the next five years as our organization grapples with all the changes in healthcare delivery," Scheinblum said. "Hopefully, both parties will come together on a permanent fix before the legislation expires."
Transition to Value-Based System
In addition to providing a period of provider payment stability, the SGR repeal deal proposes a series of reforms intended to transform Medicare reimbursement to a value-based system.
Advocates for a value-based system say the fee-for-services model gives physicians an incentive to order unnecessary tests and procedures, which drives up costs. "Doctors were encouraged to fit in as many procedures as possible," said a legislative aide to US Rep. Allyson Schwartz, (D-PA), who introduced a bill with Congressman Joe Heck, (R-NV), that helped form the framework of the SGR repeal deal.
Schwartz's aide said the two-phase transition will allow time for innovation among accountable care organizations, and time for the best ACO models to become more apparent. "This gives us a test period to make sure those work," she said.
Assessing an Paying for Quality
Under the SGR repeal deal, the first major value-based reform would take effect in 2018, when a new quality assessment system is slated to start. According to a document detailing the deal, "In 2018, it establishes a streamlined and improved incentive payment program that will focus the fee-for-service system on providing value and quality."
While Sherman applauded streamlining Medicare's quality assessment efforts into one system, he said creating performance standards for doctors will only work if the "markers" are objective.
The NH gastroenterologist said some procedures in his field lend themselves to objective measurement but others will be harder to gauge for value. Sherman said the "withdrawal time" in a colonoscopy, when a doctor is most focused on finding abnormalities such as polyps, has been proven as an objective measure of physician performance. Withdrawal times faster than 6 minutes are considered at risk of compromising accuracy, he said. "If you go too fast, you're going to miss things," Sherman said.
But treatment of gastrointestinal conditions such as irritable bowel syndrome is hard to quantify, he said. "How do you attach objective measures to such a complex set of symptoms?" the NH physician-lawmaker asked.
There appears to be widespread agreement that doctors should play a role in setting the rules for the new quality assessment system and other reforms needed to achieve value-based Medicare reimbursement.
"It brings physicians into developing these quality measures," Schwartz's aide said the SGR repeal deal.
Sherman says, "There needs to be physician leadership in developing that value-based format," he said. "If it's handed down without physician input, it's not going to have physicians on board from the get-go."
"We cannot afford, neither for ourselves or our patients, not to be part of the process," Sherman said of doctors. "I want it to stay an attractive profession."
March 31 Deadline Looms
Lawmakers face a tight deadline to replace SGR before its three-month patch expires, adding that reaching a comprehensive deal will get harder as Election Day nears.
"They need to move or they will face another short-term patch," said Nicholas Manetto, a director and strategic communications specialist at Washington DC-based FaegreBD Consulting. "The more time that goes on, the less likely this is to get done. The next step is to get this expedited, especially the offsets."
The latest estimate from the House committees places the cost of implementing the SGR repeal deal at $128 billion, according to Schwartz's legislative aid. She says that figure does not include so-called extenders, a set of Medicare policies including therapy services and rural hospitals.
With the extenders thrown in the mix, the SGR repeal deal would cost billions more, Manetto said. "I think the hope is they're going to try to get to a $150 billion mark," he said of a comprehensive doc fix deal.
Noting that early government data on certified accountable care organizations shows "some of the ACOs have returned very substantial savings," Alex Hunter, managing director of Chicago-based Navigant Consulting's healthcare practice, is optimistic that lawmakers and the healthcare industry can push the SGR repeal deal into law.
"This is the right time for collaboration," Hunter said. "I'm beginning to hear more and more from healthcare executives and doctors. They believe the opportunities to make an impact are substantial. More and more people are up to the challenge."
Joe Baker, president of the New York City-based Medicare Rights Center, likes the SGR repeal deal, but is more pessimistic about its prospects.
"We are encouraged that Congress appears committed to advancing a Medicare payment system centered on high-value care, as opposed to high-volume care," Baker said Friday in a prepared statement.
"Yet, we cannot evaluate the merits of this agreement in a vacuum. Congress has yet to make critical decisions about extenders policies of critical importance to people with Medicare and about how the SGR package will be paid for."
Seeking to avert a cut in Medicare's physician payment rate set for April 1, lawmakers in the House and Senate have embraced a pact that would replace the sustainable growth rate formula with a payment system that includes a small rate increase for doctors.
Sen. Max Baucus, (D-MT)
After a decade of squabbling and annual renewals, the federal Medicare guidelines for physician reimbursement known as the Sustainable Growth Rate appear destined for repeal and replacement.
A bipartisan deal announced Thursday in both houses of Congress includes an annual 0.5 percent reimbursement rate increase for doctors over five years, but the pact does not spell out a mechanism to pay for the new reimbursement system. In a joint statement from the Senate Finance Committee, House Ways and Means Committee, and House Energy and Commerce Committee, lawmakers urged passage of the SGR repeal deal.
"Congress has spent a decade lurching from one 'doc fix' to the next, creating a new, unnecessary threat to seniors' care each time. Enough is enough," said Sen. Max Baucus, (D-MT), chairman of the Senate Finance Committee. "This proposal would bring that cycle to an end and fix the broken system. Our bill makes Medicare's physician payments more modern and efficient, and it will protect seniors' access to their doctors. This bill is the product of years of hard work, and I hope Congress comes together to pass it."
Sen. Orrin Hatch, (R-UT), ranking member of the Senate panel, said replacing SGR is a necessary step in the push to replace the fee-for-service model in U.S. health care to a value-based system.
"For far too long, the doc fix has been annual ritual for Congress. It's time to put that ritual to an end," Hatch said. "I'm proud of this legislation. It not only fully repeals the broken sustainable growth rate formula, but puts in place real reforms that move Medicare away from a fee-for-service model that promotes greater spending to one that encourages better results."
The joint statement from Congress listed the following highlights of the SGR repeal and replacement deal:
Repeal the SGR and end the annual threat to seniors' care, while instituting a 0.5 percent payment update for five years.
Improve the fee-for-service system by streamlining Medicare's existing web of quality programs into one value-based performance program. It increases payment accuracy and encourages physicians to adopt proven practices.
Incentivize movement to alternative payment models to encourage doctors and providers to focus more on coordination and prevention to improve quality and reduce costs.
Make Medicare more transparent by giving patients more access to information and supplying doctors with data they can use to improve care.
'The SGR Problem'
Ardis Dee Hoven, MD, president of the American Medical Association, praised the deal in a prepared statement Thursday:
"The American Medical Association congratulates House and Senate negotiators for taking this critical step toward reforming the nation's Medicare program," Dee Hoven said. "Now Congress is closer than it has ever been to enacting fiscally-prudent legislation that would repeal Medicare's fatally flawed sustainable growth rate (SGR) formula."
Ardis Dee Hoven, MD, President of the American Medical Association
Hoven said reaching a long-term solution for Medicare reimbursement for doctors is critically important for providers and their patients. "Congress has been debating the shortcoming of the SGR policy for more than decade. Continuing the cycle of short-term patches by merely addressing the 2014 cut that is imminent on April 1 without solving the underlying problem would be fiscally irresponsible and further undermine the Medicare program," she said. "It is time for action to repeal the SGR and establish a transition to a new more stable Medicare physician payment policy to better serve America's senior citizens."
In a "Summary of the SGR problem," the lawmakers who crafted the deal offered a scathing assessment of the existing system in their joint statement:
"The Sustainable Growth Rate formula—the mechanism that ties physician payment updates to the relationship between overall fee schedule spending and growth in gross domestic product (GDP)—is fundamentally broken. Although originally introduced as a mechanism to contain the growth in spending on physician services, a decade of short-term 'patches' has frustrated providers, threatened access for beneficiaries, and created a budgetary dilemma from which Congress has struggled to emerge. Over the last decade, Congress has spent nearly $150 billion on short-term SGR overrides to prevent pending cuts."
Rep. Allyson Schwartz, (D-PA), a member of the Ways and Means Committee, introduced legislation a year ago that was incorporated into the SGR repeal deal. She urged Congress to approve the pact before SGR's latest extension expires at the end of March. "While we still have to grapple with the challenge of offsets, it is imperative that Congress acts to make sure seniors have access to the care they need," she said in a prepared statement. "Time is running out and Congress cannot afford to let this opportunity slip away."
New Payment System
A document prepared by the three congressional committees dated Feb. 6 provides details of the SGR repeal deal. A key provision of the pact is a set of guidelines for transitioning to the new payment system for physicians and other health care professionals, starting with the 0.5 percent annual pay hikes.
The deal "provides stable updates for five years and ensures no changes are made to the current payment system for four years," the Feb. 6 document states. "In 2018, it establishes a streamlined and improved incentive payment program that will focus the fee-for-service system on providing value and quality."
After the annual 0.5 percent rate increases from 2014 to 2018, "the rates in 2018 will be maintained through 2023, while providing professionals with the opportunity to receive additional payment adjustments," the Feb. 6 document states.
Under the deal, physicians who embrace alternative pay models would receive higher compensation when the new Medicare payment system is fully implemented. "In 2024 and subsequent years, professionals participating in [alternative payment models] that meet certain criteria would receive annual updates of one percent, while all other professionals would receive annual updates of 0.5 percent."
Alex Hunter, managing director of Chicago-based Navigant Consulting's healthcare practice, said the SGR repeal deal could be a long-term solution to the doc fix dilemma. "This will avert what was viewed by physician organizations as a 'fiscal cliff' for professional reimbursement—given that prior to the repeal of SGR, physicians were facing a possible reduction by 28 percent. Also, the proposed deal will provide a more certain financial environment in which physicians can function and plan for the future," Hunter said.
He said the new Medicare payment system could serve as an engine of change and serve the interests of patients.
"The legislation is viewed by Congress as transitional in nature, with the end game being to develop an approach that integrates value-based programs into the Medicare physician payment system," Hunter said. "During this transition period, physicians will likely continue to seek increased collaboration and coordination among themselves and local health systems. For Medicare patients, this is also good news, as physicians will likely continue to provide access to care without concern for whether their physician can afford to provide services to them."
Federal regulators overseeing public health insurance exchanges are taking a fresh look at adequacy standards for so-called narrow networks, which insurers say are an essential tool for controlling healthcare costs.
In proposed guidelines released Tuesday, CMS is seeking to pry open narrow networks with stricter standards for network adequacy and inclusion of more providers who serve low-income and medically underserved patients.
"CMS is working to strengthen the network adequacy requirements that took effect for this year for the first time under the Affordable Care Act," a CMS spokesperson told HealthLeaders Media on Wednesday. "These are important provisions and include requirements that insurers have adequate provider networks for consumers, including access to essential community providers that serve low-income, medically underserved individuals."
Part of the CMS guidelines released Tuesday call for a more stringent review of applications to offer health insurance policies on the public exchanges: "CMS will review the collected provider list to evaluate provider networks using a 'reasonable access' standard, and will identify networks that fail to provide access without unreasonable delay as required. … To determine whether an issuer meets the 'reasonable access' standard, CMS will focus most closely on those areas which have historically raised network adequacy concerns."
The focus points for the proposed 2015 network adequacy review process include hospital systems, mental health providers, oncology providers and primary care physicians.
The proposed guidelines also seek to increase the percentage of essential community providers in an exchange network's service area from 20 percent to 30 percent.
Insurers say they need to craft narrow networks to contain costs and offer health plans that public exchange policy holders can afford. Anthem Blue Cross Blue Shield of NH officials have said they designed a narrow network for the Granite State's federally administered exchange because they faced premium increases forecast as high as 40 percent.
"It is important to ensure patients can continue to benefit from the high-value provider networks health plans have established, which are helping to improve quality and mitigate cost increases for consumers as the new health care reforms are taking effect," said Robert Zirkelbach, vice president of strategic communications for America's Health Insurance Plans.
But providers who have been frozen out of narrow networks say the proposed new guidelines are necessary to avoid certifying networks that are at odds with the spirit of PPACA-driven health care reforms.
"That's exactly what I have been talking about," says Peter Wright, president and CEO of Valley Regional Hospital in Claremont, NH. "There's the narrow network that excludes a whole community, and I have a problem with that."
Anthem's network in New Hampshire's exchange excludes 10 of the state's 26 acute-care hospitals, including VRH. The hospital serves Sullivan County, which has no public transportation, an economically disadvantaged population, and poor healthcare outcomes compared to other counties in the Granite State. "How can you not look at that as classism?" Wright said.
Many of VRH's patients face not only changing primary care doctors but also drives as long as 90 miles for services. "The narrow network that was implemented here excluded Sullivan County and I want to see that changed," Wright said.
Wright says another change he would like to see is adoption of an "any willing provider" feature in the public exchanges similar to a proposal before lawmakers in the NH Statehouse. "Anybody who is willing to accept the fee schedule can be a part of that network," he said.
The new public health insurance exchanges are a good deal when compared to plans that private employers offer, PwC research shows. But don't expect employers to push workers toward the public exchanges yet.
Public health insurance exchanges are in their infancy, but they are growing into a potential game changer in the U.S. health insurance market.
In a recent study conducted by the Health Research Institute at PricewaterhouseCoopers, the costs to policy holders for health plans offered on the public exchanges were found to be comparable to or lower than plans offered through private employers. "For the first-year results, we were surprised to see these [public exchanges] were right in there with what employers were offering," said Mike Thompson, principal at PwC's global human resources services practice.
Ceci Connolly, managing director of PwC's Health Research Institute, says the study is significant because it is the first to take an objective look at the numbers in the new public exchanges as opposed to comparing the new health plans to the historical individual insurance market. "The exchanges are competitive with plans serving the 156 million people in the employer-sponsored market," she told me. "That's a very important benchmark to look at."
The Health Research Institute is the research arm of PwC's practice. It does not conduct studies for hire.
See Also: Private HIX Pose Challenge to Public Health Insurance Exchanges
PwC's research pegged the employer "active single" rate at $6,119, with the comparable public exchange median rate 4 percent lower at $5,844. The lowest public exchange rate for a similar individual was 20 percent lower at $4,885.
Connolly said she and her colleagues had assumed the public exchange rates would be higher based on "the early chatter—early rhetoric that the exchanges were really expensive."
Two experts in the health insurance field find the PwC results more refreshing than surprising.
"The market was moving toward cost-control strategies" before implementation of the federal Affordable Care Act, said Alex Feldvebel, deputy commissioner of the N.H. Insurance Department. "The carriers were looking for ways to limit costs increases to consumers… You have the phenomenon that the market is reaching an affordability barrier."
Prior to the PPACA, insurers used "risk selection tools" to avoid insuring individuals who would file the most claims such as people with pre-existing conditions, he said. With a decreased ability for insurers to limit costs, "they are aware that they are going to compete more on price," Feldvebel said, adding the PPACA has "cleared the way to more aggressive negotiations with providers."
Linda Tiano, who works in the healthcare and life sciences practice of the Washington, DC-based law firm Epstein Becker Green, said the PwC study confirms an undeniable truth. "They're all trends that would have happened anyway," she said of the relatively low cost to policy holders in the public exchanges. "Premiums are so high, we as a society have to find ways to reduce them."
According to a December 2013 "issue brief" from America's Health Insurance Plans, insurers believe so-called narrow networks are a key factor driving down policy costs in the public exchanges: "To help preserve affordability and high value health care for consumers and employers, health plans are turning to high-performance provider networks designed to reward quality and effectiveness."
One of the more intriguing implications of the PwC research is the possibility that employers may start urging their workers to seek health insurance on the public exchanges.
Feldvebel said the Massachusetts healthcare reform experience indicates employers may be reluctant to push their workers into the public exchange market. "The impact is less than you would think," he said of recent studies on the impact of the public exchange in the Bay State. "Employers continue to offer coverage as they have in the past."
Tiano was equally skeptical. "Employers are going to want to continue to have benefits that make them attractive to [potential workers]," she said. But the healthcare legal expert said employers are watching the public exchanges closely to see whether they can adopt innovations to boost their bottom lines.
"You may see employers moving to private exchanges," Tiano said. "They're similar [to the public exchanges] in that smaller employers can make more offerings to their workers."
While Feldvebel and Tiano are reluctant to view the public exchanges as a revolutionary development for the broader health insurance market, that's not necessarily the view in Texas, where everything is big, including the impact of the federally administered health insurance exchange.
"We are already seeing employers do away with small group health plans and having us come in to assist their employees with exchange plans," said Tanya Boyd, an insurance broker and owner of Tanya Boyd & Associates in Sunnyvale, TX. "Some get tax credits and some don't. For those with tax credits and dependents, it has so far been a substantial savings to both the employee and the employer."
At the very least, the public exchange market is giving Texas employers a valuable option, Boyd told me.
"Not all employers like dealing with the administrative burdens of group health plans, and this allows them to wash their hands of it, and in turn makes it more affordable for some employees depending on their income and household size," she said.
There's no crystal ball providing a clear view of the future for the public exchanges and the broader healthcare insurance market. But the view does get sharper when we can rely more on objective analysis and less on "early rhetoric."
Providers are pleased that CMS is delaying enforcement of new guidelines governing Medicare reimbursements for short-term hospital stays, but they insist the new rule is flawed and say they will continue to oppose it.
CMS's decision late Friday to delay full implementation of a new rule that reforms Medicare reimbursement for short-term hospital admissions is drawing cautious praise from providers and their allies in Washington, D.C.
In the announcement, officials at the Centers for Medicare & Medicaid Services stated that they are extending the so-called two-midnight rule's "probe and educate" transition period to the end of the federal fiscal year on Sept. 30. Full enforcement of the policy had been slated to begin in April.
"Hopefully, the two-midnights [rule] delay is a recognition that we do need to go back to the table… and seniors will know what their costs are going to be," said Lori Prater, legislative counsel to U.S. Rep. Jim Gerlach, a Pennsylvania Republican who has been pushing for delay and revision of the new rule since December.
Under the rule, which CMS issued in August 2013, hospitals that admit patients for less than two nights will receive reimbursement at Medicare B outpatient rates. The rule states that hospital admissions shorter than two midnights in length are "generally inappropriate for payment under Medicare Part A, regardless of the hours the patient came to the hospital or whether the patient used a bed."
For most services, Medicare B reimburses providers at 80 percent of the Medicare A rate. Friday's announcement from CMS is the third time since October that full implementation of the two-midnight rule has been delayed.
See Also: Two-Midnight Rule Creates Financial Hurdles, Perverse Incentives
CMS officials have said the rule is needed to clarify admission guidelines and address a recent spike in Medicare patients being admitted to hospitals for brief observation stays. Objections from hospitals and doctors have included unease over the financial impact of the rule on patients, who face higher copays, and concern that the rule will penalize efficient treatment of patients in less than two nights.
Prater says Gerlach introduced a bill in December that sought to force CMS to delay the full rollout of the two-midnight rule until the beginning of the next federal fiscal year in October. "That was really the main part of the bill," Prater said of the legislation, which had 85 co-sponsors when CMS embraced the delay on Friday. "It gave hospitals an opportunity to come in and make their case with their representatives."
In a prepared statement issued Monday, the American Hospital Association sounded a guardedly optimistic tone on the latest two midnight rule delay.
"We are pleased that CMS has extended its enforcement moratorium on the two-midnight policy for an additional six months, as the AHA has urged," said Rick Pollack, the group's executive vice president.
"This action clearly recognizes that there are still many unanswered questions about the policy. At the same time, we continue to urge CMS to fix the critical flaws of the underlying policy by immediately engaging stakeholders to find a workable solution that addresses the reasonable and necessary inpatient-level services currently provided by hospitals to Medicare beneficiaries that are not expected to span two midnights."
Ardis Dee Hoven, MD, president of the American Medical Association, says the physician group is urging CMS to revise or scrap the rule over the next six months.
"The AMA has been actively involved in issues surrounding hospital observation care and strongly opposes the two-midnight policy due to serious concerns about potential increased documentation burdens for physicians and financial liabilities for patients," she said in a prepared statement Monday.
"We recognize that these issues are causing tremendous difficulties for physicians and patients, and we will continue to work with stakeholders to pursue workable solutions during the additional time afforded by the delay issued by CMS."
During the newly extended transition period, short-term hospital admissions will be reviewed under the new rule's guidelines, but reimbursements will not change. "Medicare Administrative Contractors (MACs) will continue to select claims for review with dates of admission between March 31, 2014 and September 30, 2014," Friday's CMS announcement states, adding, "Generally, Recovery Auditors and other Medicare review contractors will not conduct post-payment patient status reviews of inpatient hospital claims with dates of admission on or after October 1, 2013, through October 1, 2014."
CMS officials did not return a request for comment.
Officials at Wake Forest Baptist Medical Center in North Carolina said delaying implementation of the two midnights rule is a positive development but only the first step in process necessary to fix or drop the new guidelines. The 885-bed teaching hospital in Winston-Salem is among four healthcare providers that have appealed CMS's plan to reduce Medicare reimbursements by 0.2 percent to help pay the agency's costs linked to implementing the two-midnight rule.
"We appreciate CMS's announcement delaying the enforcement of the two midnight rule until October 1, 2014," said Joanne Ruhland, WFBMC's vice president of government relations. "However, the rule is still CMS policy, which we will continue to oppose through the legislative and judicial process."
It's more than convenience: An integrated retail pharmacy provides hospitals with opportunities to boost patient satisfaction and lower readmission rates while producing modest revenue.
U.S. hospitals have offered on-campus retail pharmacies for years, but the drive to achieve improvements across the continuum of care is prompting a surge in new facilities and reinvention of existing on-site drug stores.
"A retail pharmacy based on-campus and operated by the hospital provides an integrated continuum of care for one of the most critical steps in the health care transitions process," said Christine Collins, director of pharmacy at Lifespan, which includes Rhode Island Hospital, The Miriam Hospital and Bradley Hospital in Rhode Island. "Research has shown that over half of medication errors occur during transitions in care."
Lifespan plans to have two on-campus retail pharmacies open at its Providence hospitals by the end of the year. The health system opened its first retail pharmacy at Rhode Island Hospital in May 2013 and a second site is set to open at The Miriam in the fall.
"By having our own pharmacy, we can provide integrated care," Collins said. "Our pharmacists have full electronic access to the patients' hospital record, including inpatient medications, lab and microbiology results, physician's notes and pharmacy interventions. It is also very collaborative. We can consult with the patient's physicians, nurses and other health professionals before the patient even leaves the hospital. And it's patient-centered. We can deliver the medications right to the patient's bedside before they are discharged. This is not only a convenience, but it also provides a major safety enhancement by ensuring that the patient actually fills their prescription."
She said there are several barriers that can stand between a patient and filling a prescription such as transportation and insurance denials. "We are able to work through these issues while the patient is still with us, greatly minimizing the risk of non-adherence and the subsequent health issues that go along with that such as readmissions," Collins said. "This helps us provide a continuum of care for our patients even beyond discharge."
Lower Readmissions
Douglas Scheckelhoff, VP of the office of practice management at the American Society of Health-System Pharmacists, says hospital officials are focusing on medication as one of the keys to adapting to the changing health care industry landscape. "One of their strategies to lower readmissions is medication," he said, noting hospitals are creating "discharge prescription programs" through their retail pharmacies. "It's a very practical way to make sure the transition to the home is successful."
While the percentage of hospitals that have on-campus retail pharmacies has held steady over the past decade at about 25 percent, Scheckelhoff said ASHP is now asking hospitals about how many pharmacies they have at their facilities. "I think the larger hospital systems are opening more [pharmacy] locations," he said.
When hospitals weigh the business side of opening a retail pharmacy, they should be mindful of economies of scale and the potential for a relatively low rate of prescription re-fill orders, Scheckelhoff said.
According to the ASHP hospital survey data, about 70 percent of hospitals with 600 or more beds have at least one on-campus retail pharmacy. But very few hospitals with 200 or fewer beds have retail pharmacies. "They just don't have the volume of prescriptions," Scheckelhoff said.
Convenience Cuts Two Ways
Convenience is a major factor in a patient's decision to re-fill a prescription, which poses a business challenge to some hospital retail pharmacies. "They may choose to have re-fills done closer to home," he said. "It may not be convenient for them to go back to a medical center."
St. Anthony's Medical Center in St. Louis has two retail pharmacies located in medical office buildings on the nonprofit hospital's campus. The 767-bed facility acquired one of the pharmacies in 2000 and opened a new site in 2012.
"Customer service is the Number One reason we put in the new one," said Dan Johnson, the hospital's director of pharmacy services. "These pharmacies meet the special needs of our patients."
Johnson said St. Anthony's retail pharmacies, which are staffed by the hospital, benefit patients through the teamwork between pharmacists and physicians. He cited as an example wound patients with compromised mobility, who can can have their medications delivered to their doctors' offices. Also, hospital pharmacies can stock products that are often not available at other commercial pharmacies.
Low Margins, But a Better Patient Experience
The pharmacy director said the retail sites are a modest contributor to St. Anthony's bottom line, for now. "It is not a significant revenue producer for the hospital, but it is a revenue producer," he said. "Our margin is relatively low, but we can build our margin up 10 percent over time."
Palomar Medical Center, a 288-bed nonprofit hospital in Escondido, CA, opened a retail pharmacy with attached Starbucks in the fall. The pharmacy, Sav-on, is a partnership with Albertsons, a retail company based in Spokane, WA.
"Palomar Health has had a long-standing relationship with Albertsons in the community, so it was a natural fit to bring our partners into our facility," CAO Gerald Bracht said. "Starbucks and the Sav-on by Albertsons retail store and pharmacy bring added comfort and convenience to our patients, visitors and staff. It's a win-win situation for everyone."
Bracht said Albertsons leases space for the stores in the hospital's lobby, but added "the partnership goes well beyond a tenant agreement."
"The staff of the retail stores share the same commitment to ideal patient care and strive to improve the experience of anyone who comes into the hospital doors," he said. "That could mean delivering flowers to a patient, purchasing a gift for a loved one, stirring up your favorite cup of coffee or picking up prescriptions as a patient is heading home."
New Hampshire has only one health insurer participating in its federal exchange marketplace, but state lawmakers and regulators are optimistic that other payers will join the market in 2015.
Anthem's standing as the sole insurer in New Hampshire's federal exchange marketplace has created a painful experience for some hospitals and patients, but relief is on the horizon, state lawmakers and regulators say.
NH Rep. Thomas Sherman, MD (D)
"I think it's going to self-correct in a year, which is a long time for patients and providers to wait, but it's the law," said Thomas Sherman, MD, a gastroenterologist and Rye Democrat who was elected to the state House of Representatives in 2012.
See Also: Frozen Out of HIX, NH Hospitals Feel Burned
Sherman says Anthem Blue Cross Blue Shield of NH appears to have complied with state and federal law when it crafted Anthem Pathway, the only health insurance exchange product in the Granite state approved to enroll patients in 2014. The Anthem Pathway network includes 16 of the state's 26 acute care hospitals.
Anthem officials have cited the need to contain premium increases for individual policies—estimated as high as 40 percent—as the driving force behind the company's decision to design a narrow network.
"The ACA was designed with the fundamental premise that the public would not tolerate public funding of health care," said Sherman, who practices at Exeter Hospital, which is in Anthem Pathway's network. "You can't really punish people for following the rules."
"I absolutely get the devastating effect of a narrow network on patients and providers," he said. "But a knee-jerk reaction to pass legislation may not solve the problem."
'The Spirit of the Law'
Top executives at several of the hospitals excluded from Anthem Pathway are chafing under a provision of the law that allows exchange health plans to require patients to travel as far as 90 miles for services.
Charles White,
COO, Upper Connecticut Valley Hospital
"I don't think people should be bullied into driving an hour to get their health care," said Peter Wright, president and CEO of Valley Regional Hospital in Claremont, NH. "They created a product that maximized the value to their investors. Anthem didn't follow the spirit of the law."
Wright said being left out of Anthem Pathway poses significant transportation hardships for patients in Claremont, which is among the most disadvantaged communities in the state. "We have to make a choice of what's more important: maximizing an insurance company's profits or providing access to affordable health care to the residents of New Hampshire who need it," he said.
Charles White, COO of Upper Connecticut Valley Hospital in Colebrook, NH, said he suspects Anthem avoided economically challenged communities when it designed its narrow network. "The most disadvantaged hospitals were red-lined out of the network," he said, noting UCVH would have accepted Anthem Pathway's relatively low reimbursement rates because the hospital relies on commercially insured patients to remain economically viable. "We would have taken the product even though it would have hurt us financially."
Chris Dugan, communications director for Anthem Blue Cross Blue Shield of NH, flatly denied the company had written off any providers. "This is certainly not the case," he said. "More than 90 percent of our customers will continue to use Anthem's broad network, which includes all of the state's hospitals. Importantly, we also anticipate that many of the individual members purchasing an exchange product in 2014 will have previously been uninsured. That means that all New Hampshire hospitals should benefit from a reduction in the amount of uncompensated or charity care"
Dugan said Anthem expects to continue doing business with all of the hospitals in New Hampshire through other products. "The fact that a hospital or provider was not chosen for this network is not at all a reflection of Anthem's relationship with that provider," he said. "Anthem views all of its contracted providers as high quality and is pleased to continue to partner with them on the vast majority of our business for small and large groups, senior, and grandfathered plans."
Single-Player Marketplace
While acknowledging that a more competitive marketplace is desirable, state Deputy Insurance commissioner Alex Feldvebel said the federal exchange's modest beginning in New Hampshire is in line with regulators' expectations.
"It wasn't too surprising that in Year One there was only one player," he said of Anthem Pathway, adding, "it wasn't surprising that Anthem was the only player."
Feldvebel said Anthem held about 90 percent of the individual health plan policies in the state before this year. "It's typical in a state with a small population that one or two players constitute the whole market (for individual policies)," he said. "There aren't enough lives out there to sustain more than one or two players."
The state Insurance Department thoroughly vetted Anthem Pathway to make sure the narrow network followed state and federal law, Feldvebel said. "Our role was to review the filings," he said. "And we did that, and the adequacy standards were met."
State Sen. Nancy Stiles, (R-Hampton), said Anthem had several advantages over potential competitors when New Hampshire was launching its health insurance exchange, including a longstanding and broad presence in the state. "They were familiar with the process," she said.
Stiles, who has taken a leading healthcare reform role in the Republican-controlled Senate, said she also wasn't surprised when Anthem emerged as the only company offering a health insurance exchange product in 2014. "The single player in the market was pretty much set up from the beginning," she said. "We are getting to a point where we can move forward."
Boosting the Marketplace
Stiles, Feldvebel, and Sherman are all optimistic that New Hampshire can expand the range of options available to individuals who purchase a health insurance exchange plan beginning next year.
"I'm very hopeful," Feldvebel said. "The real solution to this issue isn't to have nationalization of Anthem; it's to increase competition in the marketplace."
The deputy insurance commissioner noted that Harvard Pilgrim Health Care has been approved to join the exchange marketplace in 2015 and Minuteman Health Inc. is seeking regulatory approval. He said Minuteman could be a valuable addition because it is a nonprofit organization intent on following a co-op model. "They have a lot of work to do, but we're hopeful they can get up and running, and get in the market in 2015."
With a key procedural deadline looming over the Statehouse, Stiles said she is hoping lawmakers can craft legislation that will encourage more players to enter the exchange marketplace soon. "Conversations are going well," she said. "If it's going to happen, it has to happen before the end of March. … There are still opportunities. I am forever the optimist."
Sherman said there are three managed care organizations serving Medicaid patients through the state Department of Health and Human Services and at least one of them is considering offering a health insurance exchange plan. "Their forte is to provide comprehensive care at low cost," he said.
When it comes to reaching a political deal between the Democratic House and the Republican Senate to advance health care reform efforts in the Granite State, Sherman has adopted a watchful-waiting approach, particularly on the highly contested issue of expanding Medicaid in the state.
"I have co-sponsored bills with them on other issues, but on (Medicaid expansion), they are going to disagree with me," he said of Republicans in the Senate. "We still have hope for compromise on these things, and I want to keep that hope alive."
New Hampshire hospital leaders are crying foul over being squeezed out of the single health insurance exchange plan available in the state. Anthem says offering a 'select network of providers' will offset premium increases.
The stage has been set for a clash over the issue in the Granite State, where Anthem Blue Cross Blue Shield of New Hampshire is the only insurer offering a plan—Anthem Pathway—on the health insurance exchange. Nine of the New Hampshire's 26 acute-care hospitals have been excluded from the network and Concord Hospital has declined to join over Anthem Pathway's relatively low reimbursement rates.
"Anthem [pays] providers at pretty much Medicare rates," said Scott Sloane, vice president of finance at Concord Hospital. "Over the long term, it's a really bad idea." Concord Hospital, based in the state's capital, is a non-profit regional medical center with 295 licensed beds.
While top officials at the out-of-network hospitals are concerned about the long-term financial effects of Anthem's narrow network, they are nearly apoplectic over the implications for two key goals of the PPACA reform effort: improving access to healthcare services and boosting population health.
'Swimming Against the Tide'
"It's not a money issue for me," said Maria Ryan, CEO of Cottage Hospital, a 25-bed critical access hospital in Woodsville serving 26 New Hampshire and Vermont towns. "It's making sure [the patients] stay healthy. I'm swimming against the tide now when it comes to making sure they are compliant and making their appointments."
She fears Anthem Pathway patients using population health programs, such as one for diabetes education, will stop if they have to drive as far as 90 miles for services at one of Anthem's in-network hospitals. "Transportation is a big issue for them," she said of Cottage Hospital's patients.
"I have to look at the overall health of our community," Ryan said. "We are hearing loud and clear from the patients, who are heartbroken over having to leave their primary care doctors."
'A Select Network of Providers'
An Anthem official says the insurer is living up to the spirit and letter of the healthcare reform law.
"A major goal of the ACA was to provide more affordable healthcare, " said Chris Dugan, Anthem's NH communications director. "While all other carriers in New Hampshire are sitting on the sidelines, Anthem Blue Cross and Blue Shield in New Hampshire is proud to be part of an effort to provide coverage for many who have not previously had insurance. We are offering this select network of providers to offset premium increases that would otherwise be necessary in 2014."
Dugan says attaining that affordability goal posed a challenge in building the Pathway network. "Independent studies performed by both the New Hampshire Department of Insurance and the Society of Actuaries predicted that the average increase, driven primarily by higher claims of the previously uninsured and those covered through existing high-risk pools, could be significant, [by] as much as 30 to 40 percent," he said.
A 'Huge Financial Burden' for Hospitals
Cottage Hospital's Ryan and leaders at several of the nine other out-of-network hospitals in New Hampshire say that requiring Anthem Pathway patients to travel long distances for healthcare services will hurt many.
Charles White, COO of non-profit Upper Connecticut Valley Hospital in Colebrook, NH, says Anthem's narrow network could have a devastating impact on residents in the hospital's 850-square-mile service area, which is the largest in the state. With just 16 beds, the critical access facility is the smallest hospital in the state.
"We're a very fragile economic and medically served area," White said, noting that the region has the worst health outcomes in the state, no public transportation, and a relatively high number of patients suffering from costly chronic diseases. "This network hurts those patients who don't have the financial means to stay healthy."
Charles White,
COO Upper Connecticut Valley Hospital
UCVH was one of five out-of-network hospitals contacted for this report and the only one where officials said they are committed to continuing to treat local patients if they are in the Anthem Pathway network. "Our mission is to provide healthcare to the patients we serve," he said. "If we have to find a way to lower fees or provide free care, we will."
White says denying local care to patients in communities served by UCVH could have dire consequences. A few years ago the hospital had considered dropping chemotherapy because there was another facility within 90 miles offering the service.
But the reaction from the community was shocking, White said, with some patients saying they had no way to get to the other facility and others reluctant to impose "a huge financial burden" on loved ones to drive them to appointments.
He summed up the reaction in chilling terms: "They told us, 'We're going to choose to die instead.'"
Anthem Pathway a 'Comprehensive Provider Network'
Anthem's Dugan says it was necessary for Anthem to narrow the Pathway network to hold the line on premium increases. "Without the use of the new network, all individual exchange members would have seen much higher premiums than they will now see."
Anthem's exchange network in New Hampshire includes the vast majority of physicians in the state and is well within regulatory bounds, he said. "Pathway is a comprehensive provider network that meets or exceeds New Hampshire's network adequacy requirements."
Alvin Felgar,
CEO, Frisbie Hospital
Despite leaving out 10 hospitals in the state, Dugan says Anthem was able to include 78 percent of primary care physicians; 87 percent of specialists, allied and other professional providers; and 87 percent of ambulatory surgery providers.
Raising the PPACA alarm
Alvin Felgar, president and CEO of Frisbie Hospital in Rochester, NH has been one of the most vocal critics of Anthem Pathway, pressing the state legislature to force Anthem to broaden its network, and seeking to energize the community into action with a billboard, an open letter on the hospital's website, and an opinion piece published in the New Hampshire Business Review.
"We have real and practical concerns about the impact of the Affordable Care Act," Felgar wrote in the open letter. "Our hospital is not part of the process. We are on the outside looking in, and it is entirely possible this new law will serve as a wedge between our doctors and our patients."
In addition to the transportation challenge many of his patients face, Felgar said in an interview with HealthLeaders Media that compelling Anthem Pathway patients to change doctors poses another access obstacle. "It's a daunting process for people, especially people who have multiple health problems," he said of finding a new physician. "It's not a simple process."
Not long ago, I attended a meeting on the future of primary care. Most of the physicians in the room knew one another, so the discussion, while serious, remained relaxed. Toward the end of the hour, one of the physicians who had been mostly silent cleared his throat and raised his hand to speak. The other physicians smiled in acknowledgment as their colleague stood up. "Nurse practitioners," he said. "Maybe we need more nurse practitioners in primary care." Smiles faded, faces froze and the room fell silent. An outraged doctor, the color in his face rising, stood to bellow at his impertinent colleague.
