After helping to establish managed care plans for an insurance carrier, David Burton, MD, former CEO and chairman of Health Catalyst, is still committed to helping providers retool themselves into accountable care organizations.
David Burton, MD
Who can resist a good epiphany?
For David Burton, MD, the flash of clarity that set the course toward the twilight of his career came just weeks after he launched one of his most ambitious enterprises.
Burton, who had a distinguished career as an ER physician, co-founded Intermountain Healthcare's managed care plans after joining the company in 1982. Now known as SelectHealth, Intermountain's managed care plans provide insurance coverage to about 600,000 people.
His eureka moment came soon after the rollout of Intermountain's managed care plans.
"I had 10% of the premium dollar to work with," Burton says of Intermountain's payer slice of the premium rate pie. "That would get lost in the noise of the total premium." He decided the most effective way to build a value-based healthcare delivery system would be on the provider side of the equation.
While acknowledging that political reality has dictated the terms of transforming healthcare to a more value-based effort, Burton believes federally driven strategies to use payment reform such as Medicare policies to spur change are a "backwards" approach to the problem.
Burton says providers need to lead the value-based transformation, which is a process that will take far longer than any election cycle in Washington. "Transforming the delivery system takes at least 10 years to have a significant impact," he told me.
Soon after retiring from Intermountain in 2008 with expert data analytics skills he developed while operating its managed care plans, Burton became CEO and later Chairman of Health Catalyst. After retiring from the board last month, he is now at Health Catalyst in a mainly advisory capacity as a senior vice president.
The Salt Lake City-based company, which has developed a data warehouse platform, is committed to helping providers retool themselves into accountable care organizations. Burton shared his perspectives on ACOs with me last week.
HLM: What's your vision for accountable care organizations?
Burton: There's a whole lot of confusion about what we're talking about. "ACO" is used interchangeably with anything that has anything to do with shared risk. There are building blocks and additional competencies needed in order to be successful with population management.
About 98 percent of the effort is learning how to manage a population… The building blocks include network development and conducting a clinical evaluation of your population… Infrastructure is one of the most important competencies.
You have to have a platform. And that's where the data warehouse comes in. There are disparate data sources in healthcare. The data warehouse integrates those disparate sources.
HLM: How should ACOs conduct population evaluations?
Burton: Rather than focusing on year-over-year costs, I want to know how many chronic disease patients like diabetics do I have in this population. I want to be able to report out this disease density so I can tell a third-party payer how much risk is present. Then I bear down on the level of severity of disease… It's clinically-driven underwriting.
HLM: Tell me about the contracting ACO building block.
Burton: I need to find out who is large enough for me to be on their punch list: Medicare, Medicaid, the commercials… I need a pie chart to see who I want to pursue.
In that contract, population evaluation determines the price on which I assume the risk. And I don't want to be sunk by one or two outliers like a transplant. I will share that risk with the payer or get re-insurance. The contract also includes the provider network.
HLM: Does an ACO require a critical mass of patients?
Burton: It depends on how you are going to assume risk… If you get too small of a population, then a big case can sink you. It also would take a lot of time to collect meaningful data. You're not able to react quickly enough…
The bigger the better. Kaiser is the ideal. They have millions of patients.
HLM: Is there a major difference between your vision for ACOs and the federal government's first models, Pioneer ACO, and the Medicare Shared Savings Program?
Burton: In the federal models, you have the worst of all worlds at the patient level. The problem is with the attribution algorithm. The patient may not know they have been attributed to your ACO.
You can market to the… and you can be nice to them; but, beyond that, there's no financial incentive for patients to stay in your ACO network.
HLM: How can providers develop the expertise needed to operate a successful ACO?
Burton: In this early, adolescent stage of shared risk, you're going to have people operating in an immature manner. It's a lot harder than it looks. Providers end up doing it less efficiently than a third party payer. … You do, in fact, need someone to do the administrative aspect of an ACO.
HLM: What are some of the ACO pitfalls for providers?
Burton: There is a group of providers that has its collective head in the sand. There are providers that want to dip their toe in the risk sharing water. Then there are the enlightened few that are committed to managing cost.
You have to avoid a project mentality. The SWAT team approach will improve a particular area, but within two or three months they've lost their gains. It's a permanent investment, but the return on investment is substantial. This is not amenable to a one- or two-year fix.
As the healthcare industry focuses on cutting costs, narrow provider networks designed to deliver value are taking hold as a widespread business practice.
With their prominent cost-containing role in the new public exchanges, narrow provider networks have been the object of persistent healthcare industry hand-wringing this year.
But narrow networks are not only a well-established industry practice, thrifty consumers are also open to them, according to Joseph Berardo Jr., president and CEO of New York, NY-based MagnaCare, a health plan that features a provider network with 70,000 locations in the New York and New Jersey markets.
"There's been slowly, a narrowing of networks, quietly over time," he says, noting that narrow networks are appealing to small group plans. "There's a paradigm shift here. Small groups are price-sensitive."
Narrow networks are becoming an important factor in the large group market as well, Berardo says, with health plans offering narrow networks as an effective mechanism for controlling costs when companies operate in locations spread over a wide geographic area.
In May, the National Business Group on Health conducted a poll of 46 large employers and found that 17 percent already have a narrow network in place. The poll results, which were made available to NBGH members, also found that an additional 24 percent of large employers were considering narrow network health plans for 2015 and 2016, and another 20 percent were mulling narrow networks for 2017.
As consumers become a more important factor in the health insurance market, many of them will demand the affordability that comes with health policies linked to narrow networks, Berardo believes. "Consumers are less concerned about networks. The members, left to their own devices, will pick value."
The MagnaCare chief says narrow networks are "the only way we're going to hit price points."
Further ensuring the spread, providers are creating de facto narrow networks as they reorganize to achieve greater efficiency through efforts such as accountable care initiatives, Berardo said. "It's not completely driven by the payer world," he says.
"There's a fifty-fifty split here. This is collaborative, all in an effort to become more clinically integrated… It's probably a ten-year journey."
In a bit of irony given the payer arm-twisting often associated with narrow networks, forward-thinking hospital executives need to embrace clinically integrated care in general and narrow networks in particular, Berardo argues.
"Long-term, [hospitals] need to morph into a more integrated system," he says, noting the financial pressure these capital-intensive organizations face will spur many of them to open their own health plans or seek insurer partners. "They're going to be part of a large ecosystem."
Berardo says it is highly likely that adoption of narrow networks will become widespread. "It's going to be the norm rather than the exception. It's not apparent to me that you can keep broad, fee-for-service networks and get to the payment reform everyone wants."
A Cautious Voice
JoAnn Volk, a research professor and project director at the Georgetown University Health Policy Institute, is more cautious about the long-term prospects of narrow networks.
"It's a pendulum," she says of the private healthcare insurance market, noting that the consumer backlash to health maintenance organizations that fueled growth in broad provider networks over the past two decades.
There are also regulatory barriers in the way of narrow network growth, Volk says, "regulators at the state and federal level are looking at changing the network adequacy standards." Many government officials are seeking to protect consumers who are unable to get specialty care in a narrow network to "hold them harmless," she adds.
Despite her qualms, Volk acknowledges that market conditions are ripe for adoption of narrow provider networks. "It's not a surprise that large employers are using narrow networks. [It is] a way to control costs."
Insurance carriers find narrow networks appealing because other cost containment levers, such as the ability to deny coverage to individuals with pre-existing conditions, were banned under the federal Patient Protection and Affordable Care Act. "The ACA took away tools that insurers could use to control costs," Volk says.
With the nation's focus on healthcare costs at a historic level of intensity, a bottom-line moment has seized both payers and providers, she says: "They're trying a bunch of different things at once, and seeing what lowers costs."
The proposed 2015 rules for Medicare B payments add a dozen new quality measures and patient outcome-based metrics, including unplanned admissions for patients with diabetes, heart failure, or multiple chronic conditions.
With the Medicare Shared Savings Program preparing to enter its fourth year in 2015, federal officials are recasting the list of quality metrics and providing "bonus payments" to incentivize year-to-year performance gains.
The Centers for Medicare & Medicaid Services' proposed rules for 2015 payments through Medicare B, which covers outpatient care, include several changes to the Medicare Shared Savings Program. With more than 300 healthcare organizations participating, MSSP is the largest of two accountable care programs CMS administers, in part because it is a risk-bearing contract with no downside. In the other one, CMS's Pioneer ACO program, participants benefit from gain-sharing but also face the risk of cost-sharing.
The proposed Medicare B rules both refresh and cull quality measures. A dozen new quality measures add patient outcome-based metrics to the list, including unplanned admissions for patients with diabetes, heart failure, or multiple chronic conditions.
The proposed quality measures also include post-discharge tracking of hospital patients to see whether they are admitted to skilled nursing facilities within 30 days of discharge.
Eight of the 33 MSSP quality measures that were adopted in 2011 are slated to be scrapped, mostly because they were considered redundant or out of step with best clinical practices. If CMS moves forward with its proposed changes, there would be a total of 37 MSSP quality standards next year, a net gain of four standards over the current year.
"We believe the measures chosen are more outcome-oriented and would ultimately reduce the reporting burden on ACOs," CMS officials say in the proposed rules.
Tomas Mikuckis, a principal specializing in health and life sciences at New York, NY-based management consulting firm Oliver Wyman, says there are "three notable trends" in the quality measures set to be added to MSSP:
An increasing focus on patient outcomes rather than process measures, which will require ACOs to increasingly demonstrate that their activities are having measurable impacts on patient health
The emphasis on chronic condition management, which "makes a lot of sense" given the large prevalence of chronic conditions in the senior population and the disproportionate impact these conditions have on health costs
The skilled nursing facility measure could demonstrate CMS's willingness to hold the ACOs accountable for patient care across care settings and even at providers that are not formally part of the ACO
The proposed Medicare B rules also seek to provide incentives for MSSP ACOs to improve their quality measure scores from year-to-year. The incentives would be provided in addition to the program's standard gain-sharing calculation mechanism.
"ACOs that demonstrate quality improvement on established quality measures from year to year will be eligible for up to 2 bonus points per domain," say the proposed rules.
Paul Clark, a legal analyst at Wolters Kluwer, says the incentives for annual improvement indicate CMS are both determined and flexible in the agency's efforts to optimize MSSP.
"CMS is proposing to reward not just ACOs that meet the existing quality measures, but that show year-to-year improvements in specific areas. This 'explicit incentive,' in CMS's words, is to emphasize that meeting quality goals is not a static, one-time result, but an evolving process," he says. "This is one of the reasons CMS is changing the MSSP quality measures on a regular basis."
The deadline for healthcare industry stakeholders to comment on the proposed changes to 2015 Medicare B payment rules, including ACO regulations, is Sept. 2. CMS officials have solicited comments on several possible new MSSP quality standards such as care coordination, prevention and utilization.
Mikuckis says federal officials appear to be gearing the MSSP model of accountable care for the long haul.
"Taken as a whole, the rule changes and the request for comments seem to point to the fact that MSSP is on a path toward trying to drive further improvement and impact in ACO performance, and increasingly transitioning to a broad range of quality outcomes metrics that reflect the main priorities that ACOs should focus on in improving population health," he said.
"Additionally, some of the minor tweaks to align metrics and measures with those used in other CMS initiatives are a good indicator that the program is here to stay, and that CMS will have a desire to continue to grow the number of Medicare beneficiaries that it covers."
Provider Reaction
Healthcare providers appear to find MSSP intriguing, but modest levels of gain-sharing so far have them pushing for more benefits.
"Our reason to enter this program was to dip our toe into a risk-bearing contract," says Jonathan Nasser, co-chief clinical transformation officer at Middletown, NY-based Crystal Run Healthcare, one of the first 27 MSSP ACO participants. "We viewed it as a learning experience, which has been a success."
Now that it has climbed the accountable care learning curve, Crystal Run would like to see a higher level of gain-sharing, Nasser says, adding that his organization has yet to realize any significant revenue from participating in MSSP.
"It feels like the deck is stacked against the ACOs to actually see gain-sharing," he said, adding Crystal Run had faced several MSSP challenges such as embracing data analytics. "It definitely was a lot of work."
Melissa Jackson, a senior associate director in policy at the American Hospital Association, says providers need to be able to achieve greater gain-sharing if CMS wants its Medicare ACO programs to expand in the future. "We have pushed CMS to increase the amount of benefits ACOs are able to achieve," she said. "[Providers] have to make significant financial investments on the front end to improve care… The target thresholds need some adjustment."
Akin Demehin, who also serves as a senior associate director in policy at the AHA, says the proposed changes to MSSP quality standards are welcomed "in general" but need to be crafted carefully.
"The challenge is making sure those measures are adjusted for things that are out of the control of the provider," he says, adding that MSSP quality measures need to account for fundamental differences between patients such as severity of illness and socio-economic factors. "For most outcomes measures, performance is driven not just by care but also by clinical conditions."
As he looks to the future, Nasser says MSSP ACOs such as Crystal Run will eventually hit a gain-sharing ceiling.
"Accountable care is definitely here to stay because CMS is moving to value-based care delivery," he said. "But you can't continue to share savings forever. … We think over the long-term this will move to something more like Medicare Advantage and capitation."
Primary care doctors surveyed by the Medical Group Management Association say nearly 6% of their compensation was pegged to quality metrics in 2013, up from 3% in 2012.
Part of the drive to a value-based healthcare delivery system will be gearing physician compensation to value-based metrics such as quality and customer service, according to the Medical Group Management Association.
"This is going to be a gradual shift. … It will be a trend that we will see evolve," said Todd Evenson, VP of data solutions and consulting services at the Englewood, CO-based organization. "We're on the cusp of this information being available."
MGMA has been conducting an annual physician compensation survey for three decades. Beginning in 2012, the MGMA began collecting data on physicians who reported having a portion of their compensation linked to a pair of value-based metrics: quality and customer satisfaction.
The data collected in 2012 and 2013 show modest levels of linkage between compensation and the value-based metrics, but there is the start of an upward trend, Evenson says. "We are just at the beginning. You have to be able to measure quality. We're even on the front end of that process."
Excluding doctors in accountable care organizations and patient-centered medical homes, primary care physicians polled in 2013 for the MGMA survey said that an average of 5.96 percent of their total compensation was linked to measures of quality up from 3% in 2012. Specialists surveyed said about 5.70 percent of their total compensation was based on quality metrics up from 2% in 2012.
The number of physicians reporting compensation tied to customer satisfaction was even smaller in the survey, but the MGMA polling showed 43 percent growth from 2012 to 2013 among specialists. In 2012, specialists said 1.61 percent of their pay was linked to customer satisfaction metrics. In 2013, that figure rose to 2.31 percent.
Evenson says the MGMA is trying to set "baseline data" that will help guide the group's members through potentially tumultuous change as healthcare delivery is increasingly designed to provide value. "There's a lot of confusion out there," he says. "We're trying to keep our members aware. We're trying to produce reliable, bite-sized bits of information."
Gauging the impact
Increased linkage between physician compensation and value-based metrics appears inevitable, but the long-term consequences are subject to debate.
"Quality parameters will be part of compensation increasingly in the future," says James La Rosa, chief customer experience officer for East Hills, NY-based North Shore-LIJ CareConnect Insurance Company. "New York State requires every new insurance product brought to market to have some quality indicators and every government-sponsored program will have many quality parameters built in—the ACOs are a prime example—with a significant emphasis on customer satisfaction as well."
La Rosa adds that healthcare payers will play a role as value-based metrics become "tied to payments."
The trend toward greater linkage of physician pay with quality and customer satisfaction metrics will continue with gusto, according to Ingrid Lindberg, chief customer experience officer at Eagan, MN-based Prime Therapeutics. "The requirements that are emerging are that people expect to be treated like people, not patients. They want their time, their questions, their needs to be respected as much as they respect the physician," she says.
"We're seeing [patient] satisfaction being used as a derivation of quality ratings. The subjectivity of the rating the person receiving the care is giving the doctor is becoming as important as the outcome. Can you even imagine the impact? Now, not only do you have to ensure that the quality of care is there, as a physician or hospital you now have to pay just as much attention to the experience you're providing."
Lindberg says embracing customer satisfaction as a prime goal will be a challenge for many small medical practices.
"Hospitals are figuring it out," she said. "Now it will be up to all those smaller clinics and independent physicians to figure out how to make sure that they aren't only providing exceptional care, but also an exceptional experience."
Critics wonder whether there is enough value in tying physician compensation to value-based measures.
"I'm not convinced this is the most effective way to produce major healthcare cost reductions for the US population," says Kevin Coleman, director of research and data for Sunnyvale, CA-based Healthpocket Inc.
"I'm much more interested in the factors driving per capita healthcare usage among Americans and the overall cost of healthcare delivery than I am interested in the percentage of doctor compensation that is tied to various quality metrics. Addressing consumer lifestyle issues that eventually produce expensive health conditions and reducing consumer misuse of various healthcare services may have a more dramatic effect on healthcare spending than the association of doctor compensation with quality metrics."
Regardless of how physician compensation evolves in the development of value-based healthcare delivery, Evenson says MGMA is committed to providing medical practices with guidance as value-based metrics such as quality and customer satisfaction become greater factors in the healthcare industry.
"We're trying to guide them to sources that have credible information," Evenson says of MGMA members. "We're at a critical point in time where practices are changing their reimbursement models. … I just tell them to think about it."
Health insurers are expected to save billions of dollars in billing expenses by offering e-payment to providers. But some innovative e-payment mechanisms are laced with fees, raising questions about fairness.
In an industry as big and bloated as healthcare, cutting costs is necessary, but insufficient on its own to combat waste. As cost-cutting generates windfalls, industry stakeholders also need to find a fair way to divvy up the cost-savings spoils.
Many observers have compared the reform-roiled healthcare industry to the Wild Wild West. The temptation to draw open-frontier analogies is irresistible, and I have galloped down that dusty trail for a story about the Pioneer ACO program.
With opportunity aplenty, fairness is a topic that has not arisen often; until last week, when I set out to explore healthcare's electronic payment frontier.
The feds launched an e-payment Gold Rush this year: requiring insurers to start offering e-payment to providers, which offers a number of benefits because paper checks come with administrative and mailing costs, which add up to billions of dollars of expenses for payers.
A 2012 Institute of Medicine report estimates that waste linked to paperwork and administration costs the healthcare industry about $190 billion annually. A 2010 study conducted by several industry stakeholders pegs the potential yearly cost savings from e-paymentat $11 billion.
"It saves them a lot of money," Robert Tennant, senior policy adviser at the DC-based Medical Group Management Association, told me last week during a discussion about payers shifting away from paper checks.
Whenever there is "a lot of money" on the table, anyone within eyeshot of the pot starts thinking creatively. In the case of e-payments to healthcare providers, payers have not only adopted the standardized electronic fund transfers required under federal law, but also introduced innovations.
One of these e-creations is virtual credit card payment, which comes with fees ranging from 1 percent to 4 percent. Tennant believes it is unfair for payers or their automatic clearing house partners to take a fee for a digital process that costs significantly less than paper checks.
"Yes, there is a rule, but people are finding a way around it," Tennant said. "The goal was to save the country money, and people have not embraced it the way they should have."
When I contacted Emdeon, which is one of the country's largest vendors for administering healthcare financial transactions, Senior VP Tom Dean told me the company offers virtual credit card payment as part of a suite of options for providers.
"Emdeon realizes that not all providers are able to accept the federally mandated EFT-ACH transaction from all payers, therefore we offer a wide range of additional payment options to best serve the market, including virtual credit cards, image cash letters and printed checks," he said.
So this is how fairness works in the Wild Wild West of healthcare.
Payers are taking advantage of a newly opened frontier, not only offering federally required EFT payments, but also payment mechanisms that fulfill niche needs—for a price. Providers are struggling to keep up with the pace of change, with stragglers facing higher costs.
Like so many other dangers on the healthcare frontier, the downsides of e-payment are not as drastic or obvious as being robbed at gunpoint outside the local saloon. The main threat is falling out of touch with the evolving business environment and picking the wrong options in a field burgeoning with innovation.
On the new health insurance exchanges, inexperienced consumers are learning hard lessons about deductibles and other forms of coverage cost sharing. To avoid similar hard knocks, providers who are unprepared for EFT payments or uninformed about their digital reimbursement options need to school themselves on maximizing e-payment value.
Healthcare providers stand to benefit in several ways from the switch from paper-based payment to electronic payment, but not all e-payment models are created equal.
Healthcare payers portray the industry's historic shift to e-payments as a win-win proposition. But providers fear there may be a snake in the digital transfer Garden of Eden.
A 2012 Institute of Medicine report estimates annual waste in the healthcare systemat about $750 billion, with paperwork and administrative bloating tallied at about $190 billion.
Aetna is among the health plan e-payment early adopters, moving at a fast pace to offer e-payment to all of the company's provider partners from hospitals to individual-practice doctors.
"Medicare began requiring electronic payment for all providers effective January 1, 2014. Many other health plans have instituted similar policies," says Jay Eisenstock, head of provider e-solutions at Aetna. "Given the groundswell throughout the industry, we expect the conversion will happen fairly rapidly."
Robert Tennant, senior policy adviser at the DC-based Medical Group Management Association, says e-payment is a welcomed innovation, particularly electronic fund transfers. "We've been asking for this—the provider community— for years," he said, noting the EFT payment model features "one-stop shopping for the provider."
EFT payments include a wealth of information to help providers match bills to individual patients, including tax identification numbers and a "trace" number for each patient billing transaction, Tennant said. "That's a huge leap forward for practices. It used to be manual."
A prime pitfall for providers is that not all e-payment models are being created equal, Tennant said. "There's no downside per se with the standard," he said of federal rules for electronic reimbursement. "What some health plans are doing is sending the payment through virtual credit card… The credit card company takes a fee for that."
A virtual credit card fee ranges from 1 to 4 percent. "That's like the bank saying they are going to take a 4% surcharge on your [payroll] direct deposit, which would not be acceptable." Some insurers, Tennant says, are getting a piece of the action by "[cutting] deals with credit card companies to get a share of the fee."
In addition to taking a fee hit, medical practices can lose key information in virtual credit card transactions compared to EFTs. Most virtual credit card transactions batch large numbers of patients into one billing cycle reimbursement and drop individual identifier information found in the EFT model, including the trace number that links specific patients to specific bills, he says.
Tennant notes health plans are under no legal obligation to tell providers about the benefits of EFT transactions versus virtual credit cards. "They're not in opposition to the law unless the provider asks for EFT and the payer can't offer it."
"Some health plans are charging providers a percentage, sometimes 2 percent, for the privilege," Tennant said of virtual credit card payment. "They're using the standard to make more money, which I don't think is fair."
Nashville-based Emdeon is one of the largest e-payment vendors in the healthcare industry. Tom Dean, senior VP of financial services at Emdeon, says there is no free lunch, even in the virtual world of automatic clearing houses.
"There are expenses associated with each payment modality in the market. On a per-transaction basis, EFT-ACH is the least costly. However, Emdeon realizes that not all providers are able to accept the federally mandated EFT-ACH transaction from all payers; therefore, we offer a wide range of additional payment options to best serve the market including virtual credit cards, image cash letter and printed checks," Dean says.
"In Emdeon's program, virtual credit cards are not a substitute for EFT-ACH. In fact," Dean says, "our system uses virtual credit cards as a substitute for printed checks. For providers, we simplify the re-association process by including the virtual credit card in the same mail packet as the provider's explanation of payment."
Combining payers' claims data with providers' clinical data is an essential element of revolutionizing the delivery of healthcare. But there will be unintended and unfavorable consequences, says one data expert.
I gaze quickly at the watchcorder on my wrist. It's 4:05, my pulse rate is 74 beats per min and the blood sugar monitor is flashing at 81… I missed lunch, again.
I have a long drive home and it's always good to get ahead of the traffic coming out of Boston. It's Jan. 20, 2020, and tomorrow will be my sixth work anniversary at HealthLeaders. On the spur of the moment, I decide to pop into a nearby smoky bar to celebrate.
My belly has barely touched the lacquered mahogany expanse separating me and the bartenders at Phil's when the watchcorder lights up like a Christmas tree. The no smoking light. The no drinking light. The provider, payer, and employer wireless notification lights.
I'm in my 50s and my doctors have advised me to put my bad health habits behind me, especially smoky bars. My watchcorder's GPS, and its array of sensors embedded within the device and inside my collar have betrayed me.
I can count on a finger-wagging at my next primary care doctor appointment, an email from my insurance carrier announcing a $10 surcharge on my healthcare policy, and a letter from HealthLeaders' EAP urging me to seek smoking cessation and alcohol abuse counseling.
This scenario may be years away, but we're already seeing what can happen to personal health data. "There's a whole spectrum of desirable-to-undesirable consequences out there," David Burton, MD, former chairman and senior VP of the Salt Lake City-based data analytics firm Health Catalyst, told me last week.
"It's broader than healthcare—all the data mining that's going on. But it is amplified by the personal nature of the healthcare data. [Data mining for] marketing is one thing. It's another thing for someone to know where I am and what I'm doing."
Burton has practiced as an emergency room doctor and launched a health plan that now has about 600,000 beneficiaries in Utah and Idaho. He says the biggest pitfall providers and payers face in joint data integration projects is their troubled past. "The industry needs to mature to the point that this isn't a shell game where you get a piece of the other side's shell," Burton told me. "This is all about [reducing] cost."
The adversarial days of the past are haunting healthcare data integration projects, he says, noting that among providers, "only want to share the data that will get them paid." On the payer side, Burton says insurance carriers have hidden claims data behind locked doors. "There has been a historically adversarial relationship."
For beneficiaries, "there is always the risk of privacy," Burton says.
Combining the vast payer and provider data sets of consumers' highly sensitive medical history information creates a treasure trove for data analysts. "In the ideal, you have to have access to the claims data, but the insurer also needs to bear down on your care data to get down to the granular level," Burton says. Lax data governance and stewardship are prime risks for healthcare organizations. "It doesn't take much of a breach to ruin your reputation," he adds.
As the pace of data integration projects in healthcare quickens, there are stumbling blocks for payers and providers to avoid, says Jeff Cohen, co-founder of Denver-based Welltok, which describes itself as a "health optimization pioneer" on its website. The challenges, Cohen told me last week, include data access, data accuracy, "how fresh it is," and compliance with privacy protection laws such as HIPAA.
Challenges are also associated with "the technology [itself] and how you're going to mine that data," Cohen says. "It's the type of technology, the cost of the technology, and securing the data. Oftentimes, [picking the wrong technology] causes these efforts to fail."
Cohen says there are inherent challenges in the data for payer and providers. "The 'structure' of the data in healthcare makes these projects difficult," he told me, adding that there within the tremendous volumes of data, there is spotty consistency, lapses in accuracy, formatting variability, and a clinical coding morass.
Welltok is working with IBM's Watson supercomputer to overcome the structural obstacle to healthcare data integration projects and help consumers optimize their health. They are working together to build a new app that leverages Watson's unique ability to comprehend multiple types of data and provide consumers with personalized recommendations that evolve with changes in their activities, benefits or preferences.
With Watson, users can bring in 'unstructured' data, which means data from PDF and Word documents can be gobbled up, just like data stored in traditional databases. That data gets ingested into a massive data store where it can be analyzed.
IBM calls Watson a cognitive technology. "More than 100 different techniques are used to analyze natural language, identify sources, find and generate hypotheses, find and score evidence, and merge and rank hypotheses," according to Big Blue.
For payers and providers launching data integration projects, consumers are the key to avoiding risk, Cohen told me. "There are unintended consequences. You have to think through letting the consumer control the access and use of some of those data streams," he says. "You want people to feel comfortable and to share in the benefits of this sharing of data… Ultimately, the consumer has to be in control."
Data integration projects offer tremendous opportunities for healthcare organizations. But caution is advisable whenever a revolution is swirling around you. "There are going to be some bumps along the way," Cohen told me. "It's not going to be easy. There will be some failures."
One of the hottest healthcare controversies—the two-midnight rule—boils over in comments submitted to federal officials regarding the 2015 Inpatient Prospective Payment System rules.
For the past year, the federal Centers for Medicare & Medicaid Services have been at odds with healthcare providers over a proposed standard for drawing the line between outpatient and inpatient status.
Under the proposed "two-midnight rule," most hospital stays lasting less than two midnights in duration would be reimbursed at outpatient rates through Medicare B. Longer stays requiring hospital admission would be reimbursed at the more lucrative Medicare A inpatient rate.
Congress has placed the two-midnight rule on hold until early 2015. And CMS has provided no new guidance about the patient status regulation in the proposed version of the 2015 Inpatient Prospective Payment System rules released May 15.
But the issue remains a prime concern for providers.
From the institutional to the individual level, providers have raised howls of protest in comments filed with CMS regarding the proposed 2015 IPPS regulations. The deadline to submit comments to CMS was June 30.
In its comment letter to CMS dated June 20, officials at the Michigan Health and Hospital Association said it has been—and remains—opposed to the two-midnight rule since its inception last summer.
"The MHA continues to believe that in cases where a physician or other qualified and licensed practitioner has determined that a patient met national guideline criteria to be admitted as a hospital inpatient, the care provided should be covered and paid by Medicare Part A," the Michigan officials wrote.
"The decision on the appropriate setting of care can best be made by the patient's physician based on the patient medical history, co-morbidities, severity of signs and symptoms, current medical need and the risk of an adverse event without regard to any 'guesses' about how long a patient will remain in the hospital. This policy has resulted in much confusion over the past year for hospital staff, patients, and their families, and can have serious financial implications."
An Argument for the Prior Standard
The two-midnight rule is, in part, designed to address a spike in outpatient care over the past decade. But it misses the mark, according to Joseph Dawood, MD, medical director at Tacoma, WA-based Multicare Health System. In his comments to CMS about the proposed 2015 IPPS rules, Dawood calls on the agency to "eliminate" the two-midnight rule.
"It defeats the purpose of why the rule was instituted in the first place," he said in an interview after submitting his comments to CMS last month, asserting that the proposed rule is arbitrary and penalizes efficient care. "Certain things can be treated in the outpatient setting. Other things can't. They're in between."
Dawood says the prior standard for determining inpatient status makes more sense. "It was good to begin with. Medical necessity was equivalent to inpatient status," he said of the prior standard. "If you want to find a way to pay for short-term patient stays … find a way to pay for short-term patient stays, and keep the determination of medical necessity to physicians."
Officials at the Association of American Medical Colleges say the two-midnight rule would disproportionately hit the group's membership. The AAMC filed its 2015 IPPS comments on June 25.
"Our members have had a lot of difficulty with the two-midnight rule," Allison Cohen, senior policy and regulatory analyst at the DC-based group, said in an interview last month before the AAMC filed its comments. "Duration of stay really doesn't say anything about the patient."
She says the two-midnight rule unduly punishes large academic medical centers. "Based on mission, we have to treat all comers," Cohen said, noting large medical centers in urban areas face a high volume of "high-intensity" patients such as the homeless and people from disadvantaged communities who have suffered with multiple chronic conditions for years.
"Two-midnights was designed to provide clarity when it really hasn't. Then you're also underpaying these hospitals that are treating high-intensity patients… This is really something where clinical judgment should determine whether a patient is inpatient or outpatient."
If the two-midnight rule is implemented, the AAMC wants the threshold-setting clock to start as soon as a physician orders inpatient status. AAMC officials wrote to CMS:
"At high-occupancy hospitals, such as those of the AAMC members, it is not unusual for a patient to have to wait several hours or more for a bed to become available, even after a physician has written an inpatient order…"
"For example, a physician may write an inpatient order in the emergency room at 10 p.m. on a Monday night, the patient may be moved to the inpatient setting at 1 a.m. Tuesday morning, and the patient may be discharged at 7 a.m. on Wednesday morning. Under CMS' proposal, this case would not have qualified… even though the patient required inpatient care across two midnights."
Alternate Points on Time
While CMS officials show no sign of bending or breaking the two-midnight standard in their proposed Medicare payment rules for 2015, they have invited suggestions on creating a "short stay payment" (SSP) policy that would presumably supplement or supplant the two-midnight standard.
In their June 26 comment letter to CMS, American Hospital Association officials called on the federal agency to adopt an SSP that would build a more rational and effective approach to short hospital stays:
"The AHA strongly believes that CMS must appropriately and adequately reimburse hospitals for the care they provide. The existing two-midnight policy fails to meet this standard for medically necessary inpatient stays that span less than two midnights," the national hospital association officials wrote. "However, we believe that a short-stay payment policy, which would supplement the existing two-midnight policy, could reimburse hospitals more accurately for the resources they use to treat beneficiaries during these short stays."
The Michigan Health and Hospital Association is also encouraging CMS to adopt a new SSP policy, with deliberate speed. "If the CMS elects to implement a SSP, we urge the CMS to allow hospitals adequate time to comply," the Michigan officials wrote to the federal agency. "As a result, we recommend that CMS implement the SSP policy for FY 2016."
The Michigan group offers these specific recommendations for developing an SSP policy:
Payment rates would be higher than Medicare outpatient rates but lower than inpatient rates.
Payments rates for surgical cases should reflect that most costs are incurred in Day 1 of services.
The SSP would not apply to the list of short-stay procedures that automatically qualify for Medicare A payment.
Fix It
Ronald Hirsch MD, FACP, is calling on CMS to fix the two-midnight rule.
"I find the rule much more sensible than the old method of admission v. observation decision based on risk, which resulted in the appeal mess that now exists," he wrote in his comments to CMS on the proposed 2015 IPPS rules.
In an interview after he filed his comments last month, the VP at Chicago-based Accretive Health said a preferable payment system would "reflect the true costs" for short hospital stays. "Most of the costs incur in the first day of service, so it makes no sense," he said of the two-midnight rule.
Hirsch says it would make more sense to break down the two-midnight rule into eight-hour increments. The first eight hours could be bundled with the emergency department's bill, he said, with reimbursement rates increasing with each eight-hour increment leading up to the two-midnight threshold. "Clearly, patients who stay eight hours and patients who stay 48 hours use different resources," he said.
Under the two-midnight rule, the differential between outpatient and inpatient care reimbursements is too wide and punishes hospitals for providing efficient care, Hirsch believes.
In heart failure cases, for example, the reimbursement for one day of treatment under observation status is about $1,600 compared to $10,800 if a patient can cross the two-midnight mark, he says. "The hospital is going to get a payment that is much lower than if they were inefficient."
Small-town, rural North Dakota's commercial bidding approach to expanding Medicaid could have big, national implications.
In the two dozen states that have resisted the federal drive to expand the program that funds medical care for the poor, fierce opposition from conservative governors and lawmakers has ground the expansion effort to a crawl.
In several states such as Arkansas and New Hampshire, coalitions of expansion advocates and business-oriented Republican legislators have boosted Medicaid's rolls through the "private option" approach. This enables eligible adults to obtain health coverage through subsidized purchases of commercial health insurance policies on the recently launched individual health exchanges.
North Dakota has developed another approach. It is inviting commercial insurance carriers to bid for the opportunity to provide health coverage for the state's 20,500 newly Medicaid-eligible poor adults. State officials solicited bids last August from carriers that "had to have a policy that covered all the essential health benefits," says Julie Schwab, medical director of the state Department of Human Services.
Two commercial carriers placed bids: Blue Cross Blue Shield of North Dakota, the state's largest health insurer, and Sioux Falls, SD-based Sanford Health. While both bids were accepted, only Sanford decided to move forward with North Dakota's Medicaid expansion effort, which launched enrollment on Jan. 1.
As of early June, 9,000 North Dakota residents had enrolled into Medicaid coverage through Sanford, an integrated health system and the largest employer in the Dakotas. Schwab says enrollment peaked in the first quarter of the year, through the end of open enrollment on the public exchanges, and has been slow but steady since.
"We have hospitals very interested in getting people enrolled to reduce uncompensated care," Schwab says.
Ruth Krystopolski, president of Sanford Health Plan, says the not-for-profit viewed bidding for North Dakota's Medicaid expansion policy as an opportunity that fit with a key element of the organization's core business philosophy. "Sanford is a proponent of public-private partnerships."
Determining the number of previously uninsured Americans who have enrolled in health coverage this year through Medicaid expansion and the new exchanges has been bedeviling statisticians across the country. As an integrated health system, Sanford has insight about how many previously uninsured North Dakotans have obtained Medicaid expansion policies.
"These are people who are showing up for services who weren't paying before," Krystopolski says, adding that Sanford estimates 57 percent of the North Dakota residents who have received medical services through the new Medicaid expansion policies were receiving uncompensated care in the past.
Nearly 25 percent of Sanford's Medicaid beneficiaries in North Dakota had never received medical services before at one of the integrated health system's clinics in the state, according to Krystopolski.
In North Dakota, the private bidding option to Medicaid expansion provided a politically palatable path forward. The political process of moving Medicaid expansion forward nationwide will need all the help it can get, says Nicholas Manetto, director at DC-based FaegreBD Consulting.
"You got the initial group onboard – mostly Democratic states," said the former press secretary for U.S. Rep. Chris Smith, (R-NJ). "The purple states, for the most part, are still evaluating. The others will fight."
Manetto says many Republican lawmakers in deeply "red" states are loath to appear supportive of any facet of the federal Patient Protection and Affordable Care Act, particularly Medicaid expansion. "The arguments against it are focused on the reputation of Medicaid today," he says. "It will be a long slog to move Medicaid expansion in the states that remain."
Two dozen holdout states are still balking at expanding a federal program that would extend access to healthcare to more poor adults and ease the cost burden on providers who treat them.
The low-hanging fruit of Medicaid expansion has been harvested.
There are 27 states that have accepted the federal government's offer to help pay for Medicaid expansion. The other 23 states, mostly politically "red" states across the South, Plains, and Rocky Mountains, are locked in partisan struggles over expanding the program.
The expansion of Medicaid to more poor adult Americans is a key component of the federal Patient Protection and Affordable Care Act. Medicaid expansion and the new federally spawned individual health insurance exchanges are designed to provide healthcare access to poor and low-income Americans, respectively.
Under the PPACA, most individual adults with incomes under 100 to 138 percent of the federal poverty level are eligible for health insurance coverage through Medicaid. The federal healthcare law allows most individuals with incomes from 138 to 400 percent of federal poverty level to purchase subsidized insurance policies on the new exchanges.
"It's a crime. These are the most vulnerable people in our society. They have no other access to healthcare," says Lisa Dubay, PhD, a researcher at The Urban Institute and co-author of a recent report on Medicaid expansion. "We have no way to take care of them and that just seems wrong."
Prior to this year's launch of Medicaid expansion in half of the states, about 10.2 million people nationwide were potentially eligible to gain health insurance coverage through expanding the program, Dubay said. More than half of those people—5.8 million—live in states that have not expanded Medicaid.
"The states that have expanded Medicaid—they're getting a lot of people enrolled," she says. "It really speaks to the need for coverage. People are enrolling because they need it."
Resistance to Medicaid expansion in nearly half the country has created a poverty gap in the federal drive to reform the nation's healthcare system, Dubay says. "We're giving something to everybody except the poorest people in these states."
Court Fight Looms in Virginia
One of the most dramatic Medicaid expansion struggles is playing out in Virginia, where about 400,000 adults are potentially eligible to receive health insurance coverage through the program.
Last week, Governor Terry McAuliffe tried to break the Medicaid expansion impasse with Republican lawmakers by attempting to expand the program through procedural means. On Monday night, legislators in the GOP-led General Assembly blocked McAuliffe's executive power gambit, and the governor's authority to expand Medicaid appears destined for litigation.
"The ability of the governor to move forward will now be settled in court. It's not a favorable outcome," said Katharine Webb, Senior VP at the Virginia Hospital and Healthcare Association. "Somebody was going to go to court no matter what."
The political firestorm raging over Medicaid expansion in Richmond is so intense that Webb avoids using the M-word, preferring the phrase, "closing the coverage gap."
"Fundamentally, you have to get the commonwealth of Virginia to accept the federal dollars," she says, adding that Medicaid expansion advocates such as the VHHA are open to a range of mechanisms to expand the program. "We could design any kind of private option they want. But if we can't get the legislature to accept the federal dollars, we can't move forward."
Hospitals in Virginia are experiencing "real pain" financially from cuts to Medicare payments that began in 2010 to help pay for PPACA implementation as well as Medicare payment cuts linked to federal sequestration, Webb says.
The inability to expand Medicaid in the commonwealth has placed an additional financial burden on hospitals. "[The poor] go to an emergency department and get very expensive care," Webb says. "We can't keep them healthy. It's expensive and episodic."
Reports From the States
Officials from several hospital associations in states where Medicaid expansion is being debated share Webb's hopes and fears about "closing the coverage gap."
Florida
"Since our state has chosen not to accept available federal funds, our patients are not receiving health care coverage and hospitals are forced to make up these unmet costs, which leads to a 'hidden tax' that is shifted to those patients that pay out of pocket or those with private health insurance in the form of higher premiums... Florida has already left $5 billion dollars on the table by not accepting the available federal funds. We continue to lose $15 million each day, and nearly 1 million low-income Floridians remain without affordable health insurance." –Florida Hospital Association, via email.
Maine
"Our preferred answer [to the Medicaid expansion question] is, 'Yes, please,'" said "But, we are open to alternatives. … It's fair to say that while we support expansion we would also be supportive of any reasonable alternative to straight expansion." – Jeffrey Austin, VP of government affairs and communications at the Maine Hospital Association.
Missouri
Hospitals are experiencing the double whammy in Missouri. We're paying for the expansion in other states through cuts that are occurring in the Medicare program, without seeing a corresponding increase in the insured population.
In 2012, the last year we have full data, Missouri hospitals provided $1.1 billion in uncompensated care (charity care and bad debt costs combined). It is reasonable to expect that without new enrollment in a reformed Medicaid system – and only 1 in 8 of the state's uninsured enrolled in the exchange this year – that hospitals' uncompensated care costs will continue to grow." – Missouri Hospital Association spokesperson
North Carolina
"In 2012, our hospitals spent more than $1 billion on charity care to low-income and uninsured patients. Continued cuts to Medicaid reimbursement, especially in light of the state's decision not to expand Medicaid, jeopardize North Carolina hospital services and jobs… North Carolina hospitals understand that Medicaid reform must occur before Medicaid is expanded.
We join providers across the state in supporting the governor's recommendation for a patient-centered, provider-led, risk-bearing model for Medicaid. North Carolina hospitals believe health insurance coverage for everyone in our state will improve access to care, improve overall health and ultimately reduce costs."– Julie Henry, VP of the North Carolina Hospital Association
Utah
"Utah has a fairly robust economy and low unemployment rate compared to other states, which might be mitigating any impact. However, there have been reports by some hospitals of higher uncompensated care levels this year as compared to the past."
The UHA supports Gov. Gary Herbert's alternative to a straightforward expansion of Medicaid – the Healthy Utah Plan would use federal block grants to finance a state-administered Medicaid expansion. We welcome any efforts to provide coverage to those who are in need of assistance, especially those with income at or below 100 percent of federal poverty level." – Utah Hospital Association spokesperson
