A Congressional Budget Office analysis released this week lops $107 billion from the cost of eliminating the Sustainable Growth Rate funding formula, and that new estimate has resuscitated efforts by some in Congress and the physicians' lobby to repeal the reviled but unenforced mandate.
The new projection, found on page 31 of the CBO's 77-page Budget and Economic Outlook: Fiscal Years 2013 to 2023, explains that repealing the SGR would cost $138 billion over the next 10 years—significantly less than the $248 billion priced in previous estimates. CBO attributed the lower cost to a decline in the rate of Medicare spending growth when compared with historic trends, and lowered estimates for spending for physician services.
Although the SGR has been around since 1997, the reimbursement cuts under the formula have never taken effect thanks, to the repeated interventions of Congress at the behest of physicians.
Most recently, SGR cuts of nearly 30% were scheduled to take effect on Jan. 1 to account for years of "kick the can" delays of smaller, incremental annual cuts. However, as it has done every year since the SGR went into effect, Congress on Jan. 1, 2013 stepped in to delay the cuts until Jan. 1, 2014.
The American Medical Association and other physicians' professional associations, weary of the annual Congressional sideshows and last minute repeals of looming SGR cuts, have for years made repeal of the mandate a top legislative priority. This week they were quick to line up behind the new CBO projections.
"The new cost of ending this problem is $138 billion, more than $100 billion below the previous projection and less than the $146 billion Congress has already spent on short-term patches to the SGR over the past decade," AMA President Jeremy Lazarus, MD, said in prepared remarks.
Anders M. Gilberg, senior vice president, government affairs, with the Medical Group Management Association, says the new estimates are a game changer that could finally lead to the permanent repeal of the decade-old SGR after years of stop-gap fixes and toothless threats of Medicare reimbursement cuts.
"That is a significant shock to the environment in which we were having this discussion," Gilberg told HealthLeaders Media. "In Congress it is hard to say you are going to take a bill, drop it in and it is going to pass. But the climate for something like this has improved significantly because the impediment to passing this hasn't been the substance because there is near universal support for this. It was the cost. So, it's still a lot of money but that CBO report on is a significant catalyst. I don't think anyone has ever seen a drop like that—of $100 billion."
On Wednesday, U.S. Reps. Allyson Schwartz (D-PA) and Joe Heck, DO (R-NV) filed the Medicare Physician Payment Innovation Act to repeal the SGR and to create what they called "a clear path toward comprehensive reforms of Medicare payment and delivery systems."
"There is no single greater threat to the long-term solvency of Medicare and seniors access to healthcare than the broken Medicare payment system, or SGR. Each year, healthcare practitioners are faced with devastating cuts that could make it nearly impossible for them to continue providing care for Medicare beneficiaries. And each year Congress has avoided coming up with a serious solution to this problem," Heck said in a media release touting the bill.
"This bill is that solution. Our seniors and their healthcare providers deserve a program that is immune to Congressional dysfunction and that would provide stability by replacing the currently flawed formula with a system that promotes efficient, cost-effective healthcare."
The bill would:
Permanently repeal the SGR formula.
Provide annual positive payment updates for all physicians for four years.
Ensure access to preventive care, care coordination, and primary care services through increased payment updates for those services.
Aggressively test and evaluate new payment and delivery models.
Identify payment models to provide options for providers across medical specialties, practice types, and geographic regions.
Stabilize payment rates for providers who demonstrate a commitment to quality and efficiency within a fee-for-service model.
Ensure long-term stability in the Medicare physician payment system through predictable updates that accurately reflect the cost and value of providing health care services in coordinated care models.
The repeal bill has the support of key physicians associations, including the AMA and the American Academy of Family Physicians.
"By permanently repealing the SGR formula, we end repeated threats to physicians' ability to provide care for Medicare beneficiaries," Jeff Cain, MD, president of the AAFP said in a media release.
"Equally important, this bill paves the way for innovations such as the patient-centered medical home. In doing so, it moves toward a system that improves quality while it restrains the growth in costs. We need to make sure our patients can get the right care from the right health care professional at the right time."
Richard "Buz" Cooper, MD, director of the Center for the Future of the Healthcare Workforce at New York Institute of Technology and a healthcare economist at the University of Pennsylvania, calls the new estimates and the legislation to repeal the SGR "an essential step." However, he urged caution.
"It will be important to remember why there was a problem in the first place," Cooper wrote in an email exchange with HealthLeaders Media. "The SGR was predicated on the belief that the growth of medical spending could be held to the overall U.S. economic growth rate. This was applied specifically to the physician portion, but there is no reason to think that it would be different from the rest. And after 15 years, we see the result of faulty logic. It will be important not to engraft that logic into current reform efforts. Healthcare spending grows more rapidly than the economy overall. To plan differently will be to repeat the pain caused by the SGR."
Gilberg says that even with the lowered cost projections, finding $138 billion in the midst of ongoing budget battles would be no small feat. "The impetus exists in a larger package, not in isolation," he says.
"Will $138 billion materialize out of nowhere in this environment to pass this bill? No. But if there is growing support for repealing SGR along the lines of what was outlined here, then could it realistically exist in some larger package? I certainly wouldn't write it off. I think it is serious. That CBO score is a pretty big catalyst that didn't exist ever before."
It's easy for federal officials to acknowledge with great fanfare the special concerns of rural healthcare stakeholders. Making good on promises to address those concerns, however, is never guaranteed.
Still, it was hard not to be impressed this week after listening in on pledges made to rural healthcare stakeholders during a teleconference that included Health and Human Services Secretary Kathleen Sebelius, Agriculture Secretary Tom Vilsack, and Patrick Conway, MD, CMO and director of clinical standards and quality at the Centers for Medicare & Medicaid Services.
The three senior officials detailed Medicare reforms that they determined were obsolete or excessively burdensome on hospitals and healthcare providers. Eliminating those bewhiskered regulations, by CMS estimates, could save nearly $676 million annually—$3.4 billion over five years—and would greatly ease regulatory and staffing burdens for rural providers in particular.
Conway ran through a list of already implemented reforms and proposed reforms that:
Eliminate a requirement that critical access hospitals provide diagnostic, therapeutic, laboratory, radiology, and emergency room services directly by staff. Those services can now be contracted out, Conway says, "to provide high-quality care and better access to care when staffing becomes a challenge."
Eliminate a requirement that critical access hospitals, rural health clinics, and federally qualified health centers have a physician on site at least biweekly to provide medical direction.
"Many physicians in extremely remote areas found it difficult to comply with this biweekly schedule. Specifying a specific timeframe for a physician to visit a rural facility does not ensure better healthcare," Conway says. "With the development of telemedicine a physician should have the flexibility to utilize a variety of options to provide medical direction."
Allow registered dieticians to order patient diets directly rather than relying on approval from clinicians. "As a practicing hospital medicine physician I have personally—including while working in a hospital this past weekend—seen the potential for medical errors if physicians misunderstand dieticians' recommendations," Conway says.
"This will provide hospitals with the flexibility to allow dieticians to practice to the full extent of their scope of practice and enter orders directly."
Allow rural hospitals with swing beds to be surveyed when the hospital is surveyed, rather than being surveyed separately.
No longer require for one director of outpatient services. "Each hospital can determine the most efficient and effective way to manage outpatients. This change is critical for small, low volume rural hospitals with more limited staff resources," Conway says.
In addition, Conway says the Obama administration has already implemented key reforms that were recommended in May 2012 during the White House Rural Stakeholder meeting.
Those include the final rule of the physician fee schedule, which was amended to allow nurse practitioners and physicians' assistants to order portable X-rays.
"This recognizes the important role these providers play in rural clinics and hospitals and the need for flexibility," Conway says. "Lastly we made changes to the electronic health records incentive payments. We now allow cause to include capital lease costs for the purpose of determining their electronic health records incentive payments."
Vilsack, the former Iowa governor, told the teleconference that the reforms and proposed reforms "reflect an understanding that rural America—and those who serve, live, work, and raise in rural America—is potentially a different place than suburban and urban areas and requires a different thought process as it relates to regulations."
"Providing greater flexibility, expanding the leverage of resources, recognizing the various professions that are engaged in healthcare providing in rural areas from dieticians to physicians' assistants and others, allowing flexibility in outpatient services, recognizing that swing beds in hospitals may need different survey requirements, all of that is reflective of an attitude that we are trying to make life easier and at the same time improve health services," Vilsack says.
Sebelius, the former governor of Kansas, told the teleconference that the reforms are a response to the feedback generated by the White House rural stakeholder meeting last spring.
"We understand that one size doesn't fit all when it comes to healthcare and this reflects that understanding," Sebelius says. "For rural providers, the proposals not only save money, they will help ensure that doctors and nurses have more time to devout to their patients."
Sebelius asked rural providers to help CMS educate the 8.5 million uninsured people in rural America who may be eligible for health insurance under the Affordable Care Act.
"Starting October 1, new health insurance marketplaces open for enrollment. Expanding access isn't enough. We need your help to reach out to your communities to get people signed up," she says. "We know that a lot of people are so used to being locked out or priced out of the market, they don't even think about coverage anymore."
"There are also a lot of uninsured young people who may not understand why health insurance is important for their future," she says.
"Reaching them is about more than ensuring that everyone has a chance to get healthy and get the care they need. It's also about reducing the burden of uncompensated care and making sure that fewer people show up in our emergency rooms with illnesses that could have been prevented. The more successful we are in getting people enrolled the more we will reduce the strain on providers and hospitals across the country."
So what can the rest of us in "the flyover" make of all of this outreach?
It appears to be well-intentioned and sincere. Why would it be otherwise? Sebelius and Vilsack are former governors of largely rural Midwestern states, and they know firsthand the lay of the land.
And fortunately, improving quality and access for rural healthcare appears to be one issue that Republicans and Democrats embrace enthusiastically. They understand that healthcare providers fill critical access needs, create jobs, and generate economic activity.
CMS says it wants feedback from rural providers on the proposed rules changes during the 60-day public comment period. Now is the chance for those providers to step up and help shape federal rural healthcare policy.
It's easy to get cynical about all of this and just assume that the Obama administration is just playing politics or that the federal government will ignore recommendations and screw things up. Admittedly, federal healthcare policy can be hard to defend.
It's a lot tougher, however, to weigh in with thoughtful suggestions about how we can improve healthcare delivery in rural America. The stakes in this game are too high to sit on the sidelines. Make sure that CMS hears from you.
The federal government's long-delayed rollout this month of the "Sunshine Act" mandate to disclose financial relationships between drug and device manufacturers and healthcare providers is getting a mostly guarded reception from key groups that will be affected by it.
For the most part, when it came to commenting on the 287-page final rule, those lobbying groups and professional associations avoided trash talking the final rule.
Instead, they followed the cautious lead of PhRMA Senior Vice President Matthew Bennett, who says the drug makers' lobby "is currently reviewing the final regulation of the Physician Payments Sunshine Act and looks forward to seeing how CMS addressed key concerns that were previously raised."
"PhRMA remains committed to the principles of the Sunshine Act and continues to believe that careful implementation is essential to ensuring that Sunshine fulfills its objective of usable, transparent, and understandable sharing of information," Bennett said in prepared remarks.
American Medical Association President Jeremy A. Lazarus, MD, said the nation's largest physicians' association "will carefully review the new Physician Payment Sunshine Act rule."
"Physicians' relationships with the pharmaceutical industry should be transparent and focused on benefits to patients," Lazarus said in prepared remarks. "Our feedback during this rulemaking process was aimed at ensuring the new registry will provide a meaningful picture of physician-industry interactions and give physicians an easy way to correct any inaccuracies. As the rule is implemented, we will work to make sure physicians have up-to-date information about the new reporting process."
The "National Physician Payment Transparency Program: Open Payments"—was mandated under the Affordable Care Act to improve transparency in the healthcare market. The final rule was scheduled to be published 15 months ago and federal officials this week offered no explanation for the late issue, which comes three months after the November election.
"You should know when your doctor has a financial relationship with the companies that manufacture or supply the medicines or medical devices you may need," Peter Budetti, MD, deputy administrator for Program Integrity at the Centers for Medicare and Medicaid Services, said in a media release. "Disclosure of these relationships allows patients to have more informed discussions with their doctors."
The rule requires makers of drugs, devices, medical supplies, and biotech firms covered by Medicare, Medicaid, or the Children's Health Insurance Program to disclose payments or other "transfers of value" to doctors and teaching hospitals.
It also requires manufacturers and group purchasing organizations to disclose to CMS physician ownership or investment interests. CMS will post the data on a public website next year. Budetti says more transparency will reduce the potential for conflicts of interest that physicians or teaching hospitals face because of their relationships with manufacturers.
Data collection will begin on Aug. 1, 2013. Manufacturers and GPOs will report the data for August through December of 2013 to CMS by March 31, 2014 and CMS will make the data public by Sept. 30, 2014.
Physicians, teaching hospitals, manufacturers and GPOs may review and correct reported information before its publication. CMS is developing an electronic system to facilitate the reporting process.
Reaction to the final rule was mixed at Public Citizen. Michael A. Carome, MD, deputy director of the Health Research Group at the public advocacy group said it "strongly support[s] this new rule and [is] disappointed that it took CMS so long to issue it in final form, now more than a year after the statutory deadline for issuing the final rule has passed."
"We are further disappointed that the date for compliance with the requirements of the new rule are also significantly delayed: initial reports from manufacturers are not due until March 31, 2013 (covering a reporting period that begins in August 2013 and end December 2013) and the initial posting of reported data on a publicly available website will not occur until September 30, 2014. Such delays are unnecessarily long," Carome wrote in an email exchange with HealthLeaders Media.
However, Carome says, the rule is needed because "financial relationships between physicians and industry can subtly and not so subtly influence the opinions and recommendations of healthcare providers in a variety of settings."
"Such payments and other transfers of value to physicians from drug and medical device companies are intended to influence physician prescribing behavior in order to benefit the companies' bottom line and do not serve the best interests of patients," he says.
"Ideally, many forms of such payment would not be permitted, and indeed, some medical schools have taken steps to restrict such payments to their faculty members. Neither CMS, nor any other agency, has the authority to ban such payments, and it's unlikely Congress would pass a law prohibiting them."
Mary R. Grealy, however, president of the Healthcare Leadership Council, whose members include drug and device makers and biotech firms, said in a statement that "it is important that the public have a clear understanding of the nature of physician-industry interactions."
"The overwhelming majority of these collaborations are focused on developing safer and more effective medical innovations and helping physicians better understand how to utilize new medications and technologies for the benefit of their patients," Grealy said.
"And, in fact, physicians and medical innovation companies alike regularly demonstrate their commitment to transparency, researcher independence and a patient-centered focus."
Blair Childs, a senior vice president with the group purchasing organization Premier, was one of the few with skin in the game to offer a full-throated endorsement of the final rule. He said it "brings sunlight to an area where consumer confidence has been undermined by conflicts of interest."
"With these new requirements, patients will have the information so they can feel more confident that the treatments they receive are based on evidence-based care and their physicians' best judgment, rather than inappropriately influenced by financial relationships," Childs said in prepared remarks.
"We know that even small gifts can be associated with physicians' positive attitudes toward sales representatives, and can increase their rate of administering particular drugs or devices. These regulations are a long-overdue step toward greater transparency in healthcare."
Despite the delays, Carome says that once the rule is implemented it should bring greater transparency to the financial relationships between physicians and the drug and medical device industries.
"Such transparency will allow consumer advocates, patients and other stakeholders to better assess the potential influence such relationships have in (a) the development of recommendations by the advisory committees of the FDA, CMS and other regulatory agencies; (b) the development of clinical practice guidelines by professional associations and government agencies; (c) the opinions expressed by medical school faculty and attending physicians during graduate medical education training; and (d) the medical decision making of healthcare providers in the context of clinical care."
Ultimately, Carome says, the worth of the final rule will be determined by how well companies comply with reporting requirements, how vigorously CMS enforces the rule, and how user-friendly and accessible the database will be for the general public.
"Given the delays in implementation, we won't be able to assess the impact of the rule for at least a few years," he says.
Prime Healthcare Services to Buy Hospitals in NJ, KS
Ontario, CA-based Prime Healthcare Services has announced two separate acquisitions of financially troubled hospitals in New Jersey and Kansas. Financial terms of the deals were not disclosed.
In Kansas, Prime has agreed to buy Providence Medical Center in Kansas City, and Saint John Hospital in Leavenworth, from SCL Health System, a faith-based, nonprofit system. Under the terms of the deal, Prime will make "significant investments" to financially stabilize the hospitals and allow them to maintain current levels of charity care.
The hospitals will maintain their current acute care and emergency department services for at least five years, invest $10 million toward capital improvements, and employment offers will be extended to "substantially all employees."
The deal calls for Prime to hire all current St. Mary's Hospital employees. Prime will invest $30 million in capital improvements over the next five years beyond routine replacements and additions. Prime will maintain a local governing board. The APA also calls for Prime to assume the existing Collective Bargaining Agreement with JNESO which represents nurses and clinical employees.
"From the financial support to the terms of the APA, it is clear that Prime offers the best way forward for St. Mary's," Edward J. Condit, St. Mary's president/CEO, said in prepared remarks. "Prime has given St. Mary's an excellent opportunity to not only be viable, but to grow and prosper. We must proceed as quickly as possible to finalize this sale in order to protect and secure the healthcare needs of the Passaic community."
"We are appreciative of the wonderful legacy the Sisters of Charity of Leavenworth leave these hospitals and our communities," Michael Parra, MD, a board member for Providence Medical Center and Saint John Hospital, said in prepared remarks. "Yet, now is the time to embrace a new direction and Prime Healthcare Services has a strong reputation for quality, excellence and growth."
In New Jersey, Prime said it will keep the St. Mary's Hospital in Passaic open as an acute care hospital for at least five years and it will continue to operate the hospital in a manner that is consistent with its ethical and religious directives. That includes adopting charity care policies which are at least as generous as those currently used by the hospital.
Tenet's San Ramon RMC in Joint Venture with John Muir Health
Dallas-based Tenet Healthcare Corporation and Walnut Creek, CA-based John Muir Health have announced the creation of a joint venture partnership between San Ramon Regional Medical Center, a 123-bed acute care hospital in San Ramon, CA and John Muir Health. John Muir Health is an integrated system of doctors, hospitals and other healthcare services in the San Francisco Bay area.
Under the deal, John Muir Health will spend $100 million to acquire a 49% ownership interest in San Ramon RMC. The two organizations will expand and improve the efficiency and coordination of care in the TriValley area and nearby communities, including San Ramon.
The transaction is expected to close by March 31. John Muir Health and Tenet will also jointly develop outpatient services, such as Ambulatory Care Centers and other projects to be determined, in the Tri-Valley area and nearby communities, including San Ramon. John Muir Health's existing hospitals, facilities and other assets are not included in the partnership agreement.
"In the midst of healthcare reform and a very competitive local environment, we will offer better, more accessible and integrated care together than we can apart. Together, we will pursue new and innovative ways to improve patient care, access to services and affordability," Cal Knight, president/CEO of John Muir Health, said in prepared remarks.
MA's Jordon Health Systems to Join Beth Israel Deaconess
Plymouth, MA-based Jordan Health Systems, Inc. has signed a letter of intent to become part of Boston-based Beth Israel Deaconess Medical Center. The two systems are expected to finalize the deal later this year, under which Jordan Health Systems would become part of Beth Israel Deaconess Medical Center, but retain local management and board governance.
"For more than 100 years, Jordan Hospital has been a vital part of the communities we serve," Jordan Board of Trustees Chair Clark Hinkley, said in prepared remarks.
"This decision was not just about finances. It was about finding a healthcare affiliation that gives us the scale we need to compete in an ever-changing environment and ensure that local care will stay just that...local. By joining BIDMC, we will gain long-term financial stability without sacrificing who we are and what we believe in."
The affiliation will align with the resources of Harvard Medical Faculty Physicians at BIDMC. Also, under terms of the agreement, JHSI would continue to maintain its not-for-profit status.
Boston-based Steward Health Care System posted an operating loss of $14.6 million in 2011 and ran a total deficit of $56.9 million for the year, according to a report from Massachusetts Attorney General Martha Coakley's office.
However, the for-profit system, which is owned by the private equity firm Cerberus Capital Management, obeyed mandates set down by state regulators before they approved Steward's November 2010 acquisition of the six hospitals owned by non-profit Caritas Christi Health Care, according to the 70-page compliance monitoring report.
State monitors do not appear to be overly concerned about the red ink in Steward's first year of operation.
"The review reinforces previous findings that Steward acquired community hospitals in deteriorating financial condition and with significant deferred capital investment needs," the report says.
"The first year review indicates that Steward is striving to meet its stated goal of keeping more care in the community. One year of performance information is not enough to predict how Steward will perform in future years."
The AG's review also found that:
Even though outpatient volume generally increased, profits overall declined from FY10 because expenses outpaced revenues.
Steward spent heavily on capital improvements and hospital and physician acquisitions. To support this spending, the system supplemented the initial Cerberus investment of $246 million with a revolving bank line of credit, under which it had borrowed $96.3 million as of the close of FY11.
Steward's financial condition, even more so than Caritas's, is complicated by special expenses such as necessary contributions to its significantly underfunded pensions and its commitments in connection with its provider acquisitions. It will be important to monitor how these expenses affect Steward's long-term financial performance.
Healthcare economist Adam Powell, president of Boston-based Payer+Provider Syndicate, says the first-year losses were anticipated.
"Steward Health Care has built its business model around acquiring financially struggling hospitals. Substantial changes are needed to bolster the financial strength of the hospitals that it has acquired. While Steward is in the process of weaving its newly acquired hospitals into a system that can deliver value in part through economies of scale, it is still a work in progress," Powell wrote in an email exchange with HealthLeaders Media.
"Building shared assets, like the centralized ICU command center mentioned in Atul Gawande's article in The New Yorker, requires substantial capital expenditures. These shared assets have high upfront costs, but also have the promise of boosting profitability in the future. It is impossible to change processes or culture on a dime and some investments will take time to fully implement."
Because Steward is focusing on value, Powell says, it can only deliver on that promise by efficiently delivering care at a lower price than its competitors.
"This market positioning limits Steward's ability to improve its profitability by raising prices, and instead requires it to work on reducing costs and increasing volume. Neither of these changes can happen overnight," he says.
As Steward Health Care is still in the early stages of its development, Coakley is prudent in her assertion that it is too soon to draw any conclusions about Steward's future financial performance.
Perhaps some state lawmakers were waiting for the U.S. Supreme Court to rule on whether or not key provisions of the Patient Protection and Affordable Care Act were constitutional.
Other state lawmakers, no doubt, were waiting to see who won the November presidential election.
And, of course, many state lawmakers view the PPACA as an egregious federal intrusion on state sovereignty that should be derailed or delayed at every opportunity.
Whatever the reasons, a report released this Thursday by The Commonwealth Fund shows that only 11 states and the District of Columbia have passed laws or issued regulations to implement the PPACA's health insurance market reforms that go into effect in just 11 months.
Thirty-nine states have taken no action. The Commonwealth Fund says that could limit those states' enforcement of the reforms, which include bans on preexisting conditions, a minimum benefit standard, and limits on out-of-pocket costs.
"These are incredibly important market reforms that guarantee that people have access to health insurance coverage starting in January," Sara R. Collins, vice president, Affordable Health Insurance, at The Commonwealth Fund, told HealthLeaders Media.
"There has been some uncertainty about the law given the Supreme Court decision as well as the election. Now that those uncertainties are gone you would expect to see in this legislative session more action by a large number of states," she says.
"So far not many states have passed the needed legislation or issued regulations that the need to but you probably can expect some considerable activity in the coming year. States really need to press forward and implement these provisions and bake them into their laws."
According to The Commonwealth Fund, the seven reforms that begin Jan. 1,2014 apply to health plans inside and outside the exchange include:
Guaranteed Issue: Requires insurers to accept every individual and employer that applies for coverage.
Ban on Waiting Periods: Employers cannot impose waiting periods longer than 90 days before an employee can be eligible for coverage.
Rating Requirements: Insurers are restricted from using health status, gender, and other such factors in setting premiums.
Ban on Preexisting Condition Exclusions: Insurers cannot exclude or limit coverage for people with preexisting health problems.
Essential Health Benefits: Requires insurers to cover a comprehensive set of health benefits.
Out-of-Pocket Cost Limits: Holds out-of-pocket costs to the level established for high-deductible health plans that qualify for health savings accounts.
Actuarial Value: Requires insurers to cover at least 60% of total costs under each plan and sell plans that meet new benefit tiers based on average costs covered.
To date, Connecticut is on the leading edge of ACA insurance reform implementation as the only state to pass legislation that addresses all seven of the new reforms. California is a close second, having passed legislation on six of the seven reforms.
Nine states—Arkansas, Maine, Maryland, New York, Oregon, Rhode Island, Utah, Vermont, and Washington—and the District of Columbia have passed laws or issued new regulations covering at least one of the seven new market reforms, The Commonwealth Fund says.
Collins says it's not too late for many states to get up to speed. Even if they can't, she says, consumers won't be left to fend for themselves because the federal government will step in to enforce baseline provisions.
"The law is sweeping in terms of the new reforms to the individual and small group insurance markets which have made it so difficult for individuals and small businesses to get coverage over the last several years," Collins explains.
"These are truly important provisions and the law will make it much easier for people to get a health plan, particularly people who have health problems or who are over. It is critical that states move forward and pass legislation to implement these laws so the citizens in their states can benefit from them. If they don't, this is a federal law so the federal government would enforce the provisions."
In addition, The Commonwealth Fund says state legislatures around the nation will act quickly this year to implement laws dealing with the PPACA and insurance markets. The report cited an earlier study of state action taken to implement the PPACA's 2010 health insurance market reforms found that nearly all states ultimately required or encouraged compliance with those reforms, which included bans on lifetime limits on benefits and dependent coverage for young adults up to age 26.
"It is encouraging that nearly all states took action on the Affordable Care Act's early market reforms in 2010," The Commonwealth Fund President David Blumenthal, MD, said in prepared remarks. "Now, it is critical that states do the same with these reforms, to help ensure that their residents benefit from secure, affordable health insurance coverage."
News this month that Texas Health Resources will launch accountable care organizations with Aetna and Blue Cross Blue Shield of Texas are sending a clear message to rivals Baylor Health Care System that the battle is on for healthcare supremacy in the Dallas-Fort Worth area.
Texas Health's announcements come just weeks after Baylor said in mid-December that its plans to merge with Temple-based Scott & White Healthcare to create what would be the largest integrated delivery system in the Lone Star State.
If the proposal survives a due diligence review, the system that emerges will include 42 hospitals, 350 patient care sites, 4,000 doctors, and 34,000 employees, serviced by its own health plan for a coverage area stretching from the 12-county Dallas Metroplex to Temple.
Not to be outdone, the Texas Health/BCBSTX ACO, announced on January 14, would be one of the largest in the nation. Patients would be served by the 25 hospitals of Texas Health, which is one of the largest faith-based, nonprofit health systems in the nation, with more than 5,500 physicians.
In addition, Texas Health announced this week that it would create an ACO with Aetna that would include more than 750 physicians and other medical professionals from the affiliated Texas Health Resources physicians group.
"This is a sign of two big powers in the Dallas-Fort Worth market preparing for what is going to happen with healthcare reform and how they are going to cope with cuts in reimbursements as a result of deficit reduction," says John G. Self, an executive staffing consultant and veteran observer of the DFW healthcare market.
"They are both smart to get ahead of the curve. You have to have these affiliations and networks on the payer side and you have to look at your own organization to get rid of nonessential costs. You have to do both."
Doug Hawthorne, CEO of Texas Health, said in prepared remarks earlier this month that the deal with BCBSTX was "another example of the innovative approaches that we believe will lead to truly effective healthcare reform."
"Texas Health has been advancing the concept of putting more emphasis on keeping people healthy and out of the hospital and developing new programs like this ACO to help employers keep their employees healthy. By creating this ACO, Texas Health is delivering on our promise to collaborate with physicians, payers, employers and other health systems to align the efforts of all of us around what is best for the patient across the entire continuum of care," Hawthorne said.
Self says it's a good idea from a marketing perspective to talk up the establishment of the ACOs, especially in the wake of the Baylor/Scott & White merger announcement.
"You want to establish that you are moving forward," he says. "That is an inside-outside announcement: inside to reassure their people that they're doing what they need to do for success, and outside to say 'we a full-service provider.'"
The Baylor/Scott & White merger has no geographic overlap. Separately, the two systems are not natural competitors. However, Scott & White has an integrated health plan that, if extended to include Baylor facilities in Dallas, could provide critical savings through improved market share, vertical integrations and the elimination of "double marginalization" that comes when both payers and providers attempt to make a profit.
"Our new organization will not only prepare us for healthcare reform, but will help drive and shape what healthcare delivery in this country will become," Robert Pryor, MD, president/CEO of Scott & White Healthcare, said in prepared remarks last month.
"Scott & White has been recognized as a national leader for our strong physician-led population health model. Our shared vision with Baylor is to build upon our unique approach and create an innovative healthcare delivery model enhanced by medical education and research."
Self says comments by leadership in the two rival systems signal that they are positioning themselves to protect their mission interests and financial interests "before the real battle begins."
Twin Rivers Regional Medical Center in Kennett, MO, has been owned by four for-profit hospital companies over the past decades, including the current owners, Health Management Associates, Inc.
In that time, Medical Director Steve Pu, MD, a general surgeon at the 116-bed hospital, has seen various patient engagement initiatives launched with the best of intentions only to flounder months later.
"Every company that came in had some type of program that they wanted to initiate that would help with patient satisfaction. All of the programs were good. The principles they were founded on encouraged you do to all the right things, the rounding and the discharge goals," Pu says.
"I found over the years that you would initially gain a lot of momentum with these particular initiatives, and your (HCAHP) scores would go up. But usually after six to eight months things would start to decline.
The end result at Twin Rivers had been discouraging HCAHP patient engagement scores in the mid-30s as recently as one year ago.
"Most of the patients and their families were supportive of the staff, but they said they looked like they are so busy and [that they] have the time," Pu says. "That was true. That was really occurring. The staff became demoralized. Then their attitudes begin to deteriorate and the compassion wasn't there anymore. That is how the downfall started. At the end of 2011 we were just in the pits."
Pu and his colleagues concluded that the initiatives failed because they came as a mandate that did not engage physicians from the start, nor ask them to lead.
"When you look at these things, and you look at other health systems across the country and usually all of these initiatives are targeted at front-line staff. The physicians have always been left out of the loop," he says.
"You get informed about it but they're not asking us to lead it. You have to have the physicians out front because if the front-line staff sees that the medical staff not only buys into it but owns it they are much more responsive. You don't want them to perceive it as just another task."
During a brainstorming session to improve the patient experience, two physicians at Twin Rivers came up with the idea of a "sacred moment" between the physician and the patient shortly after they are admitted into the hospital.
"We asked why the initial conversation with the patient is so complicated. You have to fill out all this paperwork. 'Do you have a living will? What is your insurance?'" Pu says. "And my OB/GYN said, 'why can't we have a moment or a time at the beginning with the patient in that first 10 or 15 minutes where we really try to connect with the patient on a more-personal basis and try to address their immediate concerns and fears?' 'Do you know why you are here? Who is your support group? Do you have spiritual needs? Have you eaten in the last six hours?'"
Pu says the term 'sacred' is used not in a religious context but to re-affirm the caring bond between the physician and the patient. "That first 10 or 15 minutes the provider has with the patients means it is uninterrupted, sacred. You don't answer a cell phone or do anything else. You are completely focused on that 10 or 15 minutes with that particular patient," he says.
"We try to eliminate fears and address concerns. We found that not only can you do that but you also do something for the person who is giving the sacred moment. By making that connection you are tapping back into their original calling and mission. They feel like they are caring for somebody and it is not perceived as just another task."
For the fifth consecutive year, Moody's Investors Service has issued a negative credit outlook for the nation's not-for-profit hospitals in 2013, with revenue growth expected to continue for the sector but margins getting leaner.
The sector hasn't been stable since at least 2008, and Daniel Steingart, a Moody's Assistant Vice President and analyst, says there is no indication that anything is going to change for the better anytime soon.
"I don't want to say that this is the ‘new normal' but there is so much uncertainty out there and the balance of the factors we see are negative," Steingart told HealthLeaders Media. "We need some more clarity around some of those items and see them hopefully resolved in a more favorable light to go back to a stable outlook."
Those items include the likelihood that the federal government will trim reimbursements for Medicare and other healthcare spending in the name of deficit reduction, and that tepid economic growth and related elevated unemployment levels will dampen demand for healthcare services.
Hospitals already face more than $300 billion in reductions to Medicare through 2019 as part of healthcare reform. Steingart says additional cuts to hospitals will likely be part of any legislation intended to reduce the long-term federal deficit.
"There is a lot of uncertainty about where Medicare rates are going to go," Steingart says. "Our view is that, whatever legislation that comes out dealing with the federal deficit, both sides want to cut Medicare in some form or another. Right now they may be far apart in their proposals but they are both proposing some sort of cut."
"There is a lot of uncertainty as to regulations the Obama administration is still rolling out with the health insurance exchanges, what sort of insurance products will be on them, how they are going to reimburse hospitals. Our feeling is that they are going to reimburse at lower rates than the typical commercial insurance that you and I might have. But there is a lot of uncertainty about where those rates will be and how many people will sign up for them."
As dour as the outlook may be for 2013, Steingart says there is nothing now to suggest that it will be any better in 2014 when key provisions of the Affordable Care Act take effect.
"Everybody seems to be fairly confused about what it means to participate in the health insurance exchanges," he says. "The insurers are worried that the relatively healthy won't sign up for insurance, paying the penalty and then signing up as soon as they have a condition. There is a lot of uncertainty about what kinds of products will sell best on the exchanges."
"So when we are sitting here next January there is still going to be a lot of uncertainty, but as 2014 unfolds we should have more clarity about how many people have signed up for insurance and what the Medicaid rolls are looking like in each state," he says.
"We expect that the hospital Medicaid payer mix will go up, but you won't start to see that in the numbers until maybe the first quarter of 2014, and you'll see it in audits for those with June 30 year-end. But you're talking about a six month lag before we really start to see it."
Steingart says that Moody's adjust its analyses and outlooks to consider the changes in the healthcare market but that those adjustments can only go so far.
"We are looking at broader measures of utilization, but at the end of the day revenue growth is still a key factor for us in part because expense growth and healthcare inflation are generally very high," he says. "So keeping up top-line revenue growth is key for us. When you look at hospitals across the country it is very unusual to have a year where revenue is flat from one year to the next and very, very rare to have actual negative revenue growth."
Admissions will continue to be a key measure for hospitals, Steingart says, even though healthcare reform designs care coordination and incentives around keeping people out of hospitals.
"We used to only list admissions and now we list observation stays and admissions as an indicator of demand for hospital services," he says.
"We're looking at the whole picture. We're looking at physician office visits and ED visits. To some extent we are moving beyond that pure in-patient view of demand. But, you have to keep in mind that market share—which there is a whole cottage industry around tracking and measuring—is still largely inpatient based. It is still very hard to get good comparable data on an outpatient basis."
It's not all bad news, however. Steingart says hospital administrators have improved operations and efficiencies in the face of weaker patient volumes and slower revenue growth. The accelerated growth of mergers, acquisitions, joint operating agreements, and other collaboratives have helped hospitals improve on economies of scale, leveraged market share, and other efficiencies.
"What management teams have been effective in doing is increasing productivity at a broad level, cutting expenses in departments where revenue growth hasn't been that good, managing down the number of people needed to staff a unit. Hospitals have gotten very good about doing that. But that is all in the context of fee-for-service and reducing your unit costs to match the amount you are being paid," Steingart says.
"What we need to see is this deeper dive on the expense cuts, which is managing the whole patient through-put and patient care experience to how the reimbursement contracts change," he says. "Right now that is very fluid. That is going to be a challenging area. What you are seeing is the larger systems and the better teams are experimenting with that on certain care protocols."
For example, Steingart says some more advanced health systems offer what amounts to a warranty on procedures such as hip replacement surgeries.
"They have done a very deep dive on what it takes to admit a patient, the services they utilize when they are in the hospital, all the care providers that touch that patient during their stay, and the post-acute follow up and rehab and they are trying to value engineer that," he says.
"Right now we are at the beginnings of that. You only have it with a few services from a few really good and advanced institutions. That is something that is going to have to trickle down to the rest of the industry because the payment changes are going to come over the next two are three years."
With Congress and states looking to trim healthcare spending, the American Hospital Association this week issued a none-too-subtle reminder that hospitals are economic engines for the communities they serve.
Citing various data sources, AHA said that the nation's hospitals employ 5.5 million people and create $2 trillion dollars in economic activity, even as "some in Congress continue to threaten access to hospital services."
"It's important that people understand that hospitals are not a drain on our economy. They are a driver," Caroline Steinberg, AHA's vice president for trends analysis, told HealthLeaders Media. "They not only provide medical care to support a healthy and productive workforce. They also act as an economic engine supporting trillions of dollars of economic activity nationwide."
"Very few people really understand that," Steinberg says. "I remember some years back being at a conference where they were talking about national health expenditures. Everything they said, if they had said it about another sector of the economy, it would have been a positive. 'It's growing as a share of (Gross Domestic Product). It has this many more people employed. It's a growth industry.'"
Steinberg noted that the healthcare sector added an average of 28,000 new jobs each month in 2012. "Throughout the recession healthcare was a steady producer of jobs and you can't really say that about any other industries," she says.
In addition, AHA says that hospitals are the second-largest sources of private sector jobs, support another 10 million jobs in the economy through "ripple effects," and spend more than $702 billion each year on goods and services from other businesses.
Stuart Altman, professor of national health policy at The Heller School at Brandeis University, calls the economic activity generated by hospitals and healthcare "a mixed blessing."
"There is no question it is a major economic force in many if not most communities. It is often the largest employer. It has transformed communities," Altman says.
"Even big cities like Pittsburgh and Boston. Pittsburgh in particular was reeling from the loss of steel and other industries and now it is a healthcare mecca. If we were to cut that spending it would reduce that component of the local economy."
"On the other hand it is draining funds from other industries and state governments and communities which can use that money to generate other kinds of jobs," Altman says. "It is a big mistake to use economic power as an excuse for not finding the right balance for what we should spend on healthcare. We should spend what we need to spend and no more."
Steinberg says hospitals have a tremendous "multiplier effect" in the communities they serve.
"For every $1 you put into healthcare you get $3.28 back," she says. "One thing that is different about healthcare and hospitals in particular is that most of the money stays in the local community."
"About 60% of the money spent on hospital care goes to the wages of the staff. If you were going to spend that $1 at Wal-Mart, a lot of that $1 goes to China. Healthcare is different because it stays in the local economy and it has a high multiplier effect."
Richard (Buz) Cooper, MD, director of the Center for the Future of the Healthcare Workforce at New York Institute of Technology, says there are worse things to spend money on than healthcare.
"The reality is healthcare is a major industry," Cooper wrote in an email exchange with HealthLeaders Media. "Our problem is not that there's too much. It's that when there's more, social justice demands that it be distributed across income groups, and this happens in a much more equitable manner than transportation, food or housing and therefore entails greater transfers of wealth and taxes."
"But think about it. Take healthcare from Pittsburgh and you have just another Rust Belt town. Try doing it in New York or Philadelphia or Houston, and others," Cooper wrote.
"This is what America does. And it creates jobs, well-paying jobs—jobs with upward mobility, jobs that pay taxes that support schools and other important services. Healthcare accounts for about 10% of [all] jobs, but 20% of new jobs. This is the future. Don't kill it."
