Adding to its growing number of commercial accountable care collaborations with a deal in Texas, Aetna has also posted a $5 million ACO collaboration gain with Phoenix-based Banner Health Network.
Aetna has taken a pair of ACO strides.
Charles Kennedy, MD
Chief Executive of Accountable Care Solutions for Aetna
The Hartford, CT-based commercial payer has sealed an accountable care collaboration deal with Baylor, Scott and White Quality Alliance in North Texas. Last month, Aetna and Banner Health Network reported a $5 million gain-sharing bounty last year from their ACO collaboration in Arizona.
Both of the collaborations feature the Aetna Whole Health accountable care health insurance plan.
Aetna's ACO collaboration with Baylor, Scott and White Quality Alliance, which is affiliated with Waxahachie, TX-based Baylor Health Care System, will give Aetna Whole Health plan members access to more than 900 primary care physicians, 27 hospitals, 2,800 specialists and six urgent care facilities in the Dallas/Fort Worth area, officials at the companies say in a prepared statement released last week.
An Aetna spokesperson says the ACO collaboration with Baylor has two key objectives: to achieve measurable advancements in patient care and satisfaction while controlling costs for its customers and members in the Dallas/Fort Worth Metroplex.
Officials at both organizations say Aetna Whole Health members will reap cost savings for in-network care and the ACO collaboration rewards Baylor along several performance measures. The provider network will garner gain-sharing by hitting preventive care and screening targets, demonstrating improved management of patients with chronic conditions such as diabetes, reducing hospital readmissions, and curbing emergency room visits.
Aetna's ACO collaboration with Baylor will be effective for self-insured customers starting Oct. 1, and it is slated to be marketed for fully insured customers early next year.
Aetna, Banner Report $5M ACO Gain
Aetna has 47 commercial ACO pacts with healthcare providers nationwide, according to the insurer's Aug. 27 announcement of a $5 million ACO collaboration gain-sharing bonanza with BannerHealth Network in 2013.
Aetna and BHN officials prepared joint and individual responses to a series of questions:
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HL: What are the highlights of your ACO collaboration?
Aetna/BHN: Aetna and Banner Health Network began their accountable care collaboration in 2011, and the tools and learning from this relationship supported BHN's Medicare Pioneer Accountable Care Organization model in 2012. Aetna and BHN offer the Aetna Whole Health plans—ACO-centered health plan products—to employers and individuals in the Phoenix area.
The products are also available to individuals on the public exchange. In addition, Aetna care management and technologies support BHN in delivering patient-centered, accountable care to its Pioneer Medicare beneficiaries as well as Banner Health employees in seven states.
The relationship leverages the Banner Health Network, [which is] model of care focused on wellness and improving patient care outcomes through better coordination and access to patient information.
HL: Are there key aspects of the ACO collaboration that helped achieve the $5 million in cost savings?
Aetna/BHN: The cost-savings result from collaboration between Aetna and BHN to share claim and clinical information about patients and look for opportunities to improve care. Aetna supports BHN's staff with data that helps them understand patient health as well as compliance with care plans.
At Banner, a unique case management model helps to ensure that all patients have a seamless care experience. By reducing duplications, handoffs and variations in care, this model helps to simplify care processes and promotes efficiencies. Since the approach has been in place, Banner reduced its average length of stay to 3.81 days— representing an overall 7.52 percent improvement across the system of Arizona hospitals.
Significant results seen during the second full year of the accountable care collaboration between Aetna and BHN include:
Improvements in cancer screening rates, including cervical and colorectal cancer screening
Reductions in the percent of diabetic members with poorly controlled blood sugar levels
Reductions in radiology services of approximately 9%
Increases in generic prescribing rate by almost 4%
Reductions in avoidable admissions by approximately 9%
"The primary reason for the success of the relationship is the shared accountability to improve the quality while driving down the overall cost of care," said Charles Kennedy, MD, Aetna chief executive of accountable care solutions.
Chuck Lehn
CEO of Banner Health Network
HL: From the perspective of partnership, what are the key elements of making the Aetna-Banner ACO collaboration work? What factors make Aetna and Banner good partners?
Kennedy: We share a common vision and commitment with Banner when it comes to improving population health and making an impact on clinical outcomes.
Chuck Lehn, CEO, BHN: There has been true collaboration in our work with Aetna, it's not just an exchange of data. Our two organizations work hand-in-hand to deliver the services we offer today, and imagine what is possible tomorrow.
HL: What is the forecast for your ACO collaboration? Are higher cost savings possible?
Kennedy: We believe that we can continue to generate these types of results as more people choose the ACO-based products. In fact, we saw savings and improved medical cost trend on other Aetna members in the ACO outside the Aetna Whole Health product.
Lehn: We believe additional success is possible over time as we engage members in their wellness journey through personalized care plans, telehealth visits and other proactive, patient-centered services.
An appeals backlog for Medicare claims decisions has prompted CMS to offer providers a settlement, but hospitals and health systems consider it insufficient.
Healthcare providers are raising concerns about a Medicare claims appeals settlement offer from federal officials.
From a hospital or health system's perspective, the 68-cents-on-the-dollar deal is neither a fair resolution nor an adequate step toward addressing providers' concerns over Recovery Audit Contractor reviews of healthcare service claims to Medicare, a New York-based healthcare CFO says.
"I believe that our [appeal] success rate is over 50 percent and that from my understanding many hospitals have had similar success when taking appeals to the administrative law judge," said Mark Bogen, CFO and senior VP of finance at South Nassau Communities Hospitalin Oceanside, NY.
"Additionally, we use outside consultants to help us prepare and submit theses ALJ appeals and they usually get a contingency rate based on the successful adjudication of an ALJ appeal. Therefore, I do not agree that the 68 cents on the dollar is fair when you also take into consideration the time-value of money given the length of time these cases have been at the ALJ as there is no interest given."
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In December 2013, Chief Administrative Law Judge Nancy Griswold issued a memorandum that details the claims appeals backlog at the federal Office of Medicare Hearings and Appeals. She reported the backlog had mushroomed dramatically.
"In just under two years, the OMHA backlog has grown from pending appeals involving 92,000 claims for services and entitlement to appeals involving over 460,000 claims for services and entitlement, and the receipt level of new appeals is continuing to rise."
Bogen questioned the motives behind the appeals settlement offer from the federal Centers for Medicare & Medicaid Services.
"This 'offer' is solely being done, in my opinion, by CMS to address the public relations nightmare of trying to defend their inability to timely adjudicate the appeals process and as a way to thwart the threatened/pending lawsuits from the AHA and hospital providers," he said.
"The settlement may reduce the backlog," he added, "but it will not resolve what probably has caused it. The RAC audits have gone from a focus on medical necessity/physician judgment to a place of service (inpatient versus outpatient) argument, and, as a result, the number of accounts on appeal has grown significantly and the success rate of the appeals has declined as well. The RAC process still needs to be overhauled."
The American Hospital Association is equally unimpressed.
"RACs are not neutral judges," says Alicia Mitchell, senior VP for communications at the AHA. "Their overzealous denials broke the appeals system. This offer addresses the symptoms and does not provide a solution to the underlying problems."
She added the appeals offer does nothing to address hospital officials' concerns over the two-midnight rules cutting into one of their most lucrative lines of business: inpatient care. "This offer does not apply to appeals for admissions after October 1, 2013, when the two-midnights policy became effective," Mitchell said.
CMS officials defended the settlement offer in an email to HealthLeaders: "CMS examined and evaluated multiple matters when making its determination. As is conventional practice during settlements, CMS developed a balanced value that considered both the best interest of the government, and rendering an obtainable settlement. Based on the data and CMS's analysis, we determined 68 percent was an appropriate offer for resolving these cases."
CMS says it is trying to improve the performance of the RAC program. "This settlement is only intended to address pending appeals related to place of setting," they say. "Our goal with the Recovery Audit program is to strike the right balance between our responsibility to ensure all beneficiaries maintain access to care and ensuring all Medicare claims are paid accurately. Based on feedback received, CMS made improvements to the Recovery Audit program. CMS now has in place a Recovery Auditor Validation Contractor to measure the accuracy of the Recovery Auditor determination."
AAMC spokesperson Ivy Baer said it was "hard to say" whether the offer from CMS is fair. "Each institution must weigh the cost of continuing the appeal, and the uncertainty of how the appeal concludes, against a certain amount," she said.
"However, the CMS notice mentions a 'reconciliation process' in the event of discrepancies, so it's not clear when this would be a done deal. A hospital doesn't just submit and get paid."
Baer says RAC audits and the two-midnight rule remain problematic for providers. "The RAC process remains deeply flawed. This [settlement deal] merely addresses the enormous backlog of appeals," she said. "The settlement may help some hospitals, but the problems with RAC audits and the unreasonableness of the two-midnight rule are not addressed."
Medicare Beneficiary Perspective
A patient group that has filed two lawsuits against federal Department of Health and Human Services over the Medicare appeals backlog, the Willimantic, CT-based Center for Medicare Advocacy, is pressing for an overhaul of the Medicare claims review and appeals process.
"The goal of the lawsuit we just filed on August 26 (Lessler et al. v. Burwell) is to ensure that Medicare follows the law and provides timely decisions on beneficiaries' Administrative Law Judge appeals," Alice Bers, a lawyer at CMA, said last week.
"Congress mandated that ALJ decisions be issued within 90 days of the request for a hearing being filed, but the system is far out of compliance with that standard. Beneficiaries should not have to wait so long for answers on Medicare coverage when they are on the hook financially for the services in question and may be going without needed care."
Bers says patients are paying a price for an ongoing squabble between CMS and providers over Medicare reimbursement reforms. "From the beneficiary's point of view, reimbursement to providers should be logical and efficient. Tremendous backlogs for providers in the appeal system affect beneficiaries because they use the same appeal system and are necessarily affected by the overburdened system."
The CMA attorney said the two-midnight rule, which is in effect but yet to be strictly enforced, is contributing to the appeals backlog.
"Confusion over inpatient/outpatient billing and RAC appeals do seem to be significant contributing factors to the backlog in the appeal system," Bers said.
"CMA does not believe that the two-midnight rule is clarifying inpatient/outpatient billing issues nor is it helping beneficiaries who have been caught up in the confusion."
Appeal Deal's Complicated Calculation
CMS is set to hold a conference call Tuesday to brief hospital officials on the Medicare appeal settlement offer.
"We will participate in the CMS phone call," Dartmouth-Hitchcock Medical Center officials said last week in a prepared statement. "Our questions are about the process and procedure that will need to be followed to process these claims; and what costs will be associated with filing for the settlement.
"Once we have the information we need on the offer, we will assess the appeals in our pipeline, determine those eligible and conduct a financial analysis. Our analysis will consider the cost to continue the appeal or the risk of losing the appeal versus the benefit of accepting the 68-cents-on-the-dollar settlement offer. While we don't know the final outcome, we expect there will be cases where the settlement may be the best option."
With a nationwide dearth of access to primary care services, CVS is in a prime position to compete in a basic segment of the healthcare provider market, says one observer.
The rebranding of one of the nation's largest pharmacy retailers last week is sending "new entrant" ripples through the healthcare industry.
"We've changed our company name to CVS Health to reflect our purpose of helping people on their path to better health," officials at the company formerly known as CVS Caremark Corp. stated last week.
CVS Health officials say the rebranding effort helps align the company for an expanded role in providing healthcare services beyond the traditional retail pharmacy business model.
"As a pharmacy innovation company at the forefront of a changing healthcare landscape, CVS Health is delivering breakthrough products and services and enabling people, businesses and communities to manage health in more affordable, effective ways through programs in medication adherence, specialty pharmacy and delivery of care by walk-in medical clinics," the company said.
In February, CVS announced it would pull all tobacco products from store shelves in recognition of the fundamental conflict between good health and smoking cigarettes. Last week, CVS officials told HealthLeaders that the simultaneous timing of the rebranding announcement and the actual pulling of tobacco goods from all 7,600 of the company's stores was far from coincidental.
"The decision to remove tobacco from our stores underscores our role in the evolving healthcare system," CVS said in a written statement. "Now more than ever, pharmacies are on the front lines of healthcare, becoming more involved in chronic disease management to help patients with high blood pressure, high cholesterol and diabetes. All of these conditions are made worse by smoking. Cigarettes have no place in a setting where healthcare is delivered. "
CVS says its new brand complements its goals as a "new entrant" in the healthcare provider services market. "We are taking an active and supportive role in shaping the future of healthcare through our programs in medication adherence, delivery of care by walk-in medical clinics, and support of patients with chronic and complex conditions."
CVS Health says it will offer:
Programs to help manage chronic disease
Programs to connect patients with pharmacists to help them stay on their prescribed medications
Digital capabilities to supplement those programs
It also plans to forge strategic alliances with physicians and health plans through both CVS/pharmacy and CVS/minuteclinic to provide clinical support, medication counseling, chronic disease monitoring, and wellness programs.
'Colds, Lumps and Bumps'
A pair of healthcare industry branding experts gives CVS high marks for the company's rebranding vision and execution.
"Great strategy is when it benefits you, and it benefits others as well," says Jeff Hoffman, healthcare strategist at New York-based Kurt Salmon. "It's a win for them and a win for the people who need the access."
With a dearth of primary care services in the country, CVS is in a prime position to compete in a basic segment of the healthcare provider market, said Hoffman, who has worked with many providers on rebranding campaigns.
"The private-practice model doesn't work anymore," he said. "You can't make money on $30 a visit. That failure of that model has created huge gaps in access to healthcare."
Hoffman says affordable basic care clinics for "colds, lumps and bumps" at CVS stores will help individuals who for the first time have health coverage through the new insurance exchanges or Medicaid expansion.
For these patients, who face cost-sharing such as high deductibles for the most affordable HIX health plans, "using this type of alternative is very helpful," Hoffman said. "Going to a CVS clinic where they charge $25 is pretty good."
David Shultz, founder and president of Albany, NY-based Media Logic, said CVS officials have made a significant statement in their rebranding. "'Health' is an appropriate word to use in the name of their organization. They're one of the largest [prescription] retailers in the US … one of the top pharmacy benefit managers…and they operate the nation's largest chain of medical clinics: MinuteClinic," he said in an email message last week. "Simply put, they're a significant player in the healthcare space and, I think, they want to 'mark their territory.'"
Schultz and Hoffman noted that timing the CVS Health rebranding with the removal of tobacco products from store shelves was a savvy marketing move.
"The removal of tobacco from stores was clearly going to get a lot of positive press, so why not leverage that exposure to say, 'We've changed our name to CVS Health because we're all about helping people stay healthy?'" Schultz said. "This was especially important because they're not changing the store names, which means they needed another way to get this news in front of the consumer."
"It was a stroke of genius to drop the cigarette sales," Hoffman said. "They wanted to combine the pulling of cigarettes from their stores with the name change. … We'll see over the next few years whether that makes them a more trusted healthcare partner for people."
Retail Reality Check
In addition to helping to fill increasingly high demand for primary care services, Hoffman says CVS has powerful business motivations behind the company's new-entrant ambitions.
"I'm not sure they're being as magnanimous as they appear to be. They want people to come to their cold clinic; they want people to come into their stores to buy other products."
Hoffman believes it is unlikely that CVS will make much money in the MinuteClinic business. It is costly for any organization to offer even basic primary care services, in part because nurse practitioners and other healthcare professionals come with high staffing costs.
"You end up with four FTEs of very expensive people who are going to serve people at 25 dollars. When you look at the total benefit to CVS, it's a very good strategy for driving traffic to a store."
After decades of gorging at the fee-for-service trough, all healthcare industry stakeholders are facing a more austere future.
The healthcare party is over.
Otis Brawley, MD
CMO of the American Cancer Society
Whether you are a young doctor starting out your career with less money pouring into your bank, a health plan forced to spend at least 80 percent of every premium dollar on actual patient care, a citizen "incentivized" to stay as healthy as possible, or a hospital getting lower reimbursement for patient services from government programs such as Medicare… the squeeze is on, or at least beginning.
Don't just take my word for it. Otis Brawley, MD, chief medical officer of the American Cancer Society, believes excessive spending on U.S. healthcare is both unsustainable and unjustifiable.
"The problem is in the waste in the healthcare system," the oncologist, author, and global leader in health disparities research told me this week. "We spent $2.6 trillion on healthcare in 2010 and $1.1 trillion on food. If the U.S. health economy were a country, it would be larger than France, the world's sixth-largest economy. Yes, in 2010, we spent more on healthcare than they spent on everything in France.
"We average about $8,000 per man woman and child for healthcare [per year]. The average per-person costs in the next most expensive countries are at about $4,000. Those countries are Switzerland and Norway… Our percent of GDP for healthcare has grown every year for the past 20 years and will continue growing until it collapses the U.S. economy."
While they will be bitter pills for many healthcare industry stakeholders to swallow, Dr. Brawley prescribes curbing greed and promoting shared responsibility.
"The solution is for us to be a more evidence-driven medical system. Programs such as Choosing Wisely help, but we all have to get away from the philosophy of gaming the system for all we can. All are responsible for our healthcare system being in extremes to include doctors, healthcare systems, insurers, drug companies, lawyers and patients."
Employer-Based Change
At San Francisco-based Castlight Health, a data analytics-driven company that helps large employers manage healthcare spending, officials believe the light of day has healthcare industry party animals scurrying for the exit to make sure their own houses are in order.
"For too long, U.S. healthcare has operated as a merit-free market with little transparency, an asymmetry of information, misaligned incentives, and — as a consequence – restricted competition," says Lorie Fiber, VP of corporate communications at Castlight Health.
"This dynamic is changing, due at least in part to growing transparency to the cost and quality of healthcare. We see large employers at the forefront of this change, working closely with their employees, providers and payers, among others, to enable quality care at an affordable cost and in a highly personalized way. The change means more engagement and accountability for all involved, certainly, and that's a good thing if it means we're more effectively applying the billions spent annually on healthcare."
With America's Health Insurance Plans waging a near daily barrage of press releases, the drug companies have been enduring a beating in the media over costly medications such as Sovaldi. AHIP, in a media statement, says the high cost of specialty drugs is placing a crushing burden on health plans: "Many of these new treatments certainly represent the best care. That's why, despite the cost, health plans provide coverage for drugs like Sovaldi, which offers a chance to cure hepatitis C but also runs $1,000 per pill. When considering the limits on out-of-pocket consumer spending now in law, plans are paying at least 92 percent of the cost of Sovaldi, often more."
But the pharmaceutical industry offers some powerful statistics in defense of marketing medications with astronomical price tags, including the claim that only 2-in-10 approved medicines produce revenues that exceed average research and development costs.
Ruth Krystopolski, president of Sanford HealthPlan and executive VP of care innovation at Sanford Health in Sioux Falls, SD, says that changing the mindset of two key healthcare stakeholders is critical to any fundamental reform effort: patients and providers.
"We've had this idea that if something's broken, you can just fix it. You can take a pill," she told me, noting individuals are being cajoled into taking greater responsibility for their health, mainly through a range of economic incentives and employer-sponsored efforts such as wellness programs. "The question is, how will the public respond? For issues like charging people who smoke more, sometimes it's an agonizing talk [for health plans] to have with employers."
Krystopolski says that "changing premiums according to behavior" is one of the most effective ways to prod people to change unhealthy behaviors and adopt healthier lifestyles: "If you hit the pocketbook, that works."
Less punitive incentives may not be as effective, she says: "Positive incentives work, but I don't know how well they work."
Healthcare providers also need a new set of incentives, Krystopolski says. "People do things because they're incentivized to do them. Payment models are moving away from episodic care," and "prevention is everybody's responsibility," she says.
As millions of previously uninsured Americans gain access to affordable healthcare coverage, hospitals and health systems are reconsidering the generosity of their charity care policies.
Improved healthcare coverage access, mainly through Medicaid expansion and the new insurance exchanges, has raised a thorny question for hospitals and health systems: Should low-income people who refuse to obtain affordable coverage be eligible for charity care?
"When do we not look after patients? We don't have an answer for that question, but it's staring us right in the face," Peter Angood, MD, CEO of the Tampa, FL-based American College of Physician Executives, said last week.
While the proportions of responsibility for healthcare costs among patients, providers, and payers are changing, charity care is likely to be a flashpoint in the transformation process, he said. "It's going to get pretty contentious at times."
The future of charity healthcare as it approaches universal-access level is beginning to play out in states that have adopted some form of the prime accessibility mechanisms under the Patient Protection and Affordable Care Act: expansion of Medicaid to more adults and the new public insurance exchanges.
In New Hampshire, Southern New Hampshire Medical Center, a 188-bed, two-campus acute care facility in Nashua, has restricted its charity care policy based on patients' eligibility for health coverage, the Kaiser Family Foundation reported earlier this month.
The new policy states: "Applicants who refuse to purchase federally mandated health insurance when they are eligible to do so will not be awarded charitable care." The new policy also bars charity care aid for those who are eligible for expanded Medicaid, but who decline the coverage. Enrollment in The Granite State's Medicaid expansion program began this summer.
Officials at the New Hampshire Hospital Association say most of its members are waiting to make charity care policy changes until the new public insurance exchange is performing at a higher level.
"Generally speaking, most providers in New Hampshire are proceeding slowly in regard to adjusting their financial assistance polices as they, and the public, learn how the new health insurance marketplace and the operational components on healthcare.gov [are] affecting the delivery of care," NHHA officials said last week in a prepared statement.
"One complicating factor in New Hampshire is that because of the narrow network of providers offered under the only plan available on the health insurance marketplace this year by Anthem Blue Cross and Blue Shield, not all health providers had contracts to provide care to those who were eligible for the new health insurance during the first enrollment period."
With Pennsylvania cutting a deal last week with federal officials to expand Medicaid under the PPACA, 27 states have accepted Washington's offer to help pay for expansion of the program to millions of adults.
In the remaining 22 states that have yet to expand Medicaid, charity care is literally an imperative for hospitals, W. Stephen Love, president and CEO of the Dallas-Fort Worth Hospital Council, said last week.
W. Stephen Love
President and CEO of the
Dallas-Fort Worth Hospital Council
"Unfortunately, Texas has over 6 million people with no medical health insurance coverage. Many of these people are employed but hover near the federal poverty level. The current Medicaid coverage is generally limited to pregnant women, children and disabled adults," Love said.
Since the state has decided not to expand Medicaid stranding 1 million Texans in a coverage gap where they are not eligible for Medicaid or the health insurance marketplace, Love's organization "would like to implement a 'Texas Way' program to help people caught in the coverage gap with a program similar to other states like Arkansas."
"It appears no [North Texas] hospitals have made significant changes in charity care policies…. We truly are giving our communities these services, but obviously the patients would be better served in the right setting, at the right time of intervention or treatment, with the right coverage and access," Love said.
'No One is Denied Emergency Care'
NHHA officials say there are several factors that contribute to an effective and ethical charity care financing policy currently in place at hospitals in general, and New Hampshire in particular.
"Key factors in determining financial assistance include the clinical needs of the person seeking assistance and their access to affordable health insurance," they said. "No one is denied emergency care due to health insurance or financial issues. Hospitals and medical practices welcome an increase in the availability of health insurance for the people they serve, but also recognize that the new health insurance requirements and options are complicated to understand and implement. Proceeding cautiously with any changes in the financial assistance policies and practices allows time to understand the implications of these new health insurance options."
Love says Texas hospitals have to operate under strict guidelines for charity care and other "community benefits."
"Texas has specific regulations related to tax exempt hospitals regarding community benefits," the hospital council chief said. "The hospitals are required to have 5% of net patient revenue in community benefits, including 4% from charity care and unreimbursed cost of Medicaid and 1% from unreimbursed cost of Medicare. Additionally, all hospitals spend significant dollars on community education, including prevention, wellness and chronic disease management."
Charity care policies must strike a delicate balance and reflect a hospital's commitment to its community, he added. "Obviously, any charity care policy must be flexible, and moral, ethical and legal considerations should be an integral part of any eligibility requirements.
Not-for-profit hospitals are feeling financially pinched as healthcare reform efforts seek to simultaneously increase healthcare accessibility, cut costs, and improve quality.
Marking a second consecutive year of weak financial performance at not-for-profit hospitals, 2013 expenses outpaced revenue growth in the sector and similar results are expected this year, according to Moody's Investors Service.
In a median report released this week, Moody's says "operating revenue growth dropped to an all-time low of 3.9 percent and was outpaced by expense growth for a second consecutive year, an unsustainable trend." NFP hospitals posted 5.1 percent revenue growth in 2012.
Moody's pegged the 2013 growth rate of NFP hospital expenses at 4.3 percent. Expenses grew at 5.5 percent in 2012.
Jennifer Ewing, a Moody's analyst who co-authored the report, says lower reimbursement for services coupled with a shift to outpatient care from inpatient care is bringing financial pressure to bear on NFP hospitals.
She cites several factors dragging on revenue growth: lower reimbursement from commercial payers as they drive harder pricing deals on insurance exchanges as well as shift risk to providers and patients; tighter Medicare reimbursement; "built-in" statutory cutbacks for government programs that help fund hospitals such as reductions in federal Disproportionate Share Hospital payments; and Medicare's proposed "two-midnight rule" for determining outpatient vs. inpatient status accelerating growth of outpatient services at the expense of relatively more profitable inpatient care.
Ewing says "lower-cost providers" such as pharmacy clinics and urgent care centers are also draining revenue from NFP hospitals. They are acting as "new competitor[s]," she said of the new entrants and new business models proliferating in the delivery of healthcare.
Weak Cash Flow
Cash flow is also a weak spot in the NFP hospital median report, which states, "The operating cash flow margin reached an all-time low of 9%."
Despite that grim figure, Ewing sees glimmers of hope for hospital executives. "This is the first year expense growth slowed, [and] it still outpaced revenue."
The report also noted growth in NFP hospital "absolute and relative liquidity measures." Ewing said "we believe the reasons for the increases in liquidity are the strong equity market and wiser capital spending."
"As the stock markets do well, the hospitals do well," added Lisa Goldstein, associate managing director at Moody's and a co-author of the report. "The investment returns can build up your cash."
Goldstein says the imbalance between expenses and revenue growth at NFP hospitals will likely persist over at least the short term. "We expect these 2013 trends to continue for 2014," she said.
'In a Tough Spot'
"The hospital community has been under pressure for some time," said Peter Angood, MD, CEO of the American College of Physician Executives. The ongoing financial squeeze has prompted hospital officials reconsider how they deliver care to patients across the board.
Two of the prime efforts to expand healthcare accessibility—the new public health insurance exchanges and Medicaid expansion—are likely to be a net negative for many hospitals, Angood said.
"That's going to increase pressure on hospitals to manage that new population of patients," he said, noting traditionally low Medicaid reimbursement rates and the bill collection burden linked to the high level of patient cost-sharing on the exchanges.
Katherine Hempstead, team leader and senior program officer at the Princeton, NJ-based Robert Wood Johnson Foundation, said financing an NFP hospital is a lot like keeping an airline afloat, with both industries "highly regulated, with a high cost of entry and high cost structure."
"They really are in a tough spot," she said of NFP hospitals. "The good news is they are becoming more efficient. … Hospitals are becoming much more mindful of what they do that is wasteful and what they do that is efficient."
Hempstead pointed out that a key finding of the Moody's report is the shift away from inpatient care in dollars and cents. "If I were a hospital, I would be looking for other places in the delivery chain where there's growth," she said. "Hospitals are not going to go away, but there are so many forces that are pulling away from inpatient care."
In addition to focusing on efficiency gains and opening new lines of service, NFP hospitals can also hold the line financially through consolidation efforts that build market power and by establishing high quality standards, Hempstead said.
"Hospitals need to demonstrate superior quality," she said. "It's possible we have excess capacity. It's possible we'll see hospital closings. But there's no substitute for hospitals. I don't think [the financial situation] is an existential threat for the whole sector."
Data-driven consumer engagement is the vanguard of the effort to provide cost-effective treatment of chronic disease. How one payer is tracking psychosocial indicators for the neediest patients.
I hear bugles in the distance.
As they trailblaze the vast value-based healthcare delivery frontier opening up before them, insurance carriers have encountered two daunting obstacles: engaging individual customers, who are becoming determinants of value; and harnessing a treasure trove of health data.
Consumer engagement has risen to pivotal importance in the healthcare industry, Margaret Rowland, MD, chief medical officer of Portland-based CareOregon, told me this week. "Consumer engagement is essential for achieving ideal health outcomes. If you are going to get good health outcomes, a population has to be engaged in the process. If they are not involved, then it won't make a long-term difference," she says.
CareOregon, a nonprofit that covers 160,000 people and focuses primarily on the low-income and vulnerable, has teamed up with Health Integrated to leverage the Tampa, FL-based company's data analytics and consumer engagement capabilities to help provide cost-effective care to the health plan's most costly patients: members of medically vulnerable populations such as people suffering from multiple chronic illnesses.
About half of American adults have at least one serious chronic condition such as hypertension or kidney disease, according the Centers for Disease Control and Prevention. "The majority of US healthcare and economic costs associated with medical conditions are for the costs of chronic diseases and conditions and associated health risk behaviors," the federal agency's website states.
Rowland told me health plans are facing challenges in reaching out to these members that go far beyond the bounds of traditional approaches to healthcare. Data analytics is riding to the rescue.
"Increasingly, we are understanding the psycho-social issues that affect vulnerable populations. For example, when we speak to a diabetic about a blood test, if they have nowhere to sleep that night then a blood test is just not their priority. As healthcare providers, we need to understand their lives when we speak to them. We need to help stabilize their social lives before we can really expect them to self-manage their health issues," she says.
Zachary Fritz, executive VP for sales and marketing at Health Integrated, told me last week that there are three main elements to the company's approach to helping health plans serve vulnerable populations:
"Biopsychosocial" care management uncovers the physical, psychological, and social dimensions of a member's health conditions, then a "personal clinician" trained in social work and medical sciences targets interventions at particular needs
Data analytics tools "identify, stratify, and intervene with greater customization and scalability" while measuring the impact of interventional measures
A coordinated and integrated care delivery model strives to get the health plan, providers, and community resources "working together in the best interests of the individual and driving adherence to mutually agreed upon, medically necessary, and evidence-based treatment and care plans"
Deploying data analytics is a necessary step to target individuals in vulnerable populations who could benefit from health services, but delivering that care is a more personalized consumer engagement exercise, Fritz says. "The first step is identifying the right people through data analytics. But we go further because when an individual is simultaneously facing behavioral barriers and social impediments along with managing their multiple chronic conditions, it's a difficult challenge for them to be fully engaged in their physical health. Traditional, one-size-fits-all clinical programs don't have optimal impact for most people. We believe that a care team must first address what we call the 'root-root' causes of the barriers for better self-management."
Once data analytics have identified a health plan member in a vulnerable population, a personal clinician can assess the entirety of factors affecting the individual's medical conditions and help craft a globalized treatment plan, Fritz says. Addressing a member's "root-root" problems such as substance abuse or an ongoing domestic dispute can result in significant health gains: "Vulnerable individuals and people in vulnerable health situations face under-identified and under-treated behavioral barriers. When we engage this way, we influence the medical outcomes."
Unless health plans boost their data analytics and consumer engagement efforts, they face the risk of "missing" members in vulnerable populations and paying the price in unnecessarily high health service costs, according to Fritz.
"For us, a missed member is part of the 5-to-10% cohort that is driving 35-to-40% of the costs in Medicaid and Medicare populations. These members suffer from multiple chronic conditions exacerbated by psychosocial factors that may be in the form of a diagnosed behavioral health condition like depression or an undiagnosed, underlying challenge like poor social support, substance abuse, or a personality disorder. These factors impact physical symptoms and disease progression and often result in patterns of avoidable, costly healthcare utilization.
"In addition to being clinically complicated, these individuals are hard to reach and, understandably, difficult to motivate. Emails, text messaging, web portals, and even mail are usually not enough to engage this type of member," he says.
Engaging these types of members is in the interest of health plans. The value-based healthcare frontier will be an inhospitable place for insurers if the costs of chronic disease care continue to mount.
The Medicare Advantage program is emerging as an entry point for healthcare providers seeking to establish their own health plans, such as UNC Health Care and Catholic Healthcare Initiatives.
As healthcare providers across the country consider opening subsidiary health insurance plans, some of the early adopters view the Medicare Advantage program as an advantageous place to get started.
In combination with a population health management effort, UNC Health Care has launched a Medicare Advantage plan targeted at the residents of Wake County, NC. This week, Allen Daugird, MD, MBA, president of UNC Physicians Network and UNC Health Care's chief value officer, told HealthLeaders that developing an MA health plan is a high-gain, low-risk opportunity for providers.
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"Medicare was attractive because the annual cost of care is so high, and even a small percentage decrease in costs results in a large sum. However, we also realized the shortcomings of traditional Medicare as a vehicle for care and value, even with various shared savings programs, where any shared savings is very uncertain and very long in the future," Daugird said.
"On the other hand, with Medicare Advantage, [the Centers for Medicare & Medicaid Services] provides a monthly payment up front, and it is severity-adjusted so that there is an incentive to take care of the sickest patients. Medicare Advantage HMOs can require assignment to a primary care home and a more narrow network of like-minded value providers," he continued.
"Lastly, MA plans can offer covered benefits traditional Medicare cannot such as transportation, unrestricted home visits, exercise and nutrition classes… and these enhanced benefits can improve the health of seniors and often decrease the total cost of care."
MA plans offer seniors a value-based healthcare delivery option to traditional, fee-for-service Medicare. Across the country, dozens of carriers administer MA plans, which have expanded sharply in recent years and provide health coverage to about 15 million seniors.
Juan Serrano
Daugird says UNC Health Care officials decided it would be essential to pair their MA plan with a population management effort.
"MA means taking on full financial risk. If there is no population health management, the cost of care required by the benefit structure can exceed the aggregate per-member-per-month CMS payment, resulting in huge financial losses," he said. "This is a very costly segment of the American population, and it is fool-hardy to take on financial risk without a plan for effective population care management."
'The long haul'
Medicare Advantage is part of Catholic Healthcare Initiatives' long-term strategy "to move into different models of care," says Juan Serrano, senior VP of payer strategy and operations at the Englewood, CO-based health system.
CHI, which operates healthcare facilities in 17 states, has founded a wholly owned subsidiary, Prominence Health, to build a portfolio of health insurance products. The nonprofit health system has also acquired a pair of insurance carriers over the past two years: Soundpath Health Inc. in Washington and QualChoice in Arkansas.
Serrano says launching an MA plan in Washington and acquiring two health plan businesses has established a foundation for HCI to operate in the insurance sector of the healthcare industry. "We realized that we needed to develop the skills more traditionally found at health insurance companies."
CHI determined Medicare Advantage would be a good fit for the health system's early forays into the insurance market largely because it is an individual product, Serrano said.
Unlike the broad provider networks that are still relatively common in the group insurance market, CHI officials believe MA plans "could make a lot of sense when offered in a narrow network." The MA plan the nonprofit is offering in Washington State is based on a narrow network model and "we align each of our MA patients with a primary care doctor in our network," Serrano said.
With large commercial carriers dominating the group health insurance market, individual insurance is an area where healthcare providers can compete with established market players, he added. "We are leading with the individual products," he said of HCI's short-term health insurance strategy.
HCI is offering health plans in Washington State and Arkansas this year, and is expanding its insurance product offerings next year to Kentucky, Nebraska, Ohio, and Tennessee.
Picking the right partner
CHI and UNC Health Care each have key partners helping the healthcare providers learn how to operate health plans.
Serrano says CHI was drawn to acquire Soundpath Health and QualChoice in part because both health plans had provider roots. Two large physician organizations founded Soundpath and a consortium of health systems provided financial backing for QualChoice. "They have a culture of understanding the healthcare delivery side," he said.
Daugird says UNC Health Care established a partnership with Alignment Healthcare to leverage the Irvine, CA-based company's population management expertise.
Alignment Healthcare's "leaders not only know what to do, but have proven they can execute, and have replicated their business and care model in multiple markets," he said.
"They know how to work and align incentives with hospitals, physicians, payers, and, most importantly, seniors. They also have built very sophisticated and effective analytics to continuously risk stratify the senior populations they are accountable for and proactively manage the care of these frailest patients, often using resources traditional Medicare does not pay for."
"In short," Daugird said, "They know what they are doing. We don't. And we want to learn from them. Because we are inexperienced, they are also taking on most of the financial risk in the beginning."
Fueled by patient demand and advances in technology, the construction of costly proton beam centers is picking up steam. Insurers are paying for limited applications.
Scripps Proton Therapy Center
With several countries charging ahead in efforts to build proton beam therapy centers for cancer radiation treatment, American healthcare providers and their partners appear poised to advance the technology beyond its infancy in this country.
"It's one of the areas where the U.S. is behind," says Jason Caron, a partner at Chicago-based law firm McDermott, Will and Emery, who has worked on proton beam therapy center projects for more than eight years. He noted that Japan is considered a leader in the field, with a dozen advanced particle beam radiation centers, including four centers using the most cutting-edge technology, carbon ion beams.
So far, 14 proton beam therapy centers have been built in the United States and a dozen more are in development, according to the Silver Spring, MD-based National Association for Proton Therapy. Most of the U.S. facilities have multiple examination rooms, which are built inside giant vaults that keep protons from escaping and causing harm to caregivers and others who work or live near the facilities.
Proton beam centers have a staggering capital cost. In February, the Scripps Proton Therapy Center opened in San Diego with a $220 million price tag, according to the project's developer, San Diego-based Advanced Particle Therapy.
Despite the cost, proton therapy is becoming widely accepted in the oncology community as a superior treatment for many cancers compared to traditional proton-based radiation treatment because protons can be targeted at a tumor without irradiating surrounding healthy tissue. "In breast cancer treatment, conventional therapy irradiates the heart as well as the tumor," he says. "Proton therapy does not irradiate the heart to any significant degree."
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Unlike treatment with protons, which can pass through a patient's body, protons can be focused specifically on malignant tissue, says APT President and CEO Jeffrey Bordok. "The physics of protons versus protons are pretty hard to argue against. You're able to avoid damage to tissue around the tumor. There's a lot of evidence that this has been working over the past 20 years."
As more American patients have become aware of the less invasive technology, they are emerging as a key driver of proton beam center growth in the United States, Caron says.
"People are becoming educated about the benefits of proton therapy," he says. "It's not the best for all cancers, but if you have a cancer near a major structure or are very young, proton therapy is beneficial."
Leonard Arzt, executive director of the National Association for Proton Therapy, says consumer demand for the treatment has created a marketing opportunity for the top cancer centers in the country. "If you're in the radiation oncology business, you want the latest and greatest tool."
Proton beam center financing
Securing financing for proton beam centers remains the prime stumbling block for growth of the technology in the United States, but the capital-cost challenge is easing, say several experts in the field.
"There's no clear and simple model to do this," Arzt says. "In an age of healthcare reform and keeping costs down, banks are skeptical about the lofty goals of treating 2,000 patients per year."
Most "multi-room" U.S. proton beam centers cost about $200 million to build, and they treat approximately 1,500 patients annually. An emerging trend is construction of smaller proton beam centers with one examination room, at a cost of about $30 million, Arzt says. "The trend is away from multi-room facilities to 'compact machines.'"
There are three classes of proton beam center financing, according to Caron and Arzt.
Large healthcare providers are best equipped to follow the "institute model," in which a major hospital or health system obtains all of the financing for the project. Rochester, MN-based Mayo Clinic is building two proton beam centers with the assistance of a $100 million donation. "Only a Mayo Clinic can do that," Arzt says.
Joint ventures are the most complicated way to finance a proton beam center, according to Caron and others at McDermott, Will and Emery. Last spring, several proton beam center experts from the law firm led a presentation on financing these joint ventures. They noted that risks are difficult to align and distribute when multiple partners are involved in a proton beam center, such as health systems, equipment manufacturers, real estate firms, and banks.
The Scripps Proton Therapy Center was developed through a project manager model: Advanced Particle Therapy assumed the construction and maintenance costs, while San Diego-based Scripps Health is responsible for staffing and operating the facility. "We are responsible for providing all the equity and debt for the project," Bordok says.
Chris Van Gorder, president and CEO of Scripps Health, says the project manager agreement with APT provides the health system with a financially sustainable path to operating a proton beam center.
"Scripps Health's relationship with Advanced Particle Therapy is a great fit, because it gives Scripps the opportunity to offer advanced proton therapy to our patients without having to invest the significant capital required for this technology," he says. " We want to offer our patients the full range of cancer treatment options so they can have access to the one that is the best fit for their individual situation, close to home in San Diego."
Commercial payers getting on board
Several commercial insurance carriers are providing coverage for proton beam therapy.
"We do cover proton beam therapy for certain conditions, and costs are covered by the plan, except for appropriate copays, coinsurances, and deductibles depending on the member's benefits. This is a prior-authorized service managed for us by CareCore," said Donald Fischer, MD, MBA, senior vice president and chief medical officer at Pittsburgh-based Highmark Inc. "We have medical policy for this treatment documented online for all Highmark commercial members in Pennsylvania, West Virginia, and Delaware, as well as for our Medicare Advantage members."
According to Highmark's medical policy, the insurance carrier provides coverage of proton beam therapy for the following conditions: chordomas and chondrosarcomas of the base of the skull or spine; melanoma of the uveal tract (iris, ciliary body and choroid); hepatocellular carcinoma; pediatric brain tumors such as posterior fossa tumors, optic pathway tumors, and brainstem lesions; pediatric central nervous system tumors; and pediatric spinal tumors.
But Cigna, which also works with Bluffton, SC-based CareCore National LLC to manage proton beam therapy coverage, reimburses the therapy for only three conditions, citing a lack of clinical evidence showing the treatment is superior to more conventional radiation therapy for most cancers. "While PBT has been used in patients in the United States since the mid-1950s, and although it has been shown to be effective in some malignancies, there is no published data clearly demonstrating superiority over conventional forms of radiation therapy," state the Bloomfield, CT-based carrier's guidelines for radiation therapy.
California's latest multimillion-dollar attempt to build a statewide health information exchange aims to shave healthcare costs and improve care, but its leaders face a long-term funding challenge.
This month's launch of an ambitious statewide health information exchange in California poses an $80 million challenge to the project's organizers: sustaining an HIE over the long haul.
Blue Shield of California and Anthem Blue Cross are picking up the $80 million tab for Cal INDEX during its first three years of operation. After the seed money has been depleted, subscription fees are expected to keep Cal INDEX finances in the black.
The Cal INDEX board and other leaders of the project are mindful of earlier attempts to create broad and sustainable health information exchanges in the Golden State that have fallen short of expectations. "We have to create value in the data," David Feinberg, MD, MBA, president of UCLA Health System and chairman of the Cal INDEX board of directors, said this week.
He says there is inherent value in gathering as much data as possible about a patient such as pharmacy and clinical service records and claims information to get "the complete picture" of a patient's medical status and history.
"We've gone from paper records to digital records," Feinberg says. "The real power is when we can start using that information to make good decisions."
But designing health information exchanges that can be self-funded and become long-term players in their respective markets takes not only planning and determination, but "a sustainable business model."
Cost Savings and Smarter Clinical Decisions
Feinberg says Cal INDEX officials have already begun to identify healthcare organizations that will be likely to pay subscription fees to gain access to the HIE's data, including 30 large accountable care organizations that have active relationships with Blue Shield of California and Anthem Blue Cross.
Lloyd Dean, CEO at San Francisco-based Dignity Health, says he is hopeful that Cal INDEX will not only be sustainable, but also fill a critical gap in efforts to contain the cost of healthcare in California.
"We believe that as the Cal INDEX program is scaled, it will create efficiencies that make it cost effective over the long term," Dean said this week.
"What's unsustainable is the status quo. Today, health care spending makes up 12% of California's GDP, and the healthcare industry is well behind other industries in terms of adopting cost-saving technologies. The bottom line is that we can't afford to wait to start implementing these integrated data-sharing programs."
He says Cal INDEX will initially focus on areas that are likely to improve quality of care and cut costs. "As more providers and payers join Cal INDEX and begin sharing information, we anticipate that we'll find more and more value in the data sets available."
"In the near term, we're looking for electronic health records that will help us determine which procedures or devices are the safest and result in the fewest readmissions. Studying such information will help us improve the patient experience and provide more cost-effective care over time."
Dignity Health, which features more than 40 hospitals and healthcare centers in California, Arizona, and Nevada, sees value in the data Cal INDEX is expected to collect, he said.
John Kansky
Interim President and CEO of the
Indiana Health Information Exchange
"From a provider perspective, the idea here is very simple: The more we know about our patients, the better care we can deliver," Dean says.
"We think Cal INDEX can provide doctors and nurses immediate access to health information at the point of care that allows them to make smarter clinical decisions and provide better care with better outcomes for patients. By working together instead of in silos, we can reduce costs by eliminating redundant tests and paperwork."
Hoosier HIE Thriving
In operation for a decade, the Indiana Health Information Exchange is one of the oldest and most successful HIEs in the country.
John Kansky, interim president and CEO of the Indiana Health Information Exchange, says he and his colleagues are well-aware of the necessity to craft an HIE business model capable of delivering value to the subscribing organizations that keep IHIE afloat financially. "There's a lot of focus on health information exchange sustainability, and it's a lot of work," he says.
Kansky notes that one of the first HIE projects in the country, launched with grant money in Santa Barbara, CA, failed, mainly because of a lack of long-term planning and outreach to potential sources of financing.
He says HIE projects started with grants or other finite seed money are risky without a solid business model designed to eventually achieve self-funding. "You've given yourself a runway, and when you get to the end of the runway, you better have a way to demonstrate value," he says.
Cal INDEX officials should already be approaching as many potential subscribers as possible, Kansky says. "'What would this exchange have to do for you in three years in order for you to pay for it?'" he said. "That's the question they should be asking everyone."
Indiana's HIE built a sustainable public-private business model by offering data and data services to a wide range of healthcare industry stakeholders. "We have multiple services to multiple sectors in healthcare," Kansky says, noting that IHIE subscribers include physicians, hospitals, laboratories, imaging centers, payers, and nursing homes. IHIE officials are constantly eyeing new markets, including self-insured employers, patients, and home care organizations.
In addition to having a large portfolio of data services to offer, successful health information exchanges must focus on establishing data use agreements with the organizations that are providing the data, Kansky says.
"When you agree to participate and pay fees, you also agree to provide data… It's not our data. There's this whole concept of data governance," he says of the process involved in setting rules for the use and sharing of HIE information. "Your partners absolutely need to trust you [and know] how the data is going to be used and not used."
Thinking Big
No matter how well a state-based HIE is designed and managed, it will have inherent limitations and will likely be unable to slake the thirst of clinicians seeking "the complete picture" of their patients, according to Brian Baum, CEO of West Friendship, MD-based vitaTrackr Inc.
"Counter to the Indiana experience, I think the state-based health information exchanges… are building an infrastructure for yesterday's healthcare," he said this week.
Baum points out that Americans are not only mobile, with many people moving from state to state several times over the course of their lifetimes, but they are also increasingly drawing healthcare services from nontraditional sources such as retail clinics and telemedicine.
Gathering up all of the jigsaw pieces that constitute "the complete picture" of a patient requires an integrated, national effort."
"It's just going to get exponentially worse going forward," Baum said of the growing number and variety of sources of information on individual patients such as wearable devices. "We're at the cusp of the industry having a flood of information."
He believes state-based health information exchanges will face an increasing challenge in gathering up all of the "baseline data that becomes the predictor of health," including blood pressure, weight, and cholesterol values. "That data is going to be increasingly coming from a more diverse set of sources," Baum said. "It's just expanding at a rate that we can't even project."
The vitaTrackr CEO says health information exchanges are an essential part of the drive to adopt population management techniques that will "move the needle" of American health, but the HIE future is national in scale.
"Ultimately, healthcare data is going to have to plug into a larger national infrastructure," Baum said. "You've got to enable an environment where in order to succeed in healthcare you have to be connected."
