As many as 20% of hospitals will seek mergers over the next five years, and none of the 306 hospital referral regions in the United States is considered "highly competitive," researchers say.
Hospital mergers that create monopolies in their service areas can drive up costs and reduce quality while presenting a risk for a government bailout if they become "too big to fail," two health policy experts from Johns Hopkins University say.
In a commentary in the Aug. 13 issue of JAMA, the two researchers call on the Federal Trade Commission to be more aggressive in its review of hospital mergers, particularly when the mergers could create a single dominant hospital system in one geographic area.
"What we are saying is that the basic principles of economics hold true for medical pricing in the same way they do for any other industry," says "viewpoint" lead author Marty Makary, MD, MPH, professor of surgery at the Johns Hopkins University School of Medicine and associate professor of health policy and management at the Johns Hopkins Bloomberg School of Public Health.
Makary and his co-author, Tim Xu, a student at the Johns Hopkins University School of Medicine, note that hospital consolidation has accelerated at an "alarming" rate over the past five years, with 95 hospital mergers of some sort occurring in 2014, the most since 2000.
Marty Makary, MD
The two researchers cite studies showing that as many as 20% of hospitals will seek mergers in the next five years, and that none of the 306 hospital referral regions in the United States is considered "highly competitive" and that nearly half are "highly concentrated."
Makary draws parallels between hospital consolidation and the consolidation of the banking industry, which required a taxpayer bailout when it collapsed during the Great Recession. He says such a scenario could occur when some geographic regions are controlled by one health system.
"If a bank goes out of business because of bad decisions and the consequences affect everyday businesses and consumers—and that is what happened—as a society, we decided that because of that it is justifiable to use taxpayer dollars to bail out the bank. That is why we created the concept of 'too big to fail' as being something that there is a low appetite for in the United States. We have created healthcare systems that are so large that they dominate an entire state and maybe too big to fail."
Makery rejects the assertion that hospitals are consolidating to protect themselves from consolidation in the health insurance sector.
"There is a huge difference," he says. "While we still have a small group of geographically large insurers, the competition at the local level is still fierce. That competition keeps the market healthy and keeps pricing reasonable for the consumer."
"But when you get sick," he says, "if there is only one hospital system in a giant geographical region the patient is far less likely to choose care far outside that region than they are to choose a different health insurer when they are shopping."
"I believe insurance pricing remains very competitive. The pricing is transparent and the dollar amount spent on benefits is public information and unrestricted," Makary says. "Price increases are lower at the hospital level when there is negotiating leverage by the insurers. When there is less leverage by insurers the prices are higher and those are passed on directly to consumers in the form of high deductibles and copays."
Clinical Integration vs. Consolidation
Makary also challenges the idea that hospitals need to consolidate to prepare for integrated care and population health. That claim, he says, relies upon "metrics that are far too immature to be meaningful for value-based goals. The enthusiasm for ACOs has outpaced the maturity of the metrics for patient outcomes."
He says there is much evidence to suggest that benchmarking hospital quality scores at the state and regional level has had a tremendous effect on improving quality, and that does not require consolidation.
"The method is there and the alignment of incentives are there for hospitals to perform well and to collaborate around quality," he says. "Clinical integration is a great way in which patient information can be shared across institutions, where affiliations can allow expertise, consultations, and referrals to connect the most appropriate doctors and facilities with the patients who need that specialized care. But all these benefits can occur within the context of hospitals competing or not being wholly owned by one central corporation."
Makary says he is not rigidly opposed to consolidations, as long as it doesn't muzzle completion. He notes that his employer, Johns Hopkins Hospital and Health System, has consolidated "in a highly competitive geographic region that remains highly competitive with several large health systems."
"The prerequisite is that there remains completion," he says. "There are no pricing concerns when you have mass consolidation of a system competing with another system. The concern is in a geographic region where patients don't have feasible options to get care elsewhere."
Mega-mergers that create monopolies put hospitals on one of two roads, Makary says.
"One road is where they apply best practices and improve quality across the board and create a tide that raises all boats in their system, which is good," he says.
"On the flip side, other systems have had their central management detached from the frontline providers in their system and the disconnect has caused problems. If you talk to doctors and nurses in these large systems they will tell you they know how to improve quality of care in their system but that the system is too large for them to have input and their wisdom is not being solicited."
Let's not forget the economic benefits that Medicaid provides for rural America. The money paid to providers, however insufficient, is better than swallowing the cost whole with no reimbursement.
Much has been written of late to note the 50th anniversary of Medicare and Medicaid, and with good reason. Despite their many problems and budgetary pressures, these two programs are among the most successful pieces of legislation in the history of the United States. It would be fair to say that Medicare and Medicaid have improved, enriched and lengthened the lives of tens of millions of Americans.
For my purposes, I'll concentrate today on Medicaid, which critics hate, not because it doesn't work, but because it does. Yes, the reimbursements are too low. Yes, mandates such as the Two-Midnight Rule have no basis in reality. Yes, recovery audit contractors are like pit bulls that must be leashed and held financially accountable for over-zealous auditing. Yes, Medicaid strains state budgets. There is no shortage of complaints.
Nonetheless, the program and its many experiments and pilot projects in various states demonstrate that government can innovate and provide access to healthcare for the poor and the sick, a demographic that commercial health insurance companies (and some providers) generally avoid because they're— so far— not profitable when you take on the risk.
What would we be like without Medicaid? Unfortunately, to some extent that's not just a rhetorical question. The 21 states that have declined to expand their Medicaid populations under the Patient Protection and Affordable Care Act provide a sad comparison to those states that have expanded their rolls. For example, a study this spring by the Kaiser Family Foundation found that if the 21 states that had not expanded Medicaid were to do so, then:
The number of nonelderly people enrolled in Medicaid would increase by nearly 7 million, or 40%.
4.3 million fewer people would be uninsured.
There would be $472 billion more federal Medicaid spending from 2015 to 2024.
States would spend $38 billion more on Medicaid from 2015 to 2024.
Savings on reduced uncompensated care would offset between 13% - 25% of that additional state spending.
States would be able to realize other types of budgetary savings if they expanded Medicaid that are not included in this report.
The alleged reason why elected leaders in these states say won't expand their Medicaid populations is because they're afraid of an expensive entitlement program that they won't be able to afford. Yes, it is expensive, but doing nothing costs more both in terms of dollars and lives.
The Cost of Uncompensated Care
"Many of the states that have decided against Medicaid expansion are those who would gain the most," the KFF report noted. "This applies when examining the impact of expansion on the uninsured, increases in federal Medicaid funding, or reductions in uncompensated care."
"Reduced costs for uncompensated care are one of several sources of savings that would help to mitigate that increase in state costs," the study found. "Assuming that states only realize 25% to 50% of the reduction in their share of uncompensated care, those savings would offset 13%— 25% of the total increase in state Medicaid spending due to expansion. In addition, states could realize other types of budgetary savings and increases in revenue if they expanded Medicaid that are not included in this report."
Jodi Schmidt, a career rural hospital and Federally Qualified Health Center administrator from Kansas, and president of the National Rural Health Association, told Congress last week that Medicaid is particularly vital for rural America. Unfortunately, the majority of rural residents in this country live in states that are not expanding Medicaid. In fact, poor and rural states are least likely to expand Medicaid, even though their residents rely upon it the most.
Rural hospitals in these states continue to serve the uninsured, but reductions in disproportionate share payments and other Medicare and Medicaid reimbursement reductions have forced 55 rural hospitals to close since 2010, and 283 others are close to closing.
NRHA estimates that if those hospitals close, 700,000 rural patients will lose access to their local hospital; 50,000 jobs in rural America will be lost; and $10.6 billion in economic harm.
"After nearly 3 decades as a rural hospital, clinic and FQHC administrator, I have never been more concerned about the future. The rural safety net is unraveling," Schmidt told Congress. "I believe we must explore Medicaid Expansion through partnerships with organizations other than the state, working together to address the gap between traditional Medicaid and eligibility for the exchange," Schmidt says.
"Provider-based demonstration programs have proven successful, as the precursors to the Critical Access Hospital program, among others. If allowed the opportunity to create innovative new approaches to expanding Medicaid, I feel confident you will find willing providers."
Let's not forget the economic benefits that Medicaid provides for rural America. The money paid to providers – however insufficient – is better than swallowing the cost whole with no reimbursement. And the money paid to rural hospitals and other providers helps to pay for the salaries of employees. That money is in turned cycled through the community in the form of goods and services. If those hospitals close, those tiny economic engines seize up.
Of course, refusing to expand Medicaid was never about sound health policy or state budgets. It has always been about partisan politics, with a side dish of rigid ideology that insists that government can do nothing correctly and government doesn't create jobs.
People who actually deliver the care know better. They've seen what Medicaid can do, every day.
The findings in a "secret shopper" survey of about 300 primary care providers across the state before and after the implementation of the Healthy Michigan Plan were counterintuitive.
Access to primary care physicians in Michigan increased after the Medicaid expansion, even with the rapid addition of about 350,000 newly insured adults, a new study shows.
Renuka Tipirneni, MD, the lead author of the study and a clinical lecturer at the University of Michigan Medical School, says the findings in the "secret shopper" survey of about 300 primary care providers across the state before and after the implementation of the Healthy Michigan Plan were counterintuitive.
Renuka Tipirneni, MD
"We had an expectation that practices would get full due to the multiple insurance coverage expansions, both through Medicaid and private insurance on the exchanges under the [Patient Protection and] Affordable Care Act," says Tipirneni, who is also a practicing internist. "We thought we would see decreased availability of appointments and longer wait times. What is interesting is we saw the opposite happen."
In a study published in Health Affairs, U-M researchers in 2014 called primary care physicians posing as relatively healthy patients looking for a routine checkup with a new healthcare provider. For those who said they had Medicaid, 49% of clinics offered an appointment before the expansion and 55% offered an appointment after expansion.
For those who posed as patients with private insurance, 88% of clinics said they could take them before expansion and 86% said they could after expansion, the study said.
Overall, wait times for the first available appointment for all patients stayed the same as before the Medicaid expansion took effect, at about a week.
"There was more flexibility in the capacity of primary care providers to accommodate new patients than we initially anticipated," Tipirneni says "As a practicing primary care physician, I can see there are multiple impacts on my schedule and how easy it is to accommodate new patients and new patient appointments on the schedule. It's not just related to the number of providers. It is also related to the types of providers, whether they are physicians or non-physicians. It is related to how many appointments we can make available both on a daily basis and on a long-term basis."
One Huge Caveat
Before the PPACA, Medicaid reimbursements in Michigan were about 50% of Medicare. During the survey period, Medicaid rates were temporarily raised to 100% of Medicare, specifically to entice primary care physicians to accept Medicaid recipients. That rate has now dropped to about 75% of Medicare.
Tipirneni says it's not clear if new Medicaid patients would have a more difficult time finding a primary care physician now that the rates have decreased to 75% of Medicare.
"That is a good question and one of the reasons why we continue to track these patterns of appointment availability and wait times," she says. "We continue to track this into 2015 to see how these availability of appointments may or may not change once the rates have gone down."
Tipirneni says there were concerns among clinicians and health policy experts in Michigan that the rapid expansion of Medicaid would make it difficult for new enrollees to see a primary care physicians within three months of gaining coverage – a key provision of the Medicaid waiver that created Healthy Michigan Plan.
Tipirneni says the easy access to primary care may reflect increased efficiencies from primary care practices.
"Primary care practices are redesigning how they practice and a lot of that is related to improved efficiency," she says. "A lot of it is to improve patient-centered care. This is not related to coverage expansion but happening at the same time. There is a strong movement for patient-centered care and particularly having patients in medical homes and primary care clinics. There are many incentives that weren't always the ones intended that have made primary care practices potentially more efficient."
There were exceptions. "Clinics that had long wait times for new patient appointments had long waits for everyone," says Tipirneni.
About half the clinics had only one or two primary care providers; 6% had 10 or more providers. Nine percent of the clinics were safety-net clinics, in line with the state's overall distribution of clinics that accept all patients regardless of insurance status. While there was a small drop in the percentage of clinics that were taking new privately insured patients after expansion, this did not result in an overall increase in wait times.
Tipirneni says it's not clear if the results of the Michigan survey would apply in other states.
"There is the old adage that if you have seen one Medicaid program you've seen one Medicaid program," she says. "There are important distinctions and differences between settings and states and different programs and for that reason it is really going to be important to study this across many states."
Treating blood clots as a "never event" under pay-for-performance guidelines doesn't reflect reality, says a researcher who is calling for a re-evaluation of venous thromboembolism outcomes and process measures.
Hospitals are incurring unfair financial penalties when their patients suffer from blood clots, even when clinicians can demonstrate they've taken every best-practice preventive measure to reduce complications, according to a study published the July 29 issue ofJAMA Surgery.
Elliott R. Haut, MD, lead author of the study, says blood clots are treated as a "never event" under pay-for-performance guidelines and that doesn't reflect reality.
"We all agree that we should eliminate preventable harm. The operative words are is it really preventable," says Haut, who is also an associate professor of surgery at the Johns Hopkins University School of Medicine.
"Some things are truly preventable, these never events such as wrong site surgery or leaving objects in patients by accident after surgery. Those should be never events that happen 0% of the time."
Reducing or eliminating complications such as blood clots are a completely different matter, says Haut, who is also on the faculty at the Johns Hopkins Armstrong Institute for Patient Safety and Quality.
"We are never going to be perfect in medicine. This is not a perfect assembly line where every widget is the same and comes out perfectly each time," he says. "Each patient comes with their comorbidities their sickness, their illnesses and whatever and we know when we do surgery there are risks. Blood clots are another example of this. We can't drive the rate of blood clots down to zero."
For the study, Haut and his team reviewed case records for 128 patients treated between July 2010 and June 2011 at The Johns Hopkins Hospital, and who developed hospital-acquired venous thromboembolism (VTE). All 128 were flagged by the Maryland Hospital Acquired Conditions pay-for-performance program. The researchers looked for evidence that the clots could have been prevented.
Thirty-six patients (28%) had non-preventable, catheter-related upper extremity clots, leaving 92 patients (72%) with clots that were potentially preventable with medicine. Of those, 45 had a clot in the leg, 43 had clot in the lungs and four had both types of clots. Seventy-nine (86%) of the 92 patients were prescribed clot-preventing medications, yet only 43 (47%) received "defect-free care," researchers found.
Of the 49 patients (53%) who received suboptimal care, 13 (27%) were not prescribed risk-appropriate clot-preventing drugs, and 36 (73%) missed at least one dose of appropriately prescribed medication, the researchers said.
The 'Bar is Too Low'
Part of the problem, Haut says, is that the "bar is too low" for quality reporting. The existing VTE care goal, set by the Joint Commission and the Centers for Medicare & Medicaid Services, is that one dose of clot-preventing medication is given to patients within the first day of hospitalization. Haut says that's not enough.
Under current guidelines, he says, "the best 100% perfect hospitals have clinical outcomes for DVT and PE that are exactly the same as the lowest quintile."
"You get credit currently for giving one dose when patients may be in the hospitals for two weeks and they should be getting doses three times a day. They are saying 'we will give you credit because you gave them one dose when they came in' and they don't care about the rest of the hospitalization. That is what we have to fight for."
Haut says the results of his study illustrates the need to re-evaluate venous thromboembolism outcomes and process measures. Nearly half of the VTE events identified in the Maryland study occurred even though patients received best-practice prevention. If hospitals and clinicians can demonstrate that they took every precaution, Haut says they should not be penalized.
'A Very Doable Goal'
"It's two pieces: First pick the right medicine. Second, that patient should receive every single dose while they are in the hospital," he says. "That is a very doable goal. The goal of preventing (deep vein thrombosis) and making that number zero is impossible. But if we can provide defect-free care to patients and they get every single dose of best-practice prophylactics, I'll sleep well at night knowing I did the best thing for the patients, provided the best evidence-based care, and provided every single medication. Some bad events might occur, but then it is not my fault."
"If a patient has a (pulmonary embolism) and dies and we'd missed doses I'd feel horrible. That in my mind is preventable if we had done a better job."
A House Ways and Means Health Subcommittee hearing on rural health disparities gave a platform to three rural providers who testified about the burdensome 96-hour rule, the lack of residency slots for new physicians, and onerous regulations for physician supervision of nurse practitioners.
If you're an advocate for rural healthcare and the people who provide it, Tuesday was a good day at the U.S. Capitol.
The House Ways and Means Health Subcommittee hearing on "rural health disparities" included testimony from three rural providers who shared their complaints about the 96-hour rule, the lack of residency slots for new physicians, and overly burdensome regulations for physician supervision of nurse practitioners. These three issues are among the most pressing for rural providers.
People with knowledge of the challenges facing rural healthcare would be pressed to find anything new in testimony presented before the subcommittee, but that doesn't mean these concerns aren't worth reiteration.
In his opening remarks, Subcommittee Chairman Kevin Brady (R-TX) told his colleagues that "our constituents are seeing firsthand the difficulties caused by overregulation and bureaucracy. And it is our rural neighbors who pay the price when it comes to access."
"We are in the midst of a great opportunity to reform how Medicare reimburses hospital and post-acute care providers.I hope today we can make progress in understanding the concerns facing those in rural areas."
Brady singled out the 96-hour-rule as particularly egregious.
"Doctors at critical access hospitals have to certify that it is reasonable that an individual would be discharged or transferred to a hospital within 96 hours of being admitted to a critical access hospital. That arbitrary cut-off doesn't always match the medical reality for patients seeking treatment at facilities near their homes."
He also suggested that rules governing physician oversight might have to be revised.
Not Enough Physicians
"Physician shortages are a reality in many parts of this country," he says. "Rules that change the way routine therapeutic services are handled in rural areas or rules that bar physician assistants from providing services, like hospice, disrupt access and the continuity of care for rural beneficiaries."
Carrie Saia, CEO at Holton Community Hospital, a 12-bed critical access hospital in northeast Kansas, told the committee that the 96-hour rule disrupts care for older, more-vulnerable patients.
"As a rural hospital administrator, I can say with certainty that the discrepancies between the conditions of participation and conditions of payment have caused confusion and challenges for critical access hospitals," Saia testified. "This regulation also impedes the ability of the person who knows the needs of the patient best; the physician and other healthcare providers, and may unnecessarily cause patients to receive care away from their community."
Shannon Sorenson
Shannon Sorenson, CEO of Brown County Hospital, 23-bed critical access hospital in Ainsworth, NE, suggested that the rules governing physician supervision don't reflect the challenges of rural providers coping with a physician shortage.
"While physician supervision requirements are less of a challenge for large hospitals, they can be very problematic in areas with few doctors," she testified. "CAHs simply do not have the manpower and resources to abide by these arbitrary regulations. Nor does this regulation allow all of our licensed personnel to perform within the highest level of their scope of practice."
Tim Joslin, CEO of Community Medical Centers, in Fresno, CA, told the committee that his three-hospital health system supports about 250 medical residents in eight areas, including primary care and emergency medicine, and 50 fellows in 17 subspecialties.
"This GME program is a critical feeder to the region's entire physician population and we'd like to grow the program. We are constrained, however," Joslin testified. "Our Medicare funding for GME positions is frozen at a 1997 level," even as the service area's population has increased by one-third since then.
Tim Joslin
"We have expanded the program on its own beyond what Medicare funds by investing well over $400 million over the last 10 years," Joslin told the committee. "But considering that Community Medical Center now shoulders more than $180 million in uncompensated care each year, the ability to expand our GME program on our own is financially limited. And this, in turn, limits our ability to provide our region's residents access to healthcare now and in the future."
These hospital executives are reflecting the concerns of thousands of their colleagues in every state. It's difficult to predict what will come of this because Congress is so dysfunctional right now. However, it's gratifying to know that these concerns are getting a fair hearing.
Key drivers for spending growth include an improving economy, an aging population, spiraling drug costs, and coverage expansion under the Patient Protection and Affordable Care Act.
Healthcare spending growth will increase by an average of 5.8% annually over the next decade and will consume nearly 20% of the nation's gross domestic product by 2024, according to projections issued Tuesday by actuaries at the Centers for Medicare & Medicaid Services.
Key drivers for spending growth include an improving economy, an aging population, spiraling drug costs, and coverage expansion under the Patient Protection and Affordable Care Act, according to the federal government's projections, which were published Tuesday in Health Affairs.
As a result, healthcare spending as a share of the nation's GDP will increase from 17.4% in 2013 to 19.6% in 2024.
The nearly 6% annual increase in healthcare spending growth would likely wildly outstrip overall inflation in the larger economy, which was at 0.4% for the past year.
"When you have healthcare inflation growing much faster than CPI, you have healthcare spending crowding out other spending in the family budget, and it also happens in government budgets," says Tevi Troy, president of the American Health Policy Institute. "Medicare/Medicaid spending is starting to crowd out all other spending to the point where all government spending is going to be for healthcare and service to the debt."
Sean P. Keehan
CMS actuaries are calling the healthcare cost growth projections "relatively modest" when compared with the 9% average annual growth in healthcare spending in the 30 years before the 2007 recession. The actuaries note that the slowing growth comes even 8.4 million people have gained insurance coverage.
During a conference call with media on Tuesday afternoon, CMS actuary Sean P. Keehan said healthcare costs growth "will rebound from their relative historic lows, but they are not going to reach levels where they were pre-recession time."
"There are a few reasons why we think that," Keehan says. "There is going to be more price transparency and price sensitivity and the presence of narrow networks. We are projecting that they will keep the acceleration of price growth fairly modest."
CMS actuary Gigi A. Cuckler said the projections can't provide before-and-after scenarios to measure the effects of the PPACA.
"It's no longer pragmatic," Cuckler says. "We can't come up with a counter factual of what spending would have been. The law has been in effect for five years."
However, her colleague John A. Poisal said that "it is fair to say there are certain components of the law that have resulted in faster spending."
"The coverage expansion, people gaining coverage, [and] in some cases people moving to more generous coverage, is likely to exert upward pressure whereas some of the cuts to Medicare payment updates would exert some downward pressure," he says. "There is a mix and the ACA impacts how they play out."
The continued rise in high-deductible health plans that make consumers shoulder more of the cost is expected to play a significant role in keeping healthcare cost growth in check, CMS said.
Analysis 'Raises Questions'
Trish Riley, executive director of the National Academy for State Health Policy, says healthcare consumers are playing a big role in reducing healthcare spending growth.
"They talk about high deductibles as changing patient behavior, but that begs the questions of what happens to their healthcare and what does the underlying healthcare cost," she says. "Instead of addressing the tough issues of healthcare costs, we pass it on to consumers. There is nothing wrong with the analysis, but it does raise questions."
Healthcare spending growth in 2013 was close to the historically low rate of 4%. As the economy improved, CMS says spending growth increased to 5.5% in 2014, the first time growth surpassed 5% annually since 2007.
The increase in overall spending, which amounted to $3.1 trillion in 2014, was driven by the newly insured, and by prescription drugs, most notably the expensive new treatments for hepatitis C. As a result, prescription drug spending growth increased from 2.5% in 2013, to 12.6% in 2014, its highest annual rate of growth since 2002. From 2013 to 2014 prescription drug prices rose from 2.3% to 4.1%, CMS said.
John Holahan
Cost growth is expected to decelerate to 5.3% in 2015 as some of the initial effects of the PPACA moderate and drug spending slows. By the end of the decade, annual healthcare cost growth is expected to increase by 6% annually due to the medical costs associated with aging baby boomers, with nearly 40% of every healthcare dollar going to either Medicare or Medicaid.
For now, many value-based payment models and other reforms haven't been around long enough to determine their potential to drive savings, Cuckler says.
"To the extent that these programs have been implemented and actually illustrated savings, they have been incorporated into the Medicare and NHE projections," Cuckler says. "However, it is still too early to determine whether or not these demonstrations will have a lasting effect on health spending.
John Holahan, an institute fellow at the Urban Institute, says the CMS's 10-year projections are reasonable, at least for the first five years.
"They do a pretty good job of explaining what's happened recently and their projections out to about 2018 make sense for the reasons they give," he says. "But for the 2018–2024 period, it's almost like they throw up their hands and say the past several years have been too good to be true so it's going to go back to the way it used to be."
"The headline will be that we'll be pretty close to 20% of GDP by 2024. They could certainly well be right, but since so much of the action occurs in these out years when forecasting gets riskiest, you have to take it with a grain of salt."
Medicaid Expansion
The report also noted that Medicaid covered 66.5 million people in 2014, a 12.9% increase in lives covered. Spending growth for the program grew by spending 12%. However, because the newly enrolled Medicaid beneficiaries tend to be healthier than the traditional Medicaid enrollee, per enrollee spending growth fell off from 3.8% in 2013 to -0.8% in 2014, CMS said.
In the private sector, commercial health plans saw their premiums increase by 6.1% in 2014, up from 2.8% in 2013. Private health plans collected more than $1 trillion in 2014. The annual spending growth for private plans is expected to hit 5.6% in 2024, compared with 7.9% for Medicare and 5.9% for Medicaid.
Troy says he "was surprised by how unsurprising it was to see the numbers continue to go up."
"The ACA, by expanding coverage is spending more money. The population is continuing to age. We still have too many people who are overweight or obese. We have the overall costs going up, and insurance premiums are getting higher," says Troy, who was deputy secretary of the Department of Health and Human Services from 2007–2009.
"The moderation in health inflation over the past couple of years may be a trend that has played itself out. It predates the ACA. We are going to continue to see spending growth until we see some policy changes."
Troy says it's "presumptuous" to declare that any one action can slow healthcare cost growth, "because we haven't been able to do it."
"But overall we have to have a more value-driven health system. It can't be dependent wholly on third-party payments and people need to take more responsibility for their healthcare. It's easy to say, but getting there is hard to do."
The role of the primary care physician continues to be vital in the drive toward value-based healthcare, MGMA data shows.
A survey from Medical Group Management Association provides further evidence that primary care physician compensation is rising at a faster rate than that of specialists. However, the survey also shows that specialists earn nearly twice as much.
The findings, gleaned from comparative data from nearly 70,000 providers, found that primary care physicians reported a median compensation of $241,273 in 2014, a 3.56% increase since 2013. Median compensation for specialists rose to $411,852, a 2.39% increase since last year.
Todd Evenson, COO
"The role of the primary care physician continues to be a linchpin with the new healthcare models," says Todd Evenson, COO at Englewood, CO-based MGMA. "Obviously hospitals are playing a role hiring at a brisk pace, strengthening their referral networks and trying to ensure that they can deliver on a quality-based model."
"To do that," he says, "they are going to have to lean on and leverage those primary care physicians as well as non-physician providers to change the way that healthcare is delivered away from the fee-for-service environment to one where they can coordinate care and provide value."
The MGMA trends are consistent with other industry watchers. Merritt Hawkins, the Irving, TX-based physician recruiters, this month issued its annual survey of physician demand and compensation. Primary care specialties were among six of the top 10 most requested recruiting searches for Merritt Hawkins in 2014. Primary care compensation growth also outpaced specialists but a huge compensation gap remains between primary care physicians and specialists.
"In terms of compensation, there is a differential there clearly today," Evenson says. "There have been efforts across the industry to have more harmonization. There will be a continued separation in terms of where we see those values, but obviously we are seeing a growth curve that is a little faster in the primary care space. Will that differentiation be somewhat less in the future? That is quite likely."
"In 2012 our survey showed on average that 6.67% of compensation for primary care physicians was based on quality measures. In 2014 that had already migrated to 10.83% for primary care. On the specialty side, it was 4.6% in 2013 and 7.3% in 2014," he says. "This clearly indicates that the quality component is becoming a larger factor."
In 2012, Evenson says, 50% of survey respondents said that their compensation was 100% productivity-based. In 2014 that number was 25%. "That shift is pretty sizeable in terms of the composition of these compensation plans aligning with value measures, and reflects what is going on in these reimbursement models."
Increasing compensation for primary care physicians likely will have positive effect on luring more medical students into the field, Evenson says, but he says that surveys show that compensation is not a top consideration when medical residents choose their specialty.
"Compensation is not a driver for physician satisfaction," he says. "Compensation is a component, but it is more related to the type of patient care that physicians would like to deliver.''
The slowing growth of healthcare costs has extended Medicare's projected lifespan 13 years beyond projections made in 2009, the last report issued before the passage of the Patient Protection and Affordable Care Act.
The Medicare Hospital Insurance Trust Fund will have "sufficient funds to cover its obligations until 2030," the Medicare Board of Trustees said Wednesday in its annual financial review of the $613 billion program.
This year's projections are much the same as in last year's report, when trustees extended the solvency of the program another 13 years beyond projections in 2009, the last report issued before the passage of the Patient Protection and Affordable Care Act.
The report showed that Medicare covered 53.8 million people in 2014. Total Medicare expenditures were $613 billion, and income was $599 billion. The average benefit per enrollee was $12,432, about 2% higher than last year. Medicare outlays in 2014 were slightly lower for Part A and Part D, and higher for Part B than previously estimated.
The trustees said the projected portion of benefits that can be financed with dedicated money is 86% in 2030, falls to 79% in 2039, and then gradually increases to 84% in 2089. The 75-year actuarial deficit in the hospital Insurance Trust Fund is projected at 0.68% of taxable payroll, down from 0.87% projected in last year's report. The trustees credited the improved outlook to a change in methodology that shows a lower estimate for long-range healthcare cost growth.
Obama administration officials wasted no time crediting the Affordable Care Act with extending the life of Medicare and slowing cost growth.
"Once again, these reports demonstrate how the Affordable Care Act has bolstered Medicare and shored up the program's finances," Treasury Secretary Jacob J. Lew said in remarks accompanying the report.
Cori Uccello
"When the President signed healthcare reform into law, the Trustees projected that it would extend the life of the Medicare Trust Fund by 12 years, from 2017 to 2029. Since then, the Affordable Care Act has helped reduce the rate of healthcare price increases to their lowest rate in 50 years. As a result, the trustees have over the past several years revised down their projections of Medicare costs, and the projected life of the Medicare Trust Fund now extends to 2030, even further than estimated when the Affordable Care Act was signed."
Per-enrollee Medicare spending growth has averaged 1.3% over the past five years. Over the next decade per-enrollee Medicare spending growth, projected at 4.2%, is expected to be lower than the growth in overall health expenditures, which is projected at 5.1%.
Future Needs
Cori Uccello, Senior Health Fellow at the American Academy of Actuaries, says this year's report "continues what in the last few years has been somewhat of an improvement, especially in the long term."
"However, the program still faces significant challenges in the long term," Uccello says. "It's not just that the HI Trust fund is going to be depleted in 2030. It's that in general medical spending over time is still going to make up an increasing share of GDP and that is going to put pressure on the federal budget, and on household budgets. At least on the Part B and Part D side they are going to have to pay higher premiums down the road as spending goes up."
"So, the optimism in this report regarding lower long-term spending shouldn't make us complacent about the need to make changes to the program to ensure its sustainability in the long term."
Those changes, she says, include the push for structural reforms that move the program away from volume-based to value-based compensation.
Andy Slavitt
Those sentiments were echoed by Andy Slavitt, the acting Administrator the Centers for Medicare & Medicaid Services, who warned against complacency.
"We must continue to transform our healthcare system into one that delivers better care and spends our dollars in a smarter way for beneficiaries so Medicare can continue to meet the needs of our beneficiaries for the next 50 years and beyond," Slavitt said in prepared remarks.
Slavitt's remarks were echoed by Mary R. Grealy, president of the Healthcare Leadership Council, in a statement released by her office Wednesday. She called the report "A sharp reminder that time is limited for policymakers to take prudent, responsible action to secure Medicare's financial future for generations to come… We need to begin the debate now on how to structurally modernize Medicare so that there is ample time to enact and implement essential improvements before insolvency looms."
Part B premiums will be finalized later this year, but CMS projects that 70% of beneficiaries won't see a premium increase in 2016 because it is projected that there will be no cost-of-living increases in Social Security benefits.
The remaining 30% of beneficiaries would pay a higher premium based on this projection. These include only individuals who enroll in Part B for the first time in 2016; enrollees who do not receive a Social Security benefit; beneficiaries that are directly billed for their Part B premium; and current enrollees who pay an income related higher premium. Decisions about premium changes will be made in October and depend on a variety of factors, CMS said in a media release.
The Medicare Trustees are Lew, Health and Human Services Secretary Sylvia M. Burwell, Labor Secretary Thomas Perez, Acting Social Security Commissioner Carolyn Colvin, Obama Administration public appointees Charles Blahous III, and Robert Reischauer. Slavitt is the board secretary.
Other perennial top hospitals on this year's U.S. News and World Report "Honor Roll" include Mayo Clinic, Johns Hopkins Hospital, UCLA Medical Center, and Cleveland Clinic.
Massachusetts General reclaimed the coveted No. 1 spot among the nation's Best Hospitals, in the 26th annual survey and ranking from U.S. News & World Report.
Ben Harder
The Boston-based hospital, ranked No. 2 in last year's widely read survey, leads a list of 15 blue chip providers that each year swap chairs at the head table. Other perennial top hospitals on this year's U.S. News "Honor Roll" include Mayo Clinic, Johns Hopkins Hospital, UCLA Medical Center, and Cleveland Clinic.
Best Hospitals features national rankings in 16 specialties, and the Honor Roll includes hospitals that rank at or near the top in at least six specialties, says Ben Harder, Managing Editor at U.S. News, and the magazine's chief of health analysis. In addition, 137 hospitals performed well enough to rank in one or more complex care specialties.
"The specialty rankings are designed to answer specific questions, each one around a specific specialty," Harder says. "But even within that we are not saying the No. 1 cancer hospital is best at treating all cancers. It is best at treating the most complex patients. That is what our methodology for the specialty rankings has always been designed to do. The rankings of each of the Top 50 hospitals in each of the specialties are designed for the rare patient who needs something more than the typical level of hospital care."
Annual hospital rankings by U.S. News, The Leapfrog Group, Consumer Reports, and Healthgrades have come under criticism for their often wildly divergent results. Harder says that is to be expected because each of the survey groups is using different metrics.
"Our focus is on specific areas where patients need decision support, [and] guidance driven by data," he says. "Our rankings are those that look at complex care in 16 different specialties. The ones we published a few weeks ago look at hospitals that excel in these more common surgeries and procedures. We also published last month rankings in pediatric care. Hospitals that do well in one of those domains don't do well in others."
Accuracy of Quality Measures Questioned
Peter Pronovost, MD, director of the Armstrong Institute for Patient Safety and Quality at Johns Hopkins Medicine in Baltimore, is skeptical of the various hospital rankings surveys because he says their data sources and reporting standards are subjective and fuzzy.
"It's surprising, but there are no standards for the accuracy of healthcare quality measures," says Pronovost, who studied the discrepancies in the rankings in a report published this spring by Health Affairs.
"In other words, for a lot of these different ranking systems, there is no threshold that says 'does it have to be 90% accurate or 50% accurate,' and there is no auditing of performance data."
Peter Pronovost, MD
Pronovost says the wild divergence in the hospital ranking surveys suggests that healthcare needs to adopt rigorous reporting and accounting standards similar to that of financial institutions and other businesses.
"Ironically, we audit for financial data, but not for potentially preventable deaths," he says. "The problem with healthcare [quality rankings] is there are no rules or standards. You could make a performance measure and there is no transparency about how accurate or inaccurate it is."
"The people who make these rankings push back and say that is because we use different measures. Perhaps, but I don't think the public gets that nuance. You could go into virtually any town in America and you're on somebody's top list. With most of them you have to pay to say you are on their top list."
'Too Much Variation' in U.S. Healthcare
Harder doesn't necessarily disagree with Pronovost's assessment, but he says there are other factors in play.
"You could have written a Health Affairs study on the discordance in the U.S. News rankings," he says "That is important because a patient shouldn't necessarily choose a hospital for orthopedics that is good at cancer, and that is a great deal of what you are seeing."
"The other organizations pose different questions, so of course they get different answers," he says. "That is to a large extent a reflection of the fact that healthcare in America is full of too much variation. It'd be nice if hospitals that were good were consistently good across every specialty. It would make choosing a hospital much easier. But what we see is hospitals that are good at one thing might not be so good at something else. Patients need as much advice and decision support as they can muster."
Saying he fears "no retaliation from anyone," the CEO of a small California hospital has filed suit in U.S. District Court claiming that $1.1 million in Medicare claims flagged by recovery audit contractors have been in limbo "for years."
California's only non-profit independent rehabilitation hospital has filed suit to force the federal government to resolve disputed Medicare billing appeals within its mandated 90-day window.
Felice Loverso, president and CEO of the 68-bed Casa Colina Hospital and Centers for Healthcare in Pomona, says the federal government has "for years, years" been holding about $1.1 million in claims that were flagged by recovery audit contractors. Casa Colina has appealed the claims denials, but, he says, HHS hasn't come close to providing a hearing in front of an administrative law judge within the 90-day window mandated by Medicare law.
Felice Loverso
So, Casa Colina has filed suit in U.S. District Court in Central California, and Loverso seems to relish the fight. He says the rehab hospital runs at 100% occupancy, even with stringent screening requirements for the patients they admit.
"We just want to be paid for what we have already delivered," Loverso says. "We welcome audit[s]. We want audit[s], but a fair audit, a calculated audit where the rules of engagement are adhered to by us and by them."
The Casa Colina suit says that Medicare appeals are delayed, even as RACs were allowed to review and deny hundreds of thousands of claims, creating a backlog so severe that HHS has stopped assigning new ALJ appeals for 28 months.
Even though Casa Colina claims that it wins more than 80% of its RAC appeals, the delayed process means that the $1.2 million in care reimbursements remain in limbo. The rehab hospital has also set aside $2.1 million in reserves to account for more RAC audits, which began again recently after an 18-month moratorium expired.
'Chasing a System that Seems to be Broken'
"We have saved for 15 years to now to better serve the patients who are here, with an ICU and things like that," Loverso says. "The RAC audits, because they hold on to your money, challenges all of our bonds, all of our savings. Thank God Casa Colina right now is capable of covering the audit with reserves, but at some point those reserves will run out and we still have our bonds and loans and we still have patient who need to be seen."
Casa Colina generates about $11 million in net revenue each year, Loverso says, so the $1.2 million in deferred claims and the $2.1 million in reserves represent "a big chunk of money."
"When you run a small hospital and you have to reserve $2.1 million, there is a lot of children with autism who could be treated with that money, there is a lot of free care I could be doing, prostheses I could be putting on people. There are a lot of things I could do with that $2.1 million rather than chasing a system that seems to be broken."
David v. Goliath
During an interview with HealthLeaders Media, Loverso repeatedly likened Casa Colina's fight to that of David v. Goliath. As such, he has no desire to find other hospitals that might be willing to bump the suit into class-action status.
"Our Congressional leaders from California and around the U.S. need to know the true impact and it gets diluted when you go to the trade organizations," he says. "I met with a CEO at a fundraiser of a hospital close by here and we talked about this very thing. I said you ought to be doing what I am doing, taking an individual suit. He said 'I can't afford it and I don't want retaliation from Medicare.'"
"I fear no retaliation from anyone," Loverso says. "I believe individual lawsuits are just as strong, if not stronger for our Congressional representatives. They need to hear this. They need to see it. They need to know that Medicare beneficiaries are being denied this level of care based on medical necessities and technical denials and an audit process that is absolutely ridiculous."
Loverso says Medicare has one standard for providers and another standard for itself.
"For me, if I don't comply with a Medicare guideline I lose immediately," he says. "It seems to me that Medicare should lose every one of these RAC findings if they don't comply with the very criteria that they have been mandated to follow. It seems like an inequity, and I believe we represent thousands of hospitals that can't afford nor have the nerve to look at Medicare in the eye. We do and we are proud to represent thousands of not only rehab but acute hospitals alike."
If the suit is successful, Loverso says he'd at least like to see HHS at least pay interest on the $1.1 million it's withheld.
"A lot of CEOs are saying they should cover expenses but I don't think that is a fight that can be won," he says. "If you welcome audit then you have to pay for audit, you have to be audit ready. We do not mind being audited, but when the auditors are not compliant that there should be a penalty on the private companies that are doing the audits, that are being rewarded for every denial. That is a conflict that needs to be addressed by Congress and Medicare."
"Somebody needs to take a good look at this," Loverso says. "I guarantee you that if my hospital paid an outside company to bill for unbilled services and gave them a percentage of what they collected, OIG would be in my hospital tomorrow. But when Congress allows this to happen there are no penalties."
"We are a speck of dust on people's screen. Well, this speck is going to stay here until someone hears us."
