Two health plan initiatives—the patient-centered medical home (PCMH) and value-based insurance design (VBID)—can lead to lower health costs and improved employee health, say experts who contend that "obvious synergies" between the two programs often go unnoticed because they are carried out separately.
The proposal was made in a report presented to a conference in Washington, DC, by authors from the National Business Coalition on Health, the Patient-Centered Care Collaborative, and the University of Michigan Center for VBID.
In recent years, the authors stated in the report, entitled "Aligning Incentives and Systems –Promoting Synergy Between Value-Based Insurance Design and Patient-Centered Medical Home," numerous strategies have been pursued to achieve the "dual objective of controlling costs and improving employee health." They said that research is emerging on the effectiveness at optimizing clinical outcomes and restraining costs.
Despite growing momentum on both fronts, the approaches are usually examined separately and therefore obvious synergies go largely unnoticed, the report stated. The authors are: A. Mark Fendrick, MD, professor at the University of Michigan departments of Internal Medicine and Health Management & Policy; Bruce Sherman, MD, Patient-Centered Primary Care Collaborative (PCPCC) Center for Employer Engagement, which is a coalition of groups working to advance the patient-centered medical home; and Dennis White, senior vice president for value-based purchasing at the National Business Coalition on Health, a national nonprofit membership organization of purchaser-led healthcare coalitions.
The medical home is a comprehensive primary care program in a healthcare setting that facilitates partnerships between patients, their personal physician, and when appropriate, the patient’s family. PCMH is a supply-side mechanism to enable clinicians to delivery better quality care more efficiently, according to the report.
"The PCMH fosters relationships between patients and providers, improves access, and increases quality and consistency of care," the report stated. "PCMH incorporates re-created office processes and payment systems to reward an ongoing physician-patient relationship and high-quality coordinated care."
"The PCMH requires an investment in financing, through either upfront payments or redesigned reimbursements, to help providers implement and sustain a model," the report adds. "Through better information management, use of guidelines, and coordinated care, the PCMH theoretically may contribute to better quality, which, in turn, drives cost reductions through avoided hospitalizations and emergency department visits."
VBID is an employer-driven design strategy to optimize use of higher value healthcare services and reduce use of lower value services. "The goal is to generate better results from employers’ healthcare expenditures," the report stated. "The underlying premise of VBID is getting more out of the healthcare dollar by removing barriers for essential effective services. VBID is a demand-side initiative that focuses on patient incentives to enhance use of medical services of proven value."
Value-based insurance design is included in health reform. It allows the Secretary of Health and Human Services to develop guidelines to permit health plans to use the concepts in providing coverage, according to Sherman.
"From an employer's point of view, PCMH and VBID are complementary, used to simultaneously change provider and patient behaviors," the report added. "The PCMH creates a system of healthcare delivery that offers high-value service. That value can be realized only if members use the medical home."
Health plans, employers, and public purchasers who have adopted one or both strategies include: the city of Battle Creek, MI; IBM; Geisinger Health Plan; Roy O. Martin, the small private company; and the Whirlpool Corp.
"While there is little agreement on the specific mechanisms, there is general consensus that the healthcare system is not delivering acceptable value in clinical outcomes, for the dollars spent. Many of the solutions proposed are highly consistent with the underlying principals of VBID and PCMH.
The systems provide:
Better delivery of evidence-based practices
Increased reliance on information management in healthcare.
Cost sharing and reimbursement aligned with high value services.
Coordinated multidisciplinary care
Increased engagement of and attention to patients
"Although employers often implement VBID and PCMH initiatives in sequence, they see the logic for using them in tandem," the report stated. "From an employer's point of view, PCMH and VPID are complementary, used to simultaneously change provider and patient behaviors."
The trends, however, showed dramatic increases among older registered nurses, prompting concerns from officials about retirements impeding the growth of the nursing workforce.
The Health Resources and Services Administration (HRSA), a division of the Department of Health and Human Services, released the report this month. Published every four years by HRSA's Bureau of Health Professions, the National Sample Survey of Registered Nurses is what officials describe as the preeminent source of statistics on trends over time for the nation's largest health profession.
The report also includes comparisons from eight recurring surveys, 1980 through 2008.
The report showed that:
The number of licensed registered nurses in the U.S. grew to a new high of 3.1 million between 2004 and 2008.
16.8% of nurses in 2008 were Asian, Black/African-American/American Indian/Alaska Native, and/or Hispanic—an increase from 12.2% in 2004.
An estimated 170,235 registered nurses (RN) living in the US received their initial nursing education in another country or a US territory, comprising 5.6% of the US nursing population, compared with 3.7% in 2007. About half of the internationally educated RNs living in the US in 2008 were from the Philippines, with another 11.5% from Canada, and 9.4% from India.
Women outnumber men by more than 15 to 1 in the overall number of RNs, but among those who became RNs after 1990, there is one male RN to every 10 women, the report stated.
The average age of all licensed RNs increased to 47 years in 2008 from 46.8 in 2004; this represents "stabilization after many years of continuing large increases in the average age," the report stated.
Nearly 45% of RNs were 50 years of age or older in 2008, a dramatic increase from 33% in 2000 and 25% in 1980. "The aging trends in the RN population has raised concerns that future retirements could substantially reduce the size of the US nursing workforce at the same time the general population is growing older and the proportion who are elderly is increasing," the report said.
Overall, Dr. Mary K. Wakefield, the HRSA administrator, said officials are "encouraged by growth in the numbers and diversity of registered nurses and HRSA is committed to continuing this trend to ensure an adequate supply and distribution of nurses in the future."
Reacting to the findings, the American Nurses Association said it was "pleased to note the increasing diversity of the nation's population of registered nurses."
"More and more nurses have advanced training; more than half of American registered nurses have a bachelor's degree or higher," the ANA said. "Registered nurses in the US exhibit an increasing diversity of origins."
"By gender, race, and ethnic origin, US nurses are also increasingly diverse," the ANA said. "In the 2008 data, there were more male nurses, more non-white nurses, and more Hispanic nurses than ever before."
"Greater minority involvement in the health professions, including nurses, is critical," Wakefield said in a statement to HealthLeaders Media. "Numerous studies indicate that underserved communities benefit from the service of minority providers, who are more likely to choose to practice in these communities," she said.
The National Council of State Boards of Nursing reported that there was a large increase in the number of internationally-educated nursing graduates who passed the National Council Licensure Examination, from 5,000 nurses in 1998 to more than 22,000 nurses in 2007.
"The growth in the number of internationally-educated nurses passing the NCLEX is consistent with the substantial growth in the number of internationally educated RNs living in the US," the report stated.
Additional findings included:
There are also wide variations across states in the number of employed nurses per 100,000 people. The lowest numbers of employed RNs per 100,000 were in Utah, (598), Nevada (681), and California (638), while the largest numbers were in the District of Columbia, (1,868), South Dakota, (1,333), and North Dakota, (1,273).
Half of RNs have achieved a baccalaureate or higher degree in nursing or a nursing related field in 2008, compared to 27.5% in 1980.
The number of RNs with a master's or doctor's degree rose to 404,163 in 2008, an increase of 46.9% from 2004, and up from 85,860 in 1980.
Average annual earnings for RNs in 2008 were $66,973, an increase of almost 15.9 % from 2004, a figure that slightly outpaced inflation.
As Congress left the Capitol for a two-week holiday over the weekend, the American Medical Association took the occasion to blast lawmakers for the "unconscionable" action of not acting on the "doc fix"—slated to expire on April 1.
Earlier this month, the Senate voted to delay the physician pay cut of 21.2% in Medicare reimbursement until Oct. 1. But the House did not take up the action, and as a result, the previous decisions by both chambers still stand. And that's April 1.
Some congressional officials have said it is likely that Congress may decide on the bill retroactively. The House doesn't vote again on legislation until April 13, according to the House calendar.
But J. James Rohack, MD, president of the AMA, said in a statement released on Friday, "It is unconscionable for elected officials to play politics with seniors and military families who rely on them to preserve their ability to see the physician of their choice."
"Members of Congress eager to spend a two-week holiday with their families have left America's military families and seniors to fend for themselves through their inaction on a known threat to the Medicare and TRICARE programs," Rohack stated. "On April 1, a 21% Medicare cut to physicians begins. Congress' failure to act on permanent repeal of the broken Medicare physician payment formula has put access to healthcare for seniors and military families in jeopardy."
The physician pay cut issue has been dependent continually on congressional action, much to the consternation of physicians. On Dec. 19, Congress voted to delay the scheduled payment cut until March 1. Both houses then extended it a month.
Specifically, the Medicare payments were scheduled to be cut across the board in accordance with the sustainable growth rate (SGR) formula.
The proposed delay ostensibly is to give Congress time to adjust the SGR formula. SGR links Part B Medicare reimbursement to the gross domestic product. The formula has led to proposed large cuts annually, which physicians have successfully worked to delay.
In what officials hope to be the beginning of a nationwide initiative to help attract medical students to primary care, Texas Tech University's Health Sciences Center School of Medicine will launch a "first of its kind" three-year medical degree program to allow outstanding students emphasizing on primary care to complete a program at half the cost of a traditional medical school program.
"The high cost of medical school and resulting debt are major challenges for many prospective medical students," said Michael Ragain, MD, from the university health sciences center's department of family and community medicine. "Our program addresses debt on two levels: first by shortening the program from four to three years, and second, by providing scholarships to all qualifying students."
The university's program was approved by the liaison committee on medical education, the accrediting authority for medical education programs leading to the MD degree in U.S. and Canadian medical schools. The accrediting authority is sponsored by the Association of American Medical Colleges and the American Medical Association.
Simon Williams, PhD, associate dean for the health sciences center school of medicine, says 10 students will be selected initially out of 140 incoming medical students this fall. "Normally, we send 10 to 15 students each year into a [primary care] career, and we anticipate that will increase," Williams says. "Our primary goal is to make [a dent] on the shortage of family medicine physicians. One of the reasons is the amount of debt that is incurred by a family."
"For the average medical student, the debt amounts to $150,000. We're planning on removing the fourth year to decrease the debt substantially," says Williams. Students admitted to the program will be studying under an accelerated academic setting, he says, beginning in October.
Williams says the new program would enable outstanding family medicine students to reduce the length of medical school by 25 %, and the new program would essentially cut the debt in half, as schooling becomes more expensive in later years.
The university believes the timing of the program is important because "training primary care physicians is a national issue that targets both rural and urban areas," according to Ragain. Since 1997, U.S. medical school graduate matches in family medicine and general internal medicine programs have decreased by 50%. An American Academy of Family Physicians workforce survey in 2006 estimated that the U.S. would need about 39,000 more family physicians by 2020.
"Training primary care physicians is a national issue that targets both rural and urban areas," Ragain said. "With programs such as this, we can double the number of primary care physicians available to care for the U.S. population."
Steven Berk, MD, dean of the Texas Tech University health sciences center school of medicine added, "This is a program of national importance as we work to ensure that all Americans will have access to a primary care physician."
Under the program, the curriculum includes early introduction to clinical care in family medicine that spans the entire second year of the program. "The students will participate in additional activities during the revised three-year curriculum to acquire the necessary knowledge and skills to be fully qualified and excellent primary care physicians," Williams says.
Months ago, when healthcare reform was still only a mere possibility, I picked up a copy of Ted Kennedy's True Compass, the autobiography of the controversial Massachusetts senator, in which he detailed his passion for sailing—and working toward healthcare reform.
Kennedy, the late Massachusetts senator, had embarked on that crusade after a 1964 plane crash left him with debilitating injuries and a long convalescence. Like his presidential ambitions, Kennedy's journey to overhaul the healthcare system fell short. He died last August, months before his dream of landmark legislation became a reality this weekend.
If Kennedy were still alive during the Senate debates, I bet he would have taken the occasion to mention what was going on in his home state, where the Massachusetts Division of Health Care Finance and Policy was conducting hearings a few weeks ago about exorbitant insurance rate hikes.
The session was overshadowed by the goings on at the White House and Congress, but the Massachusetts issue may have been a true compass, in itself, laying the groundwork for what is going on nationally in healthcare. Massachusetts was one of the first to dip its toes into the waters of healthcare reform.
Massachusetts is still grappling with high insurance rate hikes, and that's what is going to happen in the rest of the country despite the healthcare legislative victories for the Obama Administration over the weekend.
Rate hikes get people's attention. And it was no different during the Massachusetts hearing, when one of the most remarkable statements was made early on by Eric H. Schultz, president and CEO of Harvard Pilgrim Health Care. Schultz said that some physicians and hospitals in Massachusetts are paid upward of 300% to 400% higher for some services compared to others.
"The variations in overall reimbursement to hospitals can also be as high as 300%, but the difference when comparing facility inpatient rates or outpatient rates can be as much as 300 to 400%," Schultz said in a written statement. "The difference in rates between the lowest reimbursed physicians and the highest can be as much as 300% for the same services. Some physician and hospital networks are paid well in excess of 200% of Medicare."
The hearing appeared to reaffirm much of what Massachusetts Attorney General Martha Coakley has emphasized in her health marketplace investigation. "Increasing reimbursement rates demanded by providers for medical services, and the trend toward providing care in more expensive settings are the primary drivers of increasing healthcare costs, increases that are reflected in premiums," she said.
The politics of providing care is a part of the problem, both in Massachusetts and across the nation. "Political leverage affects prices that Medicare pays," said Nancy Kane, professor of management and associate dean of educational programs at the Harvard School of Public Health, referring to the national picture and a proponent of payment reform. "Much of the long-term increase in healthcare costs is attributed to new technologies, some of which add great value and others of which are of dubious value. Unfortunately, it is often not obvious which technologies fall into which category," she said.
Testimony was elicited by Massachusetts officials that focused on problem healthcare cost areas, such as questionable administrative expenses among insurers; too costly physician groups, specialty departments in hospitals, and radiology imaging centers; increased specialty drugs, and too many duplicative services within the same geographic area in what was sometimes dubbed a "medical arms" race. These were about healthcare rationales for increases described in Massachusetts, but could have been said about any place across the country.
Which leads us to Washington D.C., Sen. Edward M. Kennedy's old stomping ground on the Democratic side of the Senate aisles.
David Cordani, CEO of CIGNA, had mild praise for the health reform legislation, but echoed other insurers in saying the bills never get to the core of the problem of healthcare costs, namely medical bills.
Cordani told his hometown Hartford Courant that despite the new healthcare plan, the price of health insurance will continue to rise, noting, for instance, that proposed $70 billion in taxes to insurers over the next 10 years may be passed on to consumers.
So it appears that neither the insurers nor the Obama Administration will be dealing with the issue of rising healthcare premiums this time around, but they will continue to occur. When Anthem Blue Cross proposed 39% rate hikes in California, there was immediate and vociferous reaction on Capitol Hill, but no legislation.
In Massachusetts, they are looking for possible answers to the questions of high costs.
Tufts Health Plan said it supports a state Special Commission on Payment Reform's recommendation that global payments become the predominant form to providers in the state. Such a payment form could result in more "efficient and higher quality of care."
To dig deep into the details of what is needed, Tufts has created an internal unit that works specifically with medical groups to "improve performance, check data, and monitor for quality of care being delivered," said the company's President and CEO James Roosevelt, Jr. According to Roosevelt, Tufts has tried to address some of those "medical" cost issues before they occur.
Roosevelt is the grandson of the late President Franklin Delano Roosevelt. Ted Kennedy would have liked that.
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Health reform could help the insurance industry more than any specific aspect in healthcare by drawing in tens of millions of new customers and billions of dollars of more revenue.
For many insurers, they are definitely keen on the idea of an individual mandate, which, estimates suggest, will bring 32 million to insurance, according to healthcare experts. The figures have certainly mooted criticism insurers voiced about the health bill in recent months.
Insurers say upcoming changes, such as covering pre-existing conditions are long overdue, but experts say insurers are concerned about unfolding regulations surrounding the legislation, and customers may face massive confusion as they all try to sort out specifics of new rules.
Experts also said that insurers are worried that while insurance will be required for all Americans, some people—especially the young and healthy—may forgo insurance altogether and just pay the annual penalty, less than $700 a year, leaving insurers in search of less costly customers instead of people who require more care.
Still, some insurers were more enthusiastic than others in reacting to the passage of the healthcare reform bill. However, the healthcare plans were steadfast in maintaining that the legislation doesn't address the underlying issues for real reform, such as medical costs.
Such provisions are "long overdue," and are of "historical significance," said David Corani, president and CEO of CIGNA Corp. But Corani was critical about the overall congressional action saying, "It is CIGNA's strong belief this law does not adequately improve quality and address the dramatic cost increases of our healthcare delivery system."
"In particular, we must change from pay per service or quantity to pay for outcomes and efficiency," Corani added.
The legislation channels $875 billion to expand insurance coverage over the next decade, with most changes slated to begin in 2014. The bill eliminates pre-existing conditions from coverage decisions and provides full coverage for preventative services.
America's Health Insurance Plans (AHIP), the insurance lobby, believes that the coverage expansions included in the bill represent "a significant step forward," said Karen Ignagni, president and CEO in a brief statement after the House vote. But AHIP also expects the legislation to "exacerbate the healthcare costs crisis facing many working families and small businesses," Ignani said.
In recent months, AHIP had worked against the legislation after initially favoring it. A few days before releasing Ignani's statement, AHIP criticized the legislation as lacking a "system-wide approach that would actually bend the cost curve downward." AHIP also said the legislation would "encourage people to wait to purchase coverage until they are sick, which unfairly penalizes those who currently have coverage."
The AHIP statement noted that 23 million Americans would remain uninsured once this bill is fully implemented.
A key moment in the Obama administration's effort to rally public support for healthcare reform came earlier this year when it was disclosed that Anthem Blue Cross proposed a 39% rate hike in the individual market in California.
Kristen Binns, a spokeswoman for WellPoint, owner of Anthem Blue Cross, said the company is "extremely pleased to see that more Americans will now have access to coverage."
Saying that the priority is meeting the "healthcare security needs" of the company's 34 million members, Binns added, "We remain concerned that the bill passed yesterday does not address long-term cost containment measures that will make the system sustainable."
There are also issues about how to educate consumers about these changes. Fred Karutz, general manager of health plan solutions at Silverlink Communications, predicted there will be "mass confusion, for employees, members, and providers about how the new rules apply" for insurance over the next few months.
Insurers will need to undertake a "multi-faceted communication approach, providing each constituency a road map of change, and how to access the latest information," Karutz says.
Among the changes for health insurers are rules that could drive smaller insurers out of business, according to conservative commenter Edmund Hasilmaier, senior researcher for the Heritage Foundation's center for health policy. Creation of state-run exchanges in the bill potentially undermines insurers' ability to have flexibility in underwriting and other matters because the government may have final control on types of coverage in a market, such as excluding insurers from some exchanges because of cost, he says.
Hasilmaier adds built-in regulations within the new measures may result in a stranglehold on the industry, as a "regulated utility with a limited rate of return with very few players" in a position to make profits.
Hasilmaier says young people not buying into the health insurance system could "exacerbate everything they are trying to fix."
While some insurers oppose reform and some are mixed, Kaiser Permanente of California has been one of the most enthusiastic supporters.
"Reform will make history and improve lives in some important ways," company spokeswoman Trish Doherty said. "This legislation also would establish a number of important principles that, over time and with continued refinement, should improve the functioning of the health insurance market and healthcare delivery system."
President Obama has described Medicare Advantage as a "waste," and Congress has agreed, proposing $132 billion worth of cuts to the program over 10 years in the health reform package.
While some senior citizens are worried about the cuts, experts say that payment reductions to private insurers involved in the program may pave the way for seniors to move into traditional Medicare or commercial individual plans. Under the Medicare Advantage cuts planned in reform, the first payment cuts would occur in 2011. Health insurer CEOs are advised to begin now to "absorb reduced payments," according to one health plan expert.
Private insurers involved in Medicare Advantage often offer extra healthcare that seniors in traditional Medicare don't get, such as vision care or dental, or even gym memberships. But opponents say the private Medicare Advantage plans cost the government 14% more than traditional Medicare.
The Congressional Budget Office has stated that the health reform measure passed by the House would result in a deficit reduction of $118 billion, and an additional $20 billion would come from changes included in the Senate version.
Nationwide, the average value of the extra benefits not covered by Medicare, would be cut $67 per member per month in 2019.
The Medicare Advantage reductions would cause "massive disruption for the 10 million senior citizens enrolled in the program," says Karen Ignagni, president and CEO of America's Health Insurance Plans, the insurance lobby. "If these cuts are enacted, millions of seniors will lose their coverage and face higher premiums." Senior citizens are expected to be notified of the cuts sometime this year.
Given the proposed cuts, health insurers may drop some of these extras or insurers may cut benefits and/or increase premiums, experts say.
These cuts could cost insurers to drop Medicare Advantage and seniors to leave the program. In fact, CBO estimates that Medicare Advantage enrollment would drop by 4.8 million members by 2019.
Robert Moffit, director of the conservative Heritage Foundation's center for health policy studies, calls the Medicare Advantage cuts "terrible." "It's not a pleasant situation for senior citizens. If you don't have Medicare Advantage, you have to buy supplemental coverage, employer or go into the individual market. Senior citizens are going to be very unhappy."
But the reductions are not the death knell for Medicare Advantage, says Jean LeMasurier, senior vice president for public policy for the Gorman Health Group. She says Medicare Advantage has been consistently growing "(and) companies are getting new applications, and as long as they can be competitive, they will make it work."
In a Gorman report issued earlier this year, LeMasurier stated that "Medicare Advantage plans should start preparing now to absorb reduced payment over the next few years."
The Senate bill, she says, would reduce payment "over the next decade by cutting payment 3% in 2011 and phasing in a competitive bidding process over three years. Plans should be engaged in scenario planning for their specific service areas right now to better understand the outlook."
Under the new funding scenarios, companies initiating Medicare Advantage may focus on "care coordination and client care management," she says. For those senior citizens who can't afford to stay in the program, "they may go to different Medicare, it's hard to predict now," LeMasurier says, adding that seniors are "savvy shoppers."
One argument about Medicare Advantage is that insurers should be reimbursed based on the quality of their benefits. Trish Doherty, spokeswoman for Kaiser Permanente in California, says there is a need for "incentives for high-quality Medicare Advantage plans and improvements in coverage of preventive care."
"Over the long term, we must look at how we pay for and how we provide care as a nation," Doherty says.
Most commercial health plans in New York maintained profits in 2008 despite the onset of the recession because they were buttressed by strong Medicare Advantage returns, according to a new United Health Fund report.
Those strong returns could soon be threatened though. United Health Fund said there may be a "rough road ahead" in Medicare Advantage, with possible major cuts to the program under healthcare reform, adding its fee-for-service plans may "wither on the vine."
United Health Fund officials also noted a continued decline in enrollment in commercial markets, and growing dependence on public insurance against the backdrop of state fiscal challenges, citing those concurrent events as causes for concern.
"Medicare Advantage income continues to be critical to health plans' bottom lines," author Peter Newell, co-director of the United Health Fund's health insurance project, said in a statement. "But if changes on reduction in the payments are adopted either as part of federal deficit reduction or as part of health care reform to offset coverage expansions, health plans—and consumers—will have to adjust to a vastly different landscape."
The report focused on health plan enrollment and financial results to profile New York's private markets and state and federal public managed care funds. It was written by Newell, Allan Baumgarten, a consultant, and Jenny Heffernan, a research assistant for United Hospital Fund, a health services research and philanthropic organization.
The House and Senate are in the midst of reviewing legislation for healthcare reform, with proposals that may result in significant payment reductions to Medicare Advantage insurers, at least $100 billion over a 10-year period. More than 10 million seniors are enrolled in Medicare Advantage, and the changes could result in fewer options for them.
In 2008, Medicare Advantage "continued to be a reliable source of health plan profits, amounting to $400 billion," according to the report. In New York, Medicare Advantage plans increased by 18% from 2007 to January 2009, exceeding 800,000 members, according to the report.
As far as Medicare Advantage is concerned, the report stated that there may be a "rough road ahead," noting that its "income makes up a large proportion of overall health plan net income and may not be sustainable if federal healthcare reform relies on spending restrictions in Medicare Advantage premium payments to support non-Medicare coverage expansion or if broader deficit-cutting measures outside of the context of healthcare reform include similar premium reductions."
The report added, "Many observers believe Medicare Advantage private fee-for-service plans may also wither on the vine because of requirements that these plans form provider networks in 2011."
Overall, "As of 2008, New York health plans were, for the most part, weathering the recession, retaining surpluses, and maintaining profitability," the report states.
But aggregate health plan profits were reported below $800 million for the first time since 2001 and Article 43 insurers, which operate HMOs and indemnity plans under nonprofits, posted losses of $166 million, compared to gains of more than $480 million in 2006. The report stated it was a "very difficult year" for Article 43 corporations, making them a glaring exception among the portfolios.
"Enrollment in commercial markets continues to decline, there's a growing dependence on public insurance programs, and our state is fact the biggest fiscal challenge in decades," stated Jim Fallon, fund president, in a statement. "These concurrent trends are cause for concern."
Among the report's findings:
Despite a decline in commercial group enrollment of more than 500,000, the loss of 200,000 jobs in New York between July 2008 and July 2009, and modest inflation rates, health plans collected more than $46 billion in premiums for coverage in 2008, an 11% jump over the 2006 level.
The state's Prepared Health Services Plans, which specialize in public managed care programs, such as Medicaid Managed Care and Family Health Plus, increased their collective market share to 12%, reflecting growing enrollment in public programs; two of these plans— Fidelis and HealthFirst—each exceeded $1 billion in premiums for the first time.
HMOs earned less money on their small group business than they did on their individual and Healthy NY programs.
Hospitals sometimes face issues that CEOs wouldn't like to brag about. There may be lapses in quality of care, such as hospital-based infections or failure to adhere to treatment guidelines.
A hospital may fall below optimal standards, despite the fact that the facility may be working diligently at quality improvement.
When hospitals face these issues, they don't often look to a health plan for help, but that's the case in California.
An evolving pilot program in the Golden State involves a health plan, Blue Shield of California; and a hospital system, Adventist Health as well as the California Health Care Coalition (CHCC), a membership organization of public and private sector employers, unions, employer organizations, and health & welfare trust funds representing 4 million Californians.
Under the three-year pilot program, the hospital, providers, and payers are looking to improve healthcare quality and trim costs, and all the while, working together. That's the goal at least.
They are doing this in their own neighborhood, without waiting for Congress, or the President or anybody in Washington, DC, telling them how to improve patient care. This pilot represents an interesting scenario, and we should all watch how it unfolds.
The planning began in 2007, when Blue Shield and CHCC began talking about a coordinated pilot to improve quality, while lowering costs. Blue Shield and CHCC signed an agreement to run the Hospital Quality Improvement Pilot and find a hospital to work with them.
The CHCC had been concerned that there was a "disconnect" between high costs and the actual quality of care in California hospitals. The costs were going up, that's for sure. And what about that quality of care? Was it inconsistent?
"Our goal was to work in local markets and improve quality as a means to reduce overall healthcare costs," says Michael O'Neil, Blue Shield of California's director of healthcare value.
Specifically, Blue Shield was looking at California's central valley. "We looked at what would be an appropriate provider partner and Adventist came to the top of the list."
The Adventist healthcare system includes 17 hospitals, 14 home care agencies, and four joint-venture retirement centers.
Adventist wasn't selected because the healthcare system was rated at the top. Or that it was solidly even in its performance.
The hospitals' report cards yielded grades that showed there were needed improvements, according to Blue Shield and Adventist officials. A 90% score judged by the California Hospital Assessment & Reporting Task Force means that the hospital has achieved top 10% scores. That is what Adventist wants.
Hospital officials say there are some elements in Adventist's healthcare delivery system rated highly, but others were average, and some fairly low. Generally, there are specific areas of care or documentation that are cited for needed improvement.
"They do have a wide variation in their quality scores," says O'Neil, referring to Adventist. "But over the past several years, they have been working really diligently to improve quality internally and have been working with Johns Hopkins University. We felt there was good synergy about this."
In the fall of 2008, Adventist was picked to join the pilot, and the hospital system agreed. JoAline Olson, vice president for clinical innovation for the Roseville, CA-based Adventist, says the coalition came at a good time for Adventist because it was in the midst of a single-minded purpose: trying to improve quality for its patients.
Adventist Health was selected as a partner "due to its strong presence in the Central Valley Market and strong commitment to quality," according to Blue Shield officials.
Specifically, the health system showed a significant investment in raising quality across the system by, among other things, implementing IT infrastructure improvements, developing sustainable "culture changes," and creating physician/RN councils at the hospital and system levels to improve communication.
The pilot involves four Adventist Hospitals: Central Valley General Hospital and Hanford Community Medical Center, both in Hanford; San Joaquin Community Hospital in Bakersfield, and the Sonora Regional Medical Center in Sonora.
The three-way partnership aims to create an environment in which hospitals are supported and motivated to dramatically improve on different levels in measurable improvements: Clinical quality, patient safety, health outcomes, and patient satisfaction.
"We've been on a quality journey for several years," says Olson. "Our goal is to have 90% in three years and get rid of the variability. It would be fair to say there is room for improvement. We aim to increase quality, decrease cost, and provide the highest valued care for purchasers, payers, and ultimately for the patients."
We'll be waiting for the final grades, but this could serve as a model for other regions as all stakeholders struggle with improving quality and reducing costs.
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Health insurers told a Massachusetts agency examining rising healthcare costs that a state trend toward "providing care in more expensive settings" is the primary driver of increasing health costs.
Eric H. Schultz, president and CEO of Harvard Pilgrim Health Care, submitted testimony before the Massachusetts Division of Health Care Finance and Policy hearing on Tuesday that stated some physicians and hospitals are paid upward of 300% to 400% higher for some services compared to others.
"The variations in overall reimbursement to hospitals can also be as high as 300%, but the difference when comparing facility inpatient rates or outpatient rates can be as much as 300% to 400%," Schultz said in a written statement. "The difference in rates between the lowest reimbursed physicians and the highest can be as much as 300% for the same services. Some physician and hospital networks are paid well in excess of 200% of Medicare."
"As has been highlighted in the reports issued by the division and the Attorney General's Office in preparation for these hearings," Schultz stated, "increasing reimbursement rates demanded by providers for medical services, and the trend toward providing care in more expensive settings are the primary drivers of increasing healthcare costs, increases that are reflected in higher premiums."
In written testimony, the Tufts Associated Health Maintenance Organization also spoke of disparities in costs. "Our efforts to contain unit cost increases have been constrained by provider market leverage driven by system size, reputation, service uniqueness, and geographic location," the company stated. "Our efforts also have been constrained by market preferences dictating that we maintain as broad a provider network as possible."
The insurers said in testimony their findings mirrored a Massachusetts' Attorney General's Office investigation that focused on how higher reimbursement rates were generated by the most powerful hospitals, not necessarily those providing the best care. The division is continuing hearings Thursday and Friday.
"The division's findings generally are consistent with Tufts Health Plan's experience, particularly with regard to the impact of unit cost inflation on health insurance premium increases," Tufts Associated Health Maintenance Organization stated.
Attorney General Martha Coakley, who has conducted a yearlong investigation into the healthcare cost increases, presented her findings to the division, reiterating statements she made in a preliminary report in January.
"We found that healthcare costs most closely correlated the market leverage of hospitals and physician groups, rather than other issues that we would expect—like quality of care or patient population, " Coakley said in a statement.
"Prices paid by health insurance companies to hospitals and physician groups vary significantly within the same geographic area and among providers offering similar levels of service, and price variations for hospitals and physicians are not explained by quality of care and similar factors," the attorney general said in a statement.
John J. Curley, senior vice-president of Blue Cross Blue Shield of Massachusetts, also said in a written statement that the company believes the state health reform played a role in increases and that medical expenses drove the costs.
"The increase in unit costs before considering shifts in sites of service and provider mix, contributes approximately 50% to medical cost trend," Curley stated. "Healthcare costs and trends are also impacted by shifts in the sites where members receive medical services."
Curley mentioned the effects of the state's health reform, which merger the individual and small group segments in July 2007.
"The individual segment has claims experience and trends that are significantly higher than the group business, due to higher morbidity and unfavorable selection in this segment. This has resulted in increasing per member per month annual trends across all services for the merged small group an individual segment by 4-5% and for the entire commercial group business by approximately 1-2%."
Schultz's testimony noted a difference in the company's experience compared to the Attorney General's findings.
"One specific area of the reports in which the findings are materially different than our experience is the analysis of retention, the portion of the premium that covers administrative expenses and contributes to surplus," Schultz said. "The report concludes that in 2009, small group business had the highest retention, followed by mid-sized business, with large group having the lowest retention. That was not the experience for Harvard Pilgrim, which saw the highest retention in the midsize segment, followed by large group, with small group having the lowest retention.
