Connecticut's largest health system and Tenet will remain independent of one another, but would work together to improve clinical services and coordinate care and referrals at four hospitals in the state.
Yale New Haven Health System announced Thursday that it has formed a partnership Tenet Healthcare Corporation. The move comes as the Dallas-based for-profit hospital chain expands its footprint in Connecticut. Financial terms were not disclosed.
Yale New Haven CEO Marna Borgstrom says the blue-chip system, which is the largest health system in the state, and Tenet will remain independent of one another, but would work together to improve clinical services and coordinate care and referrals at four hospitals in Connecticut that Tenet is acquiring.
Those hospitals are: Waterbury Hospital, a teaching hospital in Waterbury, CT, Bristol Hospital in Bristol, CT, and Eastern Connecticut Health Network, which includes two hospitals in Manchester and Rockville, CT.
"We and Tenet are in the process of trying to put this in place and keep these hospitals as strong as possible," Borgstrom said in a telephone interview. "We can help in these communities where the medical communities want this to supplement the clinical resources that they have had trouble replacing. It is about keeping the appropriate amount of care local. It is not about bringing it all down to the academic medical center because right now it is imperative on all of us to ensure that care is given in the lowest-cost appropriate setting."
Borgstrom says discussions had been ongoing with Vanguard Health System about a possible collaboration before Tenet's $4.3 billion acquisition of Vanguard last year. The talks continued with Tenet.
"Opportunities like this are organic and they grow out of relationships and fundamentally there were some hospitals that were looking for an opportunity to become part of a system that we felt we couldn't meet through the Yale New Haven Health System. So, they began to talk to Vanguard [and] now Tenet," Borgstrom said.
"We have had relationships with these organizations and when they began talking with the leadership in Vanguard who we have also known for a long time they also talked with us and said 'this is in your neck of the woods. Is there an opportunity for us to do something together?' We said 'let's explore it' and that is how it evolved."
Yale and Tenet said in a joint media release on Thursday that the collaboration would "create a comprehensive healthcare delivery network in Connecticut, with the intention to expand into the greater Northeast region."
"Using the strengths of each organization, the partnership will enhance the efficiency and coordination of healthcare in the region by offering comprehensive clinical services to a larger geography," the two systems said. "Additional plans include creating a clinically integrated delivery platform with local physician groups and entering into value-based contractual relationships with employers and other payers of healthcare services."
Tenet Vice Chairman Keith Pitts said the agreement "capitalizes on the respective strengths of both organizations and will enhance the clinical care and the access to that care in the communities we serve. The partnership will bring improved clinical technologies, increased economies of scale, and capital resources to the hospitals, ambulatory care centers and physician practices that we will become affiliated with in the future."
Borgstrom says Yale New Haven "brings to the table a strong brand that brand reflects a commitment to a whole array of healthcare services including tertiary care services, medical education, and opportunities to work with physicians in different ways because we have a large and robust group of physicians not only on the fulltime faculty but in the community."
"Clearly what Tenet brings to the table is much deeper experience in integrating and enhancing community-based healthcare and these are hospitals that were in search of a variety of things from capital to certain kinds of transformational management experience," Borgstrom said.
"Tenet has great experience there. Together we can also build off of some experience with Vanguard and Tenet have in understanding what it means to take insurance risk and how to make that productive for all parties. But fundamentally, this is about preserving access to patient care, enhancing that access, and providing the right kinds of care in these communities."
As physicians convene for the AMA's annual advocacy conference, President Ardis Dee Hoven, MD, says she remains optimistic that Congress will pass legislation to repeal the Sustainable Growth Rate formula, despite the lack of a clear funding plan.
Ardis Dee Hoven, MD,
President of the American Medical Association
With Congress facing an end-of-the-month deadline to repeal the reviled Sustainable Growth Rate, hundreds of the nation's physician organizations on Wednesday intensified their calls for a permanent fix for the funding formula.
Ardis Dee Hoven, MD, president of the American Medical Association, said that more than 600 state and national physicians' organizations sent a joint letter to House and Senate leaders on Wednesday asking them to repeal SGR before the latest temporary delay lapses on March 31 and a mandated 24% cut in Medicare reimbursements kicks in.
The letter was sent as hundreds of physicians descended on Washington, DC, to take part in the AMA's annually national advocacy conference. In addition, physicians from across the country are being asked this week to personally contact their members of Congress and urge them support the legislation, HR 4015 and S 2000, that would repeal the SGR formula and create what the AMA calls "a pathway to developing and implementing new healthcare delivery and payment models to improve the quality and effectiveness of care."
Even with the clock ticking, Hoven told HealthLeaders Media Wednesday that she is optimistic that Congress will get the job done.
AMA: Momentum 'Gathering'
"We continue to be very enthusiastic about repeal," she says. "Clearly the momentum has been gathering over the last several months and we now have a piece of legislation with bicameral bipartisan support that has been supported aggressively by the physician community and has been met with great support by members of Congress on both sides of the aisle, which goes to the intent and energy that has been committed to this. The challenge we have now is that there is a time crunch."
"Sometimes they do their best work when there are deadlines facing them. There has been a lot of energy and effort put into this by members of Congress already. We are encouraging them to keep up the conversations and bipartisan work that they have demonstrated they can do on the policy piece of this. So there are great opportunities there, she said"
The legislation repealing SGR appears to have widespread and bipartisan support in both the House and Senate. Hoven said that Congress has spent $153.7 billion on 16 previous legislative patches to the SGR formula, far more than the Congressional Budget Office's $138 billion estimate for the cost of a permanent fix over 10 years.
Seeking Pay-Fors
Hoven concedes, however, that the challenge now is finding a way to pay for the repeal.
"The AMA understands there are diverging opinions about where the pay-for should come from," she says. "Congress has a large menu of pay-for opportunities that CBO has presented to them. We are simply now waiting to understand where these pay-fors will come from."
Nicholas Manetto, a healthcare policy consultant and director at FaegreBD Consulting, says it's difficult to determine whether Congress will be able to repeal SGR by the end of the month.
"That is the $64,000 question," he says. "There is a lot of agreement on the core policy and the provisions of the legislation, but now the biggest question out there is really what's the final price tag and how is it going to be paid for?"
While there are any number of ways to find cuts in the federal budget to pay for the SGR repeal, Manetto says the trick is to move quickly once a set of cuts are identified and agreed upon.
Another Patch?
"The longer your pay-fors sit out there exposed, the more you are like a sitting duck," he says. "You are going to give the opposition time to marshal and rally the troops."
Manetto says the chances of passing a permanent SGR repeal grow slimmer with each passing day, as members of Congress look to wrap up business and head home to run for reelection.
"The more time that goes on absent progress in that direction, the more likely you are going to need another temporary patch and then the question is going to be what will that look like," he says. "Will it be short term, or do they try to do something longer, and really how do you get anything done this year on the longer term?"
Hoven is not entertaining thoughts about potential contingency plans if this latest SGR permanent repeal attempt fails.
"Right now all we are going to talk about is SGR repeal," she says. "Clearly the opportunity exists to get this done. I believe strongly it can be done. Our job right now is to make sure that members of Congress understand the importance of getting this repealed."
A legal matter in North Carolina, concerning whether or not a state board is exempt from federal antitrust laws, could have far-ranging effects, which explains the interest in the case from the AMA and other provider associations.
The U.S. Supreme Court said this week that it would review an antitrust ruling against a dentistry board in North Carolina in a case that could have broad implications for state regulatory boards overseeing professional activities, including those of physicians and hospitals.
The North Carolina Board of Dental Examiners had been the subject of an administrative complaint by the Federal Trade Commission in 2010 for violations of the FTC Act after the board banned non-dentists operating in mall kiosks and other venues from performing discount teeth-whitening procedures.
A federal district court rejected the board's initial complaint. Last spring the U.S. Court of Appeals for the Fourth Circuit sided with the FTC and noted that the dental examiners board was composed of dentists who stood to gain financially by restricting the practice.
"At the end of the day, this case is about a state board run by private actors in the marketplace taking action outside of the procedures mandated by state law to expel a competitor from the market," the appeals court said in its ruling.
The American Medical Association disagreed with the appeals court and this week called the FTC action an "infringement on states' powers." The AMA filed a friend-of-the-court brief with the American Dental Association and 12 other provider professional organizations that support the dentistry board.
AMA President Ardis Dee Hoven, MD, said that the decisions of state regulatory boards "meet exemption criteria from federal antitrust challenges under the 'state action doctrine' created by the U.S. Supreme Court."
"The American Medical Association is grateful that the U.S. Supreme Court has agreed to re-evaluate a case in which the federal government is interfering with the ability of state regulatory boards to protect public health and safety," Hoven said this week in prepared remarks.
"The decision in North Carolina State Board of Dental Examiners v. Federal Trade Commission allows a federal agency with no particular knowledge of medicine or dentistry to strip authority away from experts who are charged by a state legislature to shield patients from unlawful practice."
"State regulatory boards acting to fulfill the directives of state law should be free to make decisions on public health issues without fear of second-guessing under the federal antitrust laws," she said.
However, Jay L. Levine, a Washington, D.C.-based healthcare antitrust lawyer and a partner at Porter Wright Morris & Arthur LLP, says the FTC has built a strong case that has already been affirmed by lower courts. "If I had to place a bet, it would be on the FTC winning," Levine told me. "The courts have stressed that exemptions are narrowly applied. The FTC has a fair argument and I don't think the state action doctrine is one that the Supreme Court is looking to expand."
A ruling in favor of the FTC could have far ranging effects beyond the ability to limit teeth-whitening procedures in mall kiosks, which explains the interest in case from the AMA and other provider associations.
"There are a number of quasi governmental bodies that license professions that are made up of the professionals themselves. So, this is not merely teeth whitening," Levine says. "The question is: If you have boards like the North Carolina Dental Board made up of essentially private citizens who are in the professions, who are otherwise competitors in the given profession, and they enact rules and regulations that keep out would be entrants, is that conduct subject to antitrust laws or not? In a number of professions, and especially in healthcare, that is going to be a very big deal."
The board of dentistry case marks the second time in less than two years that the high court has taken on a case involving antitrust issues within healthcare. In February 2013 in FTC v. Phoebe Putney Health System, Inc. a unanimous Supreme Court ruled that the appeals court had "loosely" interpreted a Georgia law cited by Phoebe Putney to justify a merger that would give the consolidated health system control of about 85% of the market in the Albany, GA service region.
Levine says the issues driving the two suits are different, but related, and that could bode well for the FTC.
"The question in Phoebe Putney was 'was the enabling legislation that created the hospital authority sufficiently explicit in that it allowed the hospital authority to essentially authorize anticompetitive acquisitions?'" Levine says.
"The 11th Circuit Court of Appeals had said that the legislation authorizing the hospital authority essentially was broad enough to contemplate the anticompetitive consequences of it acting on its authority. The Supreme Court basically said that is too loose of a standard and that essentially exemptions to the antitrust laws are disfavored."
"The FTC has a very powerful argument, and the fact that the Supreme Court went out of its way in Phoebe Putney to deliver the message that exemptions are disfavored doesn't help the North Carolina Dentistry Board."
While new drug shortages impacting patient care have lessened, the supply chain remains vulnerable to drug shortage 'spikes', says an executive from the group purchasing organization, Premier.
Drug shortages remain widespread and hospitals spent nearly $700 million over three years to cover the additional costs of finding more expensive generic substitutes, according to a survey and analysis from the group purchasing organization, Premier.
"It's clear that this remains to be a very serious problem that continues to impact patient care and it creates major challenges for our healthcare system and other providers," Premier COO Mike Alkire said on a conference call with media last week.
The Premier survey of 124 "pharmacy experts" conducted in December 2013 and January 2014 found that 90% of respondents experience some sort of drug shortage within the last six months. Alkire says those results are similar to those found in a Premier survey conducted in 2010 at the height of the drug shortage crisis.
"Although recent reports show that new drug shortages have decreased, longer-standing, ongoing drug shortages remain an issue," he said.
"The supply chain is also vulnerable to shortage 'spikes' that significantly disrupt patient care and hospital operations. To remedy these types of shortages, including one currently affecting the supply of intravenous solutions, we need a 'SWAT team' mentality by all, including the FDA, the manufacturers, the distribution channel, the GPOs and the hospitals. FDA in particular plays a critical role given their role in approving the availability of additional drug supplies."
A Premier analysis found that U.S. hospitals spent nearly $230 million a year between 2011 and 2013 to pay for the additional costs of generic substitutes for shortage drugs.
"This is the estimated additional acquisition cost for hospitals for back-ordered products. The total economic impact is likely much higher since the figure excludes drugs purchased from off-contract distributors, more expensive purchases of therapeutic alternatives and indirect costs such as labor," Alkire says.
The survey found that the most often cited shortage drugs affecting patient safety and costs were:
Electrolytes, intravenous (IV) fluids and parenteral nutrition solutions.
Cardiovascular agents used to treat heart disease and other cardiac conditions, such as nitroglycerin IV solution.
Surgical agents used for surgery preparation/anesthesia and sedation, such as propofol.
Fewer Shortages
The survey results suggest that the prevalence of shortages affecting patient care appears to be decreasing. Compared to 2010, Alkire says the number of respondents experiencing between one and five drug type shortages increased by 30%, but that those experiencing six or more drug type shortages decreased 26%.
In addition, 35% of respondents said they did not experience a shortage that could have delayed or cancelled care, a two-fold improvement from 2010. Respondents experiencing six or more occurrences decreased 46% from 2010.
"Part of the reason why shortages have lessened is because providers have become more skilled and capable of handling severe supply chain disruptions. They are implementing more effective programs to cope with shortages," Alkire says.
"Among the survey results 90% said that they've added back up inventories or adjusted par levels for critically important categories, 87% increased communication to internal stakeholders, and 83% implemented restrictions or rationing for short-supply drugs which obviously added to their overall costs of care," he said.
The delay in the employer mandate "causes a timing mismatch between the benefit of fewer uninsured patients and the negative impact hospitals face related to reduced payment updates and cuts to Medicare and Medicaid DSH," says Moody's Investor Services.
Postponing the Affordable Care Act's mandate for mid-sized employers for a second time is a "credit negative" for not-for-profit hospitals because it delays expanded coverage for previously uninsured patients and the corresponding reduction in bad debt and charity care, Moody's Investor Services says.
The delay announced this month by the Obama administration gives companies with 50 to 99 employees until 2016 to offer insurance for their employees of face fines. The 2010 law originally required mid-sized employers to provide coverage beginning this year or face a $2,000 fine for each employee. The Obama administration last year delayed the employer mandate until 2015.
"The employer mandate is vital to hospitals because it offsets the costs of the ACA, which include agreed-upon cuts to Medicare Disproportionate Share money and existing rate cuts that are hardwired in the annual Medicare updates," Moody's said.
"Hospitals are facing more than $300 billion in reductions to Medicare payments through 2019 as a result of healthcare reform. This loss of revenue is meant to be balanced by the reduction in uninsured patients. The delay in the employer mandate causes a timing mismatch between the benefit of fewer uninsured patients and the negative impact hospitals face related to reduced payment updates and cuts to Medicare and Medicaid DSH. Hospitals most negatively affected by the delay in the employer mandate include those with a high percentage of their revenues derived from Medicaid, which will be subject to the highest DSH cuts without the benefit of fewer uninsured patients and reduced bad debt."
Shawn Gremminger
director of Legislative Affairs for America's Essential Hospitals
The delay irked the American Hospital Association, which called the move "yet another setback for those uninsured individuals who will not gain coverage through their employer. With the level of coverage envisioned when the ACA was originally passed not being met, it is critically important to mitigate some of the reductions included in the ACA, such as elimination of the Medicare Disproportionate Share Hospital program cuts for the next two years. This will provide relief to hospitals who continue to provide care to large numbers of the uninsured until coverage expansions can be more fully realized."
Shawn Gremminger, director of Legislative Affairs for America's Essential Hospitals, echoed the AHA's comments, but said that some concessions from Congress may soften the blow for safety net hospitals.
"Medicaid DSH cuts were scheduled under the ACA starting in fiscal 2014 and going out into the future. We were able to secure a change to that, which would be a one-year elimination of the cuts in 2014. Those cuts are no longer there. The 2015 cuts are delayed by a year so they are added on to the cuts that included in fiscal 2016," he says. "Basically, the good news is that at least in the short term, for the rest of this year and into fiscal 2015 we are not going to see any cuts to DSH."
"We think that will be helpful when it comes to helping to cover uncompensated care for a number of reasons. The biggest reasons that we see higher uncompensated care than we originally expected was the partial Medicaid expansion. There was an assumption from the very beginning that we would see a 50-state Medicaid expansion. Now that that is not happening we are literally looking at millions and millions of people who were assumed would be covered but who are not."
The delay in the DSH cuts gives safety net hospitals some breathing room. However, Gremminger says that starting in 2016 hospitals must brace for about $1.2 billion in cuts in federal spending.
"A lot is going to happen between now and October 2015 when those cuts go into effect. Our association is going to have to continue to fight this fight," he says.
In addition, Gremminger says, hospitals are grappling with the 2% cuts mandated by sequestration that will remain in effect until 2021. "Luckily, our sequestration exempted Medicaid from those cuts and Medicaid is a huge payer for us because we disproportionately treat low-income people," he says.
"But we are very concerned about the affect of sequestration. Two percent doesn't sound like a lot but when you are looking at safety net hospitals which last year had margins that were around or less than 2% it doesn't take a whole lot of cuts to get us right back down to zero and there is a significant portion of our membership that lost money in the last couple of years. There are only so many cuts that you can take."
Harold D. Miller, president and CEO of the Center for Healthcare Quality and Payment Reform, discusses a fundamental barrier to shifting payment models in healthcare: Some providers mistakenly think all they have to do is tweak existing fee-for-service billing structures without understanding what drives costs in the underlying payment system.
Harold D. Miller, President and CEO
Center for Healthcare Quality
and Payment Reform
The shift away from volume-based, fee-for-service billing towards value-based reimbursements is gaining momentum and will be largely in place over the next few years. And yet a surprising number of healthcare providers really don't grasp the details of how value-based reimbursements work.
Harold D. Miller, president and CEO of the non-profit Center for Healthcare Quality and Payment Reform, says many providers mistakenly believe that all they have to do is tweak existing fee-for-service billing structures without identifying potential savings or understanding what drives costs in the underlying payment system.
Miller, the author of a Robert Wood Johnson Foundation-funded report called Making the Business Care for Payment and Delivery Reform, spoke with me this week about what providers must do to build an effective business case for value-based care. The following is an edited transcript.
HLM: Where are we on the fee-for-service/value-based care timeline?
Miller: It could be the dominant model within the next five to 10 years, but it is a matter of how quickly physicians and in particular physicians in hospitals meet with the purchasers of care— the employers— to work that out. It's about how soon both side come together and create the win, win, win that is good for patients, providers, and purchasers.
HLM: What are the stumbling blocks on the road to value-based care?
Miller: Most health plans and Medicare are trying to change the way care is delivered and reduce costs by piling on pay for performance and shared savings on top of fee-for-service. The problem is that if you don't change the underlying payment system, you don't change the incentives and the barriers that it creates.
For example, one of the best ways to keep people with chronic disease healthier and out of the hospital is for a physician practice to hire a nurse to educate and encourage patients to call when they have a problem. The problem is that doctors don't get paid for nurses and they don't get paid for answering phone calls. So practices are forced to lose money under fee-for-service to deliver better care, even though it would actually save money by keeping the patients out of the hospital.
HLM: Is value-based healthcare a particularly challenging sector?
Miller: Every patient is different, but on the other hand, how do health insurance companies operate? The law of large numbers says that on average, patients are fairly similar. You don't have to deliver the exact same treatment to everybody to estimate on average what it is going to be like.
If you get the unusually expensive case—the patient who is an outlier with unique health problems— that is what insurance is for.
On the other hand, saying 'We shouldn't be giving an MRI to everyone who comes in with lower back pain. Most of them should probably go to physical therapy first.' That is something you can do across a broad number of patients. That is going to save money on average and probably be better for the patients.
HLM: Is there common ground for fee-for-service and value-based models that providers can build on?
Miller: A lot of the payment reforms that are being done actually build on fee-for-service. The idea is you don't just leave it in place and try to pile something on top. The problem with fee-for-service now is that it says you get paid the exact same amount to do something whether you do it well or poorly and whether or not [or whether] there are complications or infections that occur. And in fact you may get paid more.
But you don't fix fee-for-service by sticking little penalties or bonuses on top. You have to change the fundamental way it is delivered.
For example, for patients who have health problems, we are looking at payments based on the patient's condition and not based on exactly the procedure you used. A good example is delivering a baby. You get paid more to do a caesarian section than you get paid than a vaginal delivery. Yet the vaginal delivery takes longer, and is better for the mother and the baby.
So why do we now have a 33% C-section rate in the country? Because the fees we pay are not based on the actual value.
HLM: Why does value-based care create so much unease among many providers?
Miller: A lot of the anxiety comes because people don't have the data. You have to have access to good data and in most cases healthcare providers can't do that. Medicare has only just recently started to release data, so that someone could actually do the kind of analysis that I recommend in my report.
Most health plans treat their data as a proprietary secret, but there are a number of communities around the country that have multi-payer claims databases where people can do these kinds of analyses.
HLM: Why should providers welcome the switch to value-based care?
Miller: You could actually do better in a value-based payment model. People have the perception that somehow it is going to be worse, but the sooner you get into it the better you may be able to do because you are able to capture a lot of the value out there now that isn't being captured.
Rather than staying in fee-for-service and hoping you may get a small increase in fees or that you don't get a cut in fees, it's better to ask 'Can I redesign care in a way that would allow me to be paid significantly more?'
Medicare has done a demonstration that has been operational now for several years called the Acute Care Episode Demonstration that bundled together hospital and physician payments for orthopedic and cardiac procedures and the physicians were able to earn up to 25% more than their standard fee-for-service payments by being able to redesign care and reduce the costs. That is far more of an increase in pay quickly than you could ever get by simply staying in the existing fee-for-service model.
HLM: Who should be at the table when providers build the business case for value-based care?
Miller: Step No. 1 is changing the way care is delivered. It is the physicians on the front lines who have to say 'Where do we think we are actually doing too much of something we shouldn't do or that we are not providing good care to the patients?'
Then you have to get the COO or the CFO to say 'Let's work the numbers.' Typically, you don't find those two parts of organizations working together. Doing spreadsheets is not the physicians' skill and providing care is not the CFO's skill. But if you can get them to come together, that is where the magic happens.
You say to physicians 'Where do you think you could redesign care if somebody gave you the flexibility to be paid differently, to be paid for things that you aren't being paid for today?' When I talk to physicians, they all have ideas but nobody asks them.
The typical approach is that physicians say 'Pay me for these things that you don't pay me for today.' The health plan, Medicare, employers or whomever says, 'Wait a minute. That will increase costs if you are going to be paid for something new.' If you think it is going to be better, run the numbers to see if it actually will save money. What will you do less of and what will that save?
Get everybody in the room. Get their ideas. Figure out which subset appears to be the most promising. Do the detail work and go to payers to put it in place. If you can show success then that encourages people to do more. Not every case will it be a savings proposition.
Which of those things is there really a business case for, and if there seems to be a business case then let's do a finer analysis to show that and take it to the payers to say 'how about a deal here?' Even if you can't get the perfect data, using approximate data to at least see if it looks like a business case then tells you which things to focus on.
HLM: How soon could a value-based model see a return on investment?
Miller: For many of these things, the savings can happen very quickly. A lot of what has been done in healthcare has been desirable, but has a long-term payoff. There is a lot of focus on better management of diabetes and hypertension; all very desirable but it doesn't save a lot of money this year.
On the other hand, if you focus on people going unnecessarily to the emergency room and getting unnecessary tests and [you] figure out how to redesign that care, you save money immediately because you are avoiding the unnecessary care. Thirty day re-admissions are a perfect example.
HLM: Who do providers speak with on the payer side?
Miller: The focus will differ. Medicare doesn't have a whole lot of interest in maternity care, whereas for businesses and Medicaid maternity care is in many cases their biggest expenditures. Everyone is interested in chronic disease. The distinction I make is between the purchaser and the payer. The purchaser in commercial insurance is the employer.
In fact, 60% of commercially insured employees in the country are in self-insured employer plans. The deal you are working out is actually with the employer and not the health plan. All the health plan is doing is processing claims. One of the challenges for commercial health plans is that value-based isn't necessarily a good business proposition for them. They may have to incur costs to change the payment system, but the savings don't go to them, they go back to their self-insured accounts.
HLM: What influences will insurance exchanges and consumer-driven healthcare play in the business case for value-based care?
Miller: It could be a potential advantage if different provider organizations get beyond this fairly narrow shared-savings model to the point where they are actually able to take accountability for populations of patients and can price that.
They could go on the exchange and allow people to sign up for this ACO and pick a primary care physician there and work with the coordinated set of docs at a lower cost and higher quality than simply picking a generic health plan. It's kind of halfway between the traditional HMO/PPO models. You are picking who you want to lead your care. You don't necessarily have to be limited to once set of docs or have a gatekeeper for everything.
Some retailers, reasoning that they are "smart about efficiency and productivity and standardization and using digital technology and getting closer to the customers, believe that they can… really change the way that care is delivered and paid for in this country," says one analyst.
In Part 2 of an interview with HealthLeaders Media, analysts Vaughn Kauffman, Health Industries Principal at PwC and Ceci Connolly, the Managing Director of PwC's Health Research Institute discussed their views on what we might see in the coming months and years as retail businesses carve out a larger role for themselves in healthcare delivery. The following is an edited transcript. See Part 1.
HLM: It sounds like you believe that traditional providers could learn a lot from retailers.
Kauffman: They are actually. Over the last several years I've seen more and more recruitment happening outside of the traditional healthcare area at the senior level. [This is] to try to drive some of this change and… anchor their business and their operation where the consumer is at the center of that model as opposed to outside and navigating in.
We are seeing it all the way through not only in terms of the plans being designed, [but] all through operations, and even how the revenue cycle process is looked at. They're looking for ways to engage the consumer beyond the few hours they might spend in the hospital.
How do they become more relevant in their day-to-day lives, not so much Big Brother-like but in ways they can help inform decisions of health and fitness, etc. and become more of an advocate for their health rather than a treatment center for certain issues.
Connolly: On the flip side, healthcare can get complicated. Think about patients with multiple chronic conditions. They need really good health coaches or care coordinators. They need a whole team around them. It would be naïve to suggest that now everybody can head to the retail store and manage their health on their own and it is all going to go great.
It is much more complex than that. What we are really trying to do is figure out where you can put together these smart care teams.
Kauffman: We think about it as the formation of multiple delivery systems as opposed to the replacement of the traditional monolithic structure. But it's always going to be situational. We aren't going to have cardiologists in the retail setting, but as innovation continues to happen where diseases can be more easily managed because of technology and advances in medicine and treatment, it opens up the door for alternative channels to provide that type of support where it doesn't have to be done in the more expensive hospital setting.
That is what we are saying. Who knows if it will be two or three or four different types of delivery options, but there are multiple ones out there now that are being experimented on and it really comes down to figuring out how to navigate.
HLM: Can traditional providers compete with retailers, or will they pursue alliances?
Kauffman: There is some overlap in services. You think about retail clinic setting versus an urgent care setting versus the traditional hospital setting. And then home healthcare and telemedicine are another decision point that consumers need to make.
Partnerships are going to be really important because of this overlap and because of the risk of this decentralization of healthcare confusing consumers even more around 'what do I do and when do I go to a retail clinic versus urgent care or when do I stay home and call somebody?'
That is going to evolve over time, but it is going to be important to have these partnerships form because when you start to add up the capabilities, the retailers ability to engage the consumer whether it be a brick-and-mortar or an e-commerce platform, to combine that with the clinical knowledge of urgent care centers and hospitals, we are going to see some interesting innovation occur.
One of the reasons why this is happening now is because of the innovations in healthcare over the years. The ability to treat some diseases in a much more manageable way has opened up the opportunity to provide new ways to deliver care.
There are a lot of examples where at one point, it was a very acute disease that required a highly specialized physician to treat it. But it's now something you can do at home on your own through technology. It is that evolution that is opening up the door to allow new entrants to come in, leveraging what their core capabilities are, which is engaging consumers, brand awareness, providing convenience and trust, and offering that platform to consumers to give them choice, which is ultimately what they want."
HLM: Will we see traditional retail strategies used to attract healthcare consumers? Will the corner pharmacy use free flu shots, for example, as a loss leader to get people in the door?
Connolly: It is certainly possible. It depends upon the core business for the entity. A big retailer or grocery or pharmacy chain has different business models and numbers they work through. Some may be very interested in volume and foot traffic. But we have been struck by the number of entities, [of] the Fortune 50 companies, more than 75% of them identify themselves as being in the healthcare business and they are not hospital or insurance companies.
These are big technology companies, these are telecommunications, retailers. They are making investments because they feel that there is a great deal of opportunity in healthcare right now. Not only is healthcare about 15% of GDP and growing, but you start adding on the wellness industry, which is another few hundred billion dollars, and they see opportunities and money to be made.
HLM: What is retail medicine going to look like in five years?
Kauffman: As long as the consumer continues to bear more of the risk of the cost of healthcare, this is something that is going to move forward and should not be viewed as a fad. The retail and technology players will continue to look at ways to steal revenue from traditional players because they are looking at their own challenges to try to grow.
There are going to be a lot of companies trying and the ones that succeed are those that within their own organizations have the clout to help steer the ship in a particular way. If healthcare is viewed as a side project for one of these large retailers or technology organizations it is likely not going to survive under core business pressures.
HLM: With so many traditional providers complaining about tightening margins, why are retailers so eager to get into the sector?
Connolly: Healthcare is a sector that has not made any notable productivity gains in years, if not decades. The smart players outside of healthcare are looking at this and thinking 'we have been through a similar journey in our own core business and we are pretty smart about efficiency and productivity and standardization and using digital technology and getting closer to the customers,' so they believe that they can bring those lessons from elsewhere and really change the way that care is delivered and paid for in this country. It is going to be a fascinating journey to watch to see if that gamble makes sense.
On the question of timing, there are a couple of mile markers that are worth keeping in mind. An important on is 2017 when states can open the public exchanges to employers. Employers are also looking at private exchanges and this becomes very relevant because that is more and more individual retail customers shopping for healthcare and when you flip that business model from wholesale to retail that is when you see this changing dynamic pick up speed.
HLM: Do you foresee retailers acquiring hospitals or other traditional venues?
Connolly: It's been widely reported that Walgreen's is running three ACOs right now. I don't know if that means they want to run 300 ACOs but it is interesting that they are experimenting with that. CVS is a licensed Medicaid provider in the state of South Carolina, at 28 CVS pharmacies. Overall we are seeing experimentation. And this is a real testing period for these players to see what they might be good at.
The rise of high-deductible health plans means more consumers will have healthcare coverage that mainly provides protection against catastrophic injury or illness. As these plans become more common, pharmacy chains and big box retailers are taking a greater interest in expanding their healthcare provider capacities.
Some analysts believe that the greatest fundamental changes to traditional healthcare delivery will come from without, not from within.
The rise of high-deductible health plans means more consumers will be on the hook for much of their medical costs, with their coverage mainly providing protection against catastrophic injury or illness. As these high-deductible plans become more common, traditional retailers such as CVS Caremark, are taking a greater interest in expanding their healthcare provider capacities.
In Part 1 of an interview, analysts Vaughn Kauffman, Health Industries Principal at PwC and Ceci Connolly, the Managing Director of PwC's Health Research Institute, discussed their views on what we might see in the coming months and years as retail businesses carve out a larger role for themselves in healthcare delivery. The following is an edited transcript.
HLM: Why do you believe that retail medicine is a potential game changer for care delivery?
Kauffman: Consumers will continue to look for cost of care, convenience and price as they bear more of the costs. Whether it be the pharmacist or other retail channels, we think that because of the evolving healthcare economies, there are roles that these retailers and pharmacy organizations will play in delivering care. We also think about the scope of healthcare beyond the traditional patient setting and around the whole spectrum of health and healthcare and fitness and how that plays into the equation.
That is opening up more opportunities for retailers. Everybody is trying to figure out how to engage the consumer differently. Healthcare models should be putting the consumer at the center of the system as opposed to having them running around through a fragmented environment. Because of that, organizations are trying to figure out how to better engage with consumers and obviously retailers have a great way of doing that, whether it's because of their physical footprint with their storefront or even through their e-commerce presence.
HLM: Do traditional providers understand that retails could pose significant competition?
Connolly: We think this is powerful and we are on the verge of a significant turning point for healthcare and as Vaughn says it's with the consumer at the center. You mentioned the impact of being on high-deductible plans. We are seeing that every day. We're also seeing that employers are trying to be savvy about getting value and they're trying to teach their employees to be much better about shopping for value in healthcare.
To the question about traditional players in the health industry, we see it running the gamut right now. There are some very innovative leading edge companies in the health industry that are using Facebook and [other] social media to connect with their customers.
They are starting to push out price information because they know that transparency is important to consumers. They are using their data analytics to push population health. But there are many other providers that are frankly just trying to keep up quarter-to-quarter right now and they are still a little stuck in the fee-for-service model. They are going to have to find a way to make this transition or there is the risk they may get left behind.
HLM: What advantages do traditional retailers have over traditional medicine with consumer-driven healthcare?
Kauffman: There are some very distinct advantages for retailers. Their business model has evolved in understanding the wants and needs of consumers. Traditional healthcare organizations, outside of maybe the physician relationship with patients, are still trying to figure out their relationship with the consumer. In fact, the definition of customers is changing from what use to always be thought of as the employer as the customer to the individual as a consumer of healthcare.
There is a distinct advantage that retailers have with brand recognition and trust of the brand. You know what you get when you walk into a certain retailer. It is not that same way in healthcare and a lot of traditional companies in healthcare recognize that. We are seeing roles being formed at the senior level such as chief experience officers.
They are hiring outside of the industry, particularly in the hospitality industry. The focus is on the customer that other industries' business models have been anchored on. The convenience factor is an advantage as well. How often do you walk into a retailer on a given week versus walking into a hospital setting?
The ability to capture the hearts and minds of consumers is much easier for retailers because of the frequency that people walk in, and I don't want to discount the e-commerce presence that organization have. The interactions are much more frequent. Once you get a captive audience there is an ability to drive that engagement to another level.
HLM: Are you saying that brand loyalty will become more important with consumer-driven care?
Connolly: Brand loyalty is significant and it is something that has been a challenge for healthcare companies. We know from our survey data, that insurers in particular and pharmaceutical companies rate pretty low on the popularity and loyalty scale. Individual doctors do better. But even when you start talking about hospitals there are a lot of mixed feelings by consumers.
Consumers tell us over and over again that they are willing to switch if either they have a bad experience at one place or they find that they can get the same quality care at a lower cost somewhere and one other thing on the convenience. The average diabetic will see their pharmacist perhaps 30 times a year and they will see their doctor three times a year.
You have that ongoing relationship and every time you walk into a pharmacy or a big retail store, you will also probably pick up your test strips and you might pick up some food and do some other shopping and the idea that it is all there is another aspect of the convenience.
In our October Intelligence Report, 90% of healthcare leaders indicated a commitment to improve the overall health of a defined population. What steps is your organization taking toward population health management, and what have been some of the challenges and successes you've encountered?
Elisabeth Stambaugh, MD, FACOG
Senior Medical Director
Cornerstone Health Care
High Point, NC
On commitments and conflicts: All of our contracts include some gainshare portions. We are hoping to move even further than that. We established a couple of specialty clinics, one of which is a congestive heart failure clinic that has significantly reduced hospitalizations and especially rehospitalizations. It has put us a little bit at loggerheads with the hospital because their inpatient population has gone down so much with our success. I also sit on the hospital board so I can appreciate both sides.
On building a value-based clinic: We identified patients within our ACO and they were enrolled in this multidisciplinary clinic with psychologists, nutritionists, pharmacists, physicians, and advanced practice professionals who got the patients to come in very regularly. We have nurse navigators who reach out to patients instead of waiting for them to reach out to us.
On problems with payers: Probably the biggest obstacle in all of our population health initiatives is getting the flexibility with the payers. For instance, getting patients into the heart function clinic frequently means they often have more copays. Whereas in the future when we get to full risk, we will be able to say 'you don't have copays. If you go to the emergency room you will have a huge copay so come see us first for no copay.' The other part of dealing with the payers that has been so frustrating is that in order to truly analyze the data, the payers have to be willing to give it to us. Some of that we can get from our own records but some of it we need from payers and that has been like pulling teeth.
Ben Humphrey, MD Former CEO
The Medical Group of Ohio
Columbus, OH
We are a physician-owned organization but we are partnered in a physician-hospital organization called Ohio Health Group.
We have a variety of quality metrics that year after year have been improving. Through our processes we can provide actionable data to physicians at the point and time of care so that they can enhance their performance. We've had a very successful pay-for-quality program. Starting last year, we began a total cost-of-care gainsharing arrangement with payers with the goal in time that we will probably be on the risk side of that.
The challenges have been ongoing but we led the system to understand that we must become clinically integrated. We invited our hospital partner to join us in that endeavor. The biggest hurdle was engaging physicians but that is a hurdle we crossed several years ago. We then engaged what we called our physician support tool, which is a data warehouse where we can collect data from the payers, the practices, the hospitals, the laboratories in the area, and then feed actionable data out to the practice through a web-based physician support tool. Physicians are pretty competitive. If you give them data that says "you are not doing as well as you did last year" or "you're not as good as you think you are here at the bottom quartile of your specialty," it's amazing what they come up with.
Jim Nathan President and CEO Lee Memorial Health System
Fort Myers, FL
While we and our community are not fully ready for comprehensive population health management, we have been working hard with limited resources to build competencies and capacity to transform care delivery to increase value to our community, including patients, business, payers, and other health providers. We have a 300-plus employed physician group, Lee Physician Group, that is transforming into [using] more team-based care, care coordination, [and] data to manage performance at the point of care.
LPG is also pursuing patient-centered medical home status including accepting certain pay-for-performance arrangements. We are using our own employee health plan with 15,000 participants as an early test case for population health and chronic disease management while repurposing our nearly 20-year-old physician hospital organization to collaborate with independent, contracted, and employed physicians to establish a quality-focused model for clinical integration. We are developing knowledge of how to use data mining and information technology tools for data driven medical management. We are developing an extensive continuum-of-care model for nonacute care services through both owned and independent community health and human service providers.
Early successes include redesigning our nationally acclaimed care management services to better coordinate care across the continuum into multiple settings including the home, our care transitions program, and telehealth, plus early stages of house calls, a skilled nursing physician specialist program, and partnering with independent nursing homes to reduce unnecessary readmissions.
Donald R. Lurye, MD CEO
Elmhurst (Ill.) Clinic, LLC
We are working hard both within Elmhurst Clinic and at a health system level to become experts at population health. Within our practice, we are expanding the use of RN care managers to assist physicians with the care of chronic illness and using data from our electronic health records to help them do so. This includes proactive patient outreach, prescheduling of labs, and connecting patients to various support services.
We are also reexamining our workflow and trying to move our culture from reactive, patient-initiated care to, at some level, thinking about all of our patients every day. Elmhurst Memorial Hospital's merger with Edward Hospital and the creation of the Edward-Elmhurst Healthcare system has allowed us to take part in a multipayer clinical integration effort. In the near future, we look forward to having all of Edward-Elmhurst Healthcare's physician practices and hospitals on a single EHR platform, all measuring quality and utilization in the same manner.
Physicians respond well to the concept of population health and the opportunity to improve both quality and service. Certainly moving to a single EHR will be a challenge, as will working through issues of physicians' continued desire for autonomy and their angst over increasing collaboration with colleagues currently viewed as competitors.
A Department of Justice complaint alleges that for more than 10 years, four hospitals in Georgia and one in South Carolina paid kickbacks to Georgia-based Hispanic Medical Management, which operated an obstetric care clinic serving mostly undocumented aliens.
The federal government said it will intervene in False Claims Act suits leveled against hospitals owned by Tenet Healthcare Corp. and Health Management Associates Inc., which have been named in an alleged kickback scheme involving obstetrics services for undocumented aliens.
The Department of Justice complaint alleges that starting in 2000 and continuing for more than 10 years, four hospitals in Georgia and one in Hilton Head, SC paid kickbacks to Georgia-based Hispanic Medical Management, which operated the Clinica de la Mama. The clinic was paid for obstetrics care to mostly undocumented Hispanic women in return for labor and delivery referrals to the hospitals, who then billed the Medicaid programs in Georgia and South Carolina.
In some cases, prosecutors allege, the hospitals obtained Medicare reimbursements based on the influx of low-income patients. Undocumented aliens are not eligible for Medicaid benefits in Georgia and South Carolina under most circumstances. However, some emergency labor and delivery care is reimbursed. The whistleblower suit alleges that false reimbursement claims were made to the Georgia Medicaid's emergency medical assistance program for newborn care.
The three Tenet hospitals in Georgia and one hospital in South Carolina that were named in the whistleblower suit are: Atlanta Medical Center, North Fulton Regional Hospital, Spalding Regional Hospital, and Hilton Head Hospital.
"My office has made the investigation of healthcare fraud a priority," Michael J. Moore, US Attorney for the Middle District of Georgia, said in prepared remarks. "In a time when too many people were struggling to get healthcare for themselves and their children, Tenet and these hospitals plundered a system set up for those truly in need. This kind of scheme drives up costs for everyone, not just the vulnerable patients and groups like those targeted in this case."
Tenet issued a statement strongly denying the government's accusations.
"… the agreements between Hispanic Medical Management and Atlanta Medical Center, North Fulton Hospital, Spalding Regional Hospital and Hilton Head Hospital provided substantial benefits to women in underserved Hispanic communities," the statement said. "By ensuring that pregnant women received prenatal care and appropriate treatment during birth, these programs increased the likelihood of a safe birth and a healthy baby while reducing the overall cost to state Medicaid programs. We will continue to vigorously defend against these allegations."
The fifth hospital named in the suit, HMA's Walton Regional Medical Center, in Monroe, GA, was renamed Clearview Regional Medical Center when Community Health Systems finalized its $7.6 billion acquisition of HMA last month.
Calls Wednesday to HMA, and CHS were not immediately returned. It's not clear how CHS's acquisition of HMA will affect the federal suit and who will be held accountable if a settlement is reached.
The whistleblower suit was brought forward in 2009 by Ralph D. Williams, the former CFO at HMA who claims that he was fired after he discovered the payments. Williams said in his complaint that HMA paid Clinica between $15,000 and $20,000 each month for the referrals, and that the payments were disguised as "translation services" and "eligibility determination services."
Williams said that executives at HMA Monroe anticipated a 56.2% rate of return on a $1.8 million investment in Clinica's "Hispanic Maternity Program."
Williams alleged in the suit that he was told by HMA executive Gary Lang that a similar arrangement with Clinica existed at Tenet's Hilton Head Hospital, where Lang once worked as a marketing executive. The suit also alleges that HMA "cloned its kickback model from Tenet in order to receive additional Medicaid patient referrals and revenues."
Under the whistleblower provisions of the False Claims Act Williams could be eligible for a portion of any settlement money. The lawsuit is being heard in the Middle District of Georgia.
HMA and its former CEO Gary Newsome are also defendants in a separate whistleblower lawsuit out of South Carolina that alleges that the Naples, FL-based company orchestrated a "massive scheme to boost company profits and defraud Medicare and Medicaid by unlawfully inducing and pressuring hospital emergency room doctors to increase the rate of ER-to-hospital admissions over a period of at least four years."
The Justice Department said that since January 2009 it has recovered more than $19 billion through False Claims Act cases, with more than $13.4 billion of that amount recovered in cases involving fraud against federal healthcare programs.
