A report that warns against "stop-gap" substitutions of nurse practitioners for primary care physicians may have rekindled the long-smoldering border skirmish between the clinician associations.
The report, Primary Care for the 21st Century, was issued this month by the American Academy of Family Physicians, and reaffirms its support of physician-led, patient-centered medical homes as the best method of transforming primary care delivery.
In sharp contrast, the AAFP says advocating "independent practice by a single health professional," namely nurse practitioners in place of physicians, "flies in the face" of studies supporting the cost-effectiveness and quality outcomes of the physician-led care team approach.
"We are not trained to do the same things, so to imply that one can substitute for the other is just incorrect," Roland Goertz, MD, chair of the AAFP Board of Directors, told HealthLeaders Media. "The educational backgrounds are different. Even nursing leadership says 'we are not trying to be doctors,' but policy setters tend to simplify things, which is a kind way of saying it."
Goertz says physicians are also concerned that the public could be "easily confused" if caregivers aren't transparent about their roles and scope of practice. "If you ask a patient when they went in for care and they saw someone with a white coat, the vast majority of the time they're going to think it was a physician that provided the care," he says.
"You have to be clear about who is providing care and what the training is that has substantiated that ability to provide that care. Our organization has nothing against creativity and entrepreneurism in the delivery model but we believe you have to be careful when changing abilities and skills and knowledge without understanding that there is a huge difference between the training models."
Goertz says the intent of the report is not to restart the long-running scope-of-practice debate with nurses' associations but he also acknowledged that the report would do exactly that.
"What tends to happen is it becomes you are warring with the nurses again,'" he says. "That is not the point of the report. The point is we have a better model that uses everybody appropriately and the proof is in the model."
Lisa Summers, CNM, a senior policy fellow, at the American Nurses Association, told HealthLeaders Media there is "a basic level of agreement" with the AAFP on the increased need to shift focus away from the costly and inefficient illness care model and toward primary care and preventive medicine.
Beyond that she says is "where the contention comes in."
"I have mixed feelings when reports like this come out," she says. "The bottom-line feeling at the ANA is that these turf battles that these kinds of reports turn into don't do a lot to benefit moving ahead the agenda of coordinating care, a shared goal of providing the best care for patients. That is our focus: How do we build truly integrated teams that keep the patient at the center of focus?"
Summers says that organizations and stakeholders as varied as the Joint Commission and AARP have for several years developed accrediting guidelines and policy statements addressing access to primary care that refer more broadly to the role of "clinicians" and move away from the physician focus.
"What this report points out to me is that it is a continued effort by organized medicine to preserve the status quo by focusing on physicians," she says. "Folks are beginning to reject this antiquated notion that they only way to deliver high-quality, patient-focused care is to have this captain-of-the-ship model."
Summers also takes "exception" with the report's contention that the shortage of primary care physicians is the primary driver for independent practice for nurse practitioners.
"That certainly is part of what is driving the discussion, but all kinds of health policy think tanks have come out in the last couple of years with policy statements supporting the need to remove barriers for advance practice registered nurses," she says.
"So what is behind those proposals and that support isn't just the shortage. It's the fact that there are decades of evidence to support the safety and quality of care by nurse practitioners and other advanced practice nurses."
"People are beginning to realize that the restrictions we have now on autonomous practice don't do anything to increase the quality of care. We know they impair access. They lead to duplication of services. Once you slow down and duplicate services, you start increasing healthcare costs."
Summers says the scope-of-practice debate will always be around and continually evolving, and not just for doctors and nurses, but for all clinicians. "No intelligent healthcare professional practices 'independently' in the way they are suggesting in this report," she says.
"We talk about independent practice as the ability and responsibility of any provider to use the knowledge skills judgment and authority that they have to practice to the full extent of their licensure and education. That is true about anybody, registered nurses, psychologists, pharmacists. This report sets up a false dichotomy between team-based care and APRN's practicing 'without a physician on staff.' "
"That is an odd way to frame it, because when we talk about meeting the needs of patients, anybody who has experienced the healthcare system realizes there is no one individual provider who can do everything a patient needs."
Summers says nurse practitioners are well equipped to provide primary and preventive care and manage chronic diseases and when the needs of the patients fall outside of their expertise they will refer to a physician, just like a family physician will refer patients to a specialist.
"It no more reasonable to talk about APRNs practicing without a physician on staff than it would be to talk about a family physician practicing without a cardiologist on staff," she says.
Goertz says much of the tension in the scope-of-practice debate is found at the 20,000-foot-level between rival policymakers, and not at the point of care delivery, where "you have these understandings in place."
"If you are talking about on-the-ground activity where the teams are taking care of patients, there is not a lot of contentiousness about this. Everybody understands the patient is the focus of attention. In the actual act of delivering care, I don't see a line-in-the-sand problem," he says.
"Where I see it is in the higher level of leaders of some nursing schools who want to essentially change the model of care delivery and they have already succeeded in doing that to a certain extent. Our issue is that there is not one single profession that can solve this problem. We all need to work together and the patient-centered medical home is a far better model than simply expanding nurse practitioners."
That is all we are trying to say. Since there is a difference in education and training, we need to honor those differences and work within them."
It's already tough enough for rural healthcare providers to survive.
There are a number of reasons why. One the biggest is that rural providers generally care for a sicker, older population that includes a higher mix of Medicare, Medicaid, and indigent patients, so reimbursements tend to be smaller.
A study published in the Journal of Rural Health now shows that it's not going to get any easier. University of Florida researchers found that 40% of rural residents are obese, compared with 33% of urban residents. No pun intended, but this is huge.
Earlier studies had already shown that overweight and obesity is a bigger problem in rural areas, but those studies put the difference in the 2% to 3% range. That estimate is now doubled. With about 60 million people live in rural America , and assuming that the UF findings are valid, 24 million rural residents are obese as measured by the Body Mass Index of height and weight.
"The problem [is that] the earlier studies were based on surveys that asked people to self-report height and weight," UF study author Michael G. Perri told HealthLeaders Media. "The study we did was based on measured heights and weights. One thing we are well aware of is that people tend to underreport their weight and over report their height. Everybody is five to 10 pounds heavier than they report and an inch shorter than they claim."
Obesity is a preventable condition that is linked to any number of serious and expensive-to-treat chronic diseases and other medical conditions such as Type 2 diabetes, coronary heart disease, high-blood pressure, cancer, sleep apnea, osteoarthritis, liver and digestive tract complications, and even mental illness.
As the nation's obese population grows larger in size and number—and there is no indication that this trend is reversing—these are all conditions that rural provider will have to contend with more frequency and in numbers disproportionately higher than those of their colleagues in non-rural settings.
"We simply cannot ignore the link between obesity and poverty, and the disproportionate impact this is having on rural America," Alan Morgan, CEO of the National Rural Health Association, said on the advocacy group's Web site. "If we truly want to decrease healthcare costs and improve the nation's health status, we are going to have to start viewing obesity as a top-tier public health concern for rural Americans."
This greater demand to provide and manage care for the obese will come as healthcare reform turns towards reimbursement models that reward quality outcomes and prevention over fee for service. Rural healthcare providers must get on the front end of this epidemic and emphasize prevention. Unfortunately there doesn't seem to be much coordination for this in any broad fashion.
"I don't think there is any single entity that will be able to turn the tide on this epidemic of obesity both in the nation and specifically in rural areas. It is going to have to be a convergence of many factors coming together," says Perri, who is also a professor and dean of the UF College of Public Health and Health Professions.
He believes the most cost-effective route may be to use existing infrastructures to provide nutrition and health education to rural families.
"One thing that jumps out is cooperative extension services in almost every county throughout the country. Part of their mission is nutritional education," Perri says. "In rural areas the extension office is highly valued as a place to go and get assistance. Often the extension offices are the places to go for the WIC (Women, Infants and Children) Program. We can teach family and consumer science agents in the offices how to do weight management programs targeting children and adults and families."
Perri points to another UF study that he co-authored that tracked 298 obese adults in six counties using cooperative extension as the venue for treatment. "We taught the extension agents how do to standard lifestyle behavioral treatment programs. We also were interested in how do we get people to maintain the changes that they have made," he says.
"We were able to produce weight losses that were equivalent or even better than those seen in diabetes prevention programs."
In the second phase of the study, the researchers randomized people for different follow-up care programs, either by mail, by telephone, or face-to-face. "We were particularly interested in effectiveness and cost effectiveness," Perri says.
"We showed the follow-up programs that were face-to-face or by telephone were significantly better than the follow-up by mail. That suggests that once we get people to lose weight we may be able to help them sustain it without having them come in for additional sessions other than telephone follow-up sessions."
Perri says related studies have demonstrated effectiveness in educational nutrition with just the parent rather than the entire family. "Particularly for school-age children, the parents often are the gatekeepers of food preparation and intake. We found you can get equal effectiveness whether the parents are alone or have the kids come in as well," he says.
All of this was accomplished outside of the traditional rural healthcare system of hospitals, clinics, and physicians' offices. "The nice thing is that it takes it out of the whole medical reimbursement arena and the other piece is you don't have to establish a new infrastructure. The kind of activities fit nicely with the mission of the extension services," Perri says.
This may makes perfect sense, but Perri says the idea is embraced neither by rural providers nor extension services.
"They are coming from totally different angles. We have people with different world views," he says. "The folks in cooperative extension are coming largely from the perspective of agriculture. They feel somewhat uncomfortable moving towards healthcare as part of their mission. The folks in hospitals and clinical care see cooperative extension as the folks who help farmers and run 4-H clubs. There hasn't been a concerted effort to bring the two groups together."
This has to change. I suspect that it will. A big motivator will be money.
Providers are entering a new world of disease management, coordinated care, quality outcomes, and smaller reimbursements. It behooves them to step beyond the confines of the healthcare establishment to find new and nontraditional partners who can effectively and cost-effectively educate rural families about nutrition.
Even in the face of an uncertain economy, the challenges and pitfalls of healthcare reform, and the recent deceleration in job growth, hospital workers and executives have done relatively well this year with pay raises.
Hay Group's 2012 Healthcare Compensation Study shows that hospitals increased base salaries by an average of 2.9% in 2012, compared with 2.5% in 2011, and 2.4% in 2010.
A further breakdown shows that employees at larger integrated systems received median base salary raises of 2.9%, down from 3% in 2011, and hospital employees received 2.4% base increases, slightly up from 2.3% in 2011.
These figures will not inspire cartwheels. They're about in line with other estimates on compensation increases in other parts of the economy. However, it's worth remembering that these raises come with inflation at 1.7% as measured by the Consumer Price Index, and with an unemployment rate of 8.3% in the larger economy. Relatively speaking, healthcare workers and executives are doing all right.
Not surprisingly, the rate of growth for healthcare executive compensation is outstripping that of the general employee ranks, but not by much and that margin appears to be shrinking.
CEOs at not-for-profit integrated health systems received a median 3.2% increase in base salary for 2012, compared to a 4% increase in 2011, while hospital CEOs received a 3% increase in 2012, compared to a 5% increase in 2011, Hays Group found.
"I have seen over the last several years a much closer parallel, if not an exact parallel, between base salary increases provided to the general employee population and what is being provided to executives," Jim Otto, a senior principal in Hay Group's Healthcare Practice, told HealthLeaders Media.
"Compensation committees are asking specifically ‘what is the range of base salary increase for the rest of the employees?' They're taking that into account and unless there are particular circumstances for a position that general employee population range is the range that the committee works within to determine base salary increases."
Another trend Otto notes is the continuing shift away from base pay raises for healthcare CEOs as compensation packages continue to move toward incentive pay and long-term benefits.
"Base salary adjustments are going north compared to prior years but not tremendously. What has really influenced pay at the executive level, especially the cash compensation over the last 10 years, is the increasing level of comfort with using incentive plans," Otto says.
"I don't see that changing in the near future given our work with boards and compensation committees at the executive level dealing with compensation arrangements. They aren't looking to give the kinds of base salary increases that you used to see 10, 15, 20 years ago and they are much more inclined to putting more pay at risk to make sure they get the outcomes they are willing the additional dollars for."
Healthcare executives are also seeing an uptick in benefits and perquisites incentives that are slightly higher than in the general market. At health systems, for example, 74% of the compensation packages offered executive long-term disability benefits, compared to only 33% of the general market.
Otto estimates that incentive compensation represents between 25%-40% of base salary. "That is at a decent-sized healthcare system doing between $500 million and $1.5 billion of net revenues. That gives you a sense that cash compensation is the pie and base salary is going to be anywhere between 65%-70% of the pie," he says.
Boards at tax-exempt hospitals are particularly sensitive to public scrutiny about high executive salaries and recognize that compensation can be more easily justified when it is linked to specific goals.
"That is attractive to a lot of boards and committees. ‘I am willing to pay these dollars but we need to see outcomes that are commensurate with what we are willing to pay,'" Otto says. "At tax-exempt healthcare providers a lot of board members are coming from the for-profit world. They are used to these kinds of incentives. It is not a foreign concept for them to think of a base salary and annual incentives and even a base, annual and long-term incentives as major components of an executive's pay package."
It shouldn't be surprising that we see this shift in compensation packages because everything else in healthcare is in a state of flux.
"Because you are going to change how you operate you are probably going to change how you are structured organizationally, which means that jobs are going to change," Otto says. "We are seeing that with certain clients where they have changed operating models, how they are organized, what the jobs are going to look like both now and what they see them turning into in the future and if people are successful at doing that they are going to be in demand."
Otto says healthcare leaders understand that these new demands have changed the way they will be compensated.
"The CEOs who I talk and work with view this as the world they have been living in for a while and we aren't going to go back to the way it was where the heavy lifting of cash compensation increases was coming year over year out of base salary and not out of incentives," he says. "Those days are gone."
The nation's four largest hospital associations and their allies at medical schools urged Congress in a letter this week to oppose a cap on payments for outpatient services in hospitals.
The cap proposal was floated earlier this year by the Medicare Payment Advisory Commission, which estimates that it could save the federal government about $1 billion.
Under the proposal, for non-emergency examinations in a hospital outpatient setting the physician would get the standard amount for the service in a hospital setting. The hospital would get the difference between the physician office payment minus the physician payment in the hospital.
The hospital associations say the proposal would reduce payments by at least 71% for 10 of the most common outpatient hospital services.
"Simply put, it is significantly damaging to beneficiaries and the providers on which they rely to enact legislation that will result in such large cuts. We urge you to oppose inclusion of these cuts in any legislation, and appreciate your continued support of our hospital and its patients," the letter stated.
The letter was co-signed by the American Hospital Association, the Association of American Medical Colleges, the Catholic Health Association of the United States, Federation of American Hospitals, and the National Association of Public Hospitals and Health Systems, and sent to every member of Congress.
Congress is already contending with $1.2 trillion in mandated cuts that take effect on Jan. 1under the Budget Control Act of 2011, which includes a 2% sequester of Medicare funding. In addition, a separate 27% cut in physician Medicare reimbursements is schedule to go into effect on Jan. 1 under the sustainable growth rate funding formula.
The MedPAC cap proposal does not appear to be on any committee agendas at least until after the November general election and the hospital associations made clear in their letter to lawmakers that they want to keep it that way.
"Knowing there is going to be tremendous pressures on policy makers to achieve more savings as we go into the next round of discussions, whether it is the physician fee fix or the bigger issues around the 'fiscal cliff,' we would just anticipate that this idea may come up again as one that is debated by policy makers," Beth Feldpush, vice president of policy and advocacy at NAPH, told HealthLeaders Media.
Feldpush says approximately 200 safety net hospitals represent about 2% of all hospitals in the United States. However, they would absorb 15% of the cap reductions—a $150 million hit—owing to their patient mix, high facilities and operations costs, and a care delivery structure that relies heavily on outpatient clinics.
"That's 15% of $1 billion: 200 hospitals; 2% of hospitals; 15% of the cuts. That is a lot," Feldpush says. "You could pretty much say that it would be incredibly challenging to stake an institution to cuts of that magnitude without seeing negative consequences in terms of the services we could offer and the people we could serve."
Much of that disproportionate hit comes because large safety net hospitals in urban settings rely on extensive ambulatory care networks. "Among NAPH member hospitals, they have on average 20 outpatient clinics. This is intentional. We manage those hard-to-reach patient populations with very complex multiple co-morbidities," Feldpush says.
"We often think of ambulatory care and the clinics providing primary care. That is certainly true, but in addition, our members have specialty clinics that often act as a medical home for those complex patient populations. For example, most of our members will have a cardiovascular clinic, a diabetic clinic, a pain clinic, cancer clinics, and the patients that we serve really don't have any other source of care to manage those really complex medical conditions."
Feldpush says capping outpatient reimbursements doesn't meld with the integrated care model that the federal government is advocating.
"As we think of moving to integrated care, providing better care in the ambulatory setting to keep people out of the hospital, reaching out to folks who don't have good access now, this proposal seems to fly in the face of that," she says.
"This proposal contradicts the agreed upon goals we are all working for, integrated care and providing care in the least-resources-intensive setting for the benefit of patients."
As many as 766,000 healthcare and related jobs could be lost by 2021 with the 2% sequester of Medicare spending that goes into effect Jan. 1, the nation's leading healthcare professional associations said in a joint warning on Wednesday.
The American Medical Association, the American Hospital Association, and the American Nurses Association issued a report Wednesday morning detailing the state-by-state impact of the sequestration as part of their coordinated effort to urge Congress to fix the problem.
"The 2% cut would have such a profound impact on jobs in the healthcare sector," AMA President Jeremy A. Lazarus, MD, told HealthLeaders Media. "It has a tremendous economic impact and a tremendous patient care impact. The AMA, the AHA and the ANA coming together to express our deep concern indicates that this is a high priority for us."
Lazarus says the AMA and scores of professional medical associations and societies are already battling with Congress to stave off the looming 27% Medicare physician payment cut, which also takes effect on Jan. 1 under the sustainable growth rate funding formula.
"We are coupling our concern with the yearly issue of the potential 27% cut in the sustainable growth rate," he says. "This adds another level of uncertainty for physicians so we want them to know about it and what we are doing on it."
Caroline Steinberg, vice president for trends analysis with the American Hospital Association, says the jobs report demonstrates the importance of the healthcare sector to the economic well-being of the nation. The report estimates that nearly 500,000 jobs will be lost in the first year of the sequester.
"Few people really recognize the impact of healthcare on the economy," Steinberg says. "Healthcare is really an economic mainstay and healthcare job growth has remained strong throughout the economic downturn. It's a message that people need to hear what is often missed in the larger debate."
"With healthcare services the spending often stays in the community," Steinberg says. "When you spend a dollar on healthcare, 60% of that dollar is going to go to creating jobs at that hospital in the community. If you spend a dollar a Wal-mart a lot of that money is going to go to China because a lot of the products are made in other countries. That is why healthcare has a pretty high multiplier relative to other industries."
She says that multiplier effect could also work in reverse for thousands of hospitals and the communities they serve across the nation if the cuts go through.
"When you cut Medicare funding Medicare hospitals will have less reimbursements coming in. They will have to lower their expenses and some of that will be through staff reductions. That is the direct effect," Steinberg says. "And part of that direct effect is that hospitals will reduce spending on other supplies and services."
"The indirect effect would be when the hospitals reduce their spending on other supplies and services and other businesses are affected," she says. "If a hospital reduces spending on laundry or food service or medical devices or drugs those companies will in turn have to reduce their expenditures, which could result in staff layoffs."
Finally, Steinberg says, there is the "induced effect" of the loss of revenue for people who've lost their jobs either at a hospital, or supplier. "They are then going to reduce their purchases in their community, which will cause additional business, restaurants, clothing stores, car dealerships, to have less revenue coming in, which will lead to more job losses," she says.
The cuts were mandated by the Budget Control Act of 2011 as part of an agreement to raise the debt ceiling after a bipartisan "Super Committee" failed to negotiate a balanced budget deal. If a new deal can't be hammered out by Jan. 1, cuts totaling $1.2 trillion will kick in automatically against military and domestic programs.
Congress will take up the issue again after the November general election. Several Congressional leaders from both parties said this week that they anticipate a successful resolution, but House Speaker John Boehner, (R-OH) told reporters that he is "not confident at all" that a deal would be finalized.
The healthcare sector has been one of the few bright spots for job growth over the last decade and through the Great Recession. In August, healthcare created 16,700 new jobs, 17.3% of the 96,000 new jobs in the overall economy for the month.
So far this year, healthcare has created 197,300 jobs, nearly 18% of the 1.1 million jobs created by the overall economy. Since January 2008 healthcare has created 1.2 million jobs in an economy that has otherwise seen a net loss of 4.7 million jobs over the same period.
Nearly half of Tennesseans living in rural areas who seek healthcare drive past the hospitals closest to their homes to look for care in more urban settings, even when their local hospitals offer the same services, a study shows.
The study, Patterns of Care in Tennessee: Use of rural vs. non-rural facilities, from the BlueCross BlueShield of Tennessee Health Institute, explains in great detail the sourcing and methodology used to cull the 2009 data and how it was parsed to get "apples-to-apples" comparisons. For expediency's sake read the original report.
Steven L. Coulter, MD, president of the Health Institute told me the data clearly shows that rural patients are migrating to more urban settings for their healthcare. Coulter also readily concedes that the data can't say why.
"That actually is the question of the hour," says Coulter, an internist. "My speculation is that they perceive, whether true or not, that the services are better elsewhere. We really can't make a policy-level judgment based on the data we have found. All we can say is people are mobile and they are moving. What we can't say is whether that is a good thing or a bad thing, because we haven't looked at clinical outcomes or the economic impact on the communities that these small hospitals serve."
These findings suggest that profound changes are underway for rural hospitals in Tennessee. If nearly half of the potential patient base is driving past the door to get the same services farther from home—for whatever reason—that challenges financial viability. Hospitals that don't attempt to understand that migration and that don't adapt to that migration will shutter.
"These hospitals are going to find themselves forced to either go it alone or sell to a for-profit or somebody like that who knows how to do it, because the reality is a lot of these places are not financially viable," Coulter says.
Maybe it's time for rural hospitals to wave the white flag for elective procedures and instead focus on services that take advantage of their proximity to patients: Trauma and chronic care.
"Trauma is 'every minute counts,' but there are diseases like myocardial infarction and pneumonia where minutes really do count as well," Coulter says.
"It has also been shown that the most appropriate and best intervention for myocardial infarction is on-the-spot angioplasty and not the clot busters that for so long we thought were the equivalent. In other words, if you don't have a cardiac cath lab, you aren't serving the people in your community. If anything, you may be just slowing them down from getting where they need to go."
Coulter suggests that many rural hospitals could convert into emergency stabilization centers. "Instead of having inpatient beds, put in a cath unit in, put in a trauma unit. Have a trauma surgeon and a cardiologist in the house or on call 24 hours a day," he says.
"My bias is that many of these facilities could be converted to much more effective facilities for not really a whole heck of a lot of money."
The Affordable Care Act will place a renewed emphasis, and money, on chronic care treatment. Coulter believes that rural hospitals are a perfect source point. Instead of traveling longer distances for their more-frequent chronic care consultations, patients could drive to the hospital down the street.
"The emphasis is going to come particularly through the (Accountable Care Organization) concept. It's going to come from the perspective of case management," Coulter says. "There is finally some literature coming out showing that intensive case management really does prolong life. It is not necessarily cheaper in the aggregate, but it does improve quality of life."
This change in care models and emphases for rural hospitals will likely accelerate the consolidations that the sector has seen over the past five or six years. "We are going to see a lot of CHS and HCA and Tenet-type organizations are going to take over these small hospitals and they are going to figure out what the most profitable means to make the viable," Coulter says. "Then you have to ask is the most profitable the right thing to do?"
There is no way to determine if the patient migration patterns identified in Tennessee apply in the same measure to other states. Geographically, Tennessee is long and narrow and surrounded by eight states with lots of potential for patient migration. And while Tennessee is mostly rural, the state's highway system is among the best in the nation. As a result, access to quality care in more-urban settings, both instate and across state lines, is readily available.
Still, it would not be unreasonable to suggest that the findings in Tennessee are somewhat applicable to rural hospitals in other states. After all, these migratory patterns are a function of consumer behavior and consumer behavior is not restricted to state lines.
In other words, if consumers have a choice and can go elsewhere, a certain percentage of them will exercise that choice.
Rural hospitals across the country would be wise to understand why patients in their service areas drive past the doors. Once the reasons for patient migration are understood, rural hospitals can determine which services best play to their home-field advantage.
When cost-effective point-of-service options are identified, a rural hospital can turn its remote location into a distinct competitive advantage.
In the February 2012 Impact Analysis Report, Value-Based Purchasing: Facing the HCAHPS Hurdle, HealthLeaders Media Council members were evenly divided on whether VBP, as designed, will succeed in improving quality of care while also reducing costs. We asked four leaders: What is the outlook for your organization, and what are the reasons it will succeed or fail?
Scott Trott, MHA
Vice president of payer management and faculty services
UNC Healthcare System
Chapel Hill, N.C.
On the outlook for VBP:
Our outlook is good from the perspective that the patient experience component is already very high. The clinical components need improvement and we have active programs in place around all of those measures. It will succeed in the near-term based on the organizational approach of looking at this across the board for our health system.
On synergies:
We have a couple of our major commercial contracts that have many of these measures in them as well, so we have some synergy between the governmental and commercial payers. One thing that might lead to its failing is if we get focused on multiple other measures or other payer-specific measures that aren't in sync with value-based purchasing core metrics.
On incentivizing physicians:
The other part of this is keeping our physicians engaged. Another year or so of having incentives built in to help keep physicians engaged in helping to drive these changes and improve these measures and is absolutely critical. Some incentives have to be built in, maybe it's an internal thing that we need to do, where our physicians have the chance to benefit as these scores improve.
On reducing cost of care:
I am not sure if cost will actually be reduced. So many of these clinical measures are based and predicated on folks who are in the hospital or have had an encounter, and costs are really mostly reduced when you avoid having folks come in from the beginning. This kind of value-based purchasing is focused on inpatient or acute events.
Judy Schwartz, MD
CMO
Knox Community Hospital
Mount Vernon, Ohio
I don't think it will have an impact on quality because I don't think what they are monitoring is quality. It's more about monitoring processes than things that have been shown to improve quality.
For example, all the VTE [venous thromboembolism] prophylaxis that we are near 100% on, I am not sure that it really prevents anything of significance from a clinical perspective. Or whether or not you think to document after you tell patients they should take aspirin. Patients are already doing it so I don't think it is markedly changing what is going on. It's just improving the documentation, which of itself may be some benefit but I don't think it is much of a quality benefit as stated.
I do think it will help with service delivery. It will make everybody pay attention to that but when you look at it, those scores are already very high. On the other hand, it depends upon what area you are looking at. ED scores, for example, tend to be lower than ambulatory services scores. Inpatient is heavily impacted by what happens in the ED. So, if your ED isn't doing well, your inpatient scores can suffer from that. We are fairly comfortable here in that we don't have the huge volumes they have in large-city EDs, where they have hours upon hours of waiting times.
Marlene Weatherwax
CFO and vice president
Columbus (Ind.) Regional Health
We are an independent single-hospital health system and I believe we have a good outlook for the organization. We have strong financial statements, good results, high quality, and improving patient experience. We used to be at the top of the game before HCAHPS came into play and we are working on getting back on top.
Why would it fail? I don't know how to answer that one. We are pretty close to the Indianapolis market and there is a lot of posturing going on by the large health systems. I would contend that Indianapolis is a little overbuilt with specialty hospitals, so everybody is fighting for market share. When they have a difficult time in their own market, they start looking outward. Our pockets are only so deep, where some of their pockets are a little deeper.
I don't know that in and of itself value-based purchasing is doing anything to improve quality while reducing costs, but it is getting people to focus on these things. By using very process-oriented metrics, it is forcing hospitals to look at better types of process improvement methodologies, such as Lean and Six Sigma. I think that by going through that, they will improve their quality and costs, but I don't think that value-based purchasing as it is designed will really cause that to happen on its own.
Gary Tiller
CEO
Ninnescah Valley Health System Inc.
Kingman (Kan.) Community Hospital
Don't call it value-based purchasing. Call it "We are going to throw you under the bus and take your money." Do I have any faith in these things? Not much. It's a ruse. First of all let's separate quality from cost. There are a thousand different interventions, séances, Kumbaya moments in quality that HHS is pushing and they are plunking down money and some of these things they have studied for years and they have not proven to be of any benefit.
The push for quality is not going to save money and it's not going to improve quality either. But they tie money to all these things.
The two things that have a chance to actually save money are the medical home concept and the evidence-based medicine, and we will never see much of those. For one thing, on the medical home, the family practice docs don't want to lose the camaraderie with the specialists, and the specialists don't want to see any of that happen. They want to see the patient get into that vortex where the specialists keep handing them off. While you may impact the rate of increase with this sort of stuff, you are not going to ever have a decrease.
For years now Bureau of Labor Statistics' monthly employment reports have been showing that the healthcare sector is the biggest job creation machine in the U.S. economy.
BLS has estimated that by 2020 the healthcare sector will create 5.6 million new jobs, thanks in large part to the aging Baby Boomer population and the expansion of health insurance under the Patient Protection and Affordable Care Act.
Healthcare is labor-intensive. The American Hospital Association says that labor accounts for nearly 60% of spending for hospital care. With healthcare costs rising at roughly three times the rate of inflation, it's not clear how long the rest of the economy can continue to support this job growth.
It is not completely farcical to say that the nation is on a trajectory that may eventually have everyone working in healthcare and spending all of their money on healthcare, which already gobbles nearly 20% of the gross domestic product.
The talk about "bending the healthcare cost curve" centers around reducing waste and fraud and improving quality. We don't hear much about slowing healthcare job growth even though wages and benefits are the single largest expense in healthcare.
In most sectors of the economy new technology reduces job growth and lowers costs. For better or worse, robots on the assembly line means fewer jobs for humans and labor cost savings. That logic doesn't necessarily apply to healthcare.
The advent of electronic medical records, for example, has led to a huge demand for thousands of technicians who can design, install, and operate these highly complex computer systems. The newest imaging equipment also requires highly skilled operators with clinical and technological expertise.
Technology will probably save money by reducing waste, fraud, misdiagnoses, and abuse. But it will not come cheap, and the savings may not be readily apparent for years.
This steady hiring in healthcare continues even as there is near universal agreement that very soon the healthcare sector will be required to provide more care for less money. Medicare and Medicaid are cutting reimbursements and increasingly linking the value of payments to quality outcomes. Commercial plans are following the government's leads and are taking a hard line against cost shifting.
There are signs that the healthcare job growth may already be slowing.
Relatively speaking, it's been a slow summer. BLS notes that from June through August, job growth in healthcare averaged 15,000 per month, compared with an average monthly gain of 28,000 in the prior 12 months. Every day in the media we see local stories across the nation about hospital layoffs brought on by financial strains or consolidations.
However painful, these are anecdotal and generally isolated events.
Even with the slow summer, on a macro level in the first eight months of 2012 healthcare created 72,000 more jobs than it did for the same period in 2011. So, it's hard to say if this is the start of a slump in healthcare job growth or merely a blip.
Generally speaking it's not a good idea to hold much stock in one, two, or even three months of job data when making longer term predictions. After all, BLS considers its two most recent months of job data to be "preliminary" and subject to considerable revision.
In August, healthcare created 16,700 new jobs, 17.3% of the 96,000 new jobs in the overall economy for the month. So far this year healthcare has created 197,300 jobs, nearly 18% of the 1.1 million jobs created by the overall economy. Since January 2008 healthcare has created 1.2 million jobs in an economy that has otherwise seen a net loss of 4.7 million jobs over the same period.
A further breakdown of BLS data for August shows that ambulatory services, which include physicians' offices, grew 14,200 jobs, while hospitals grew 5,700 jobs. The volatile nursing homes subsector with its larger cohort of semi-skilled workers actually shed 3,200 jobs for the month, which happens occasionally.
More than 14.3 million people worked in the healthcare sector in August, with more than 4.8 million of those jobs at hospitals and more than 6.3 million jobs in ambulatory services, which includes more than 2.4 million jobs in physicians' offices.
In the larger economy, BLS reported that the 96,000 jobs created in August were led by 28,000 new jobs in food services, and 27,000 new jobs in professional and technical services. The unemployment rate dropped slightly in August to 8.1%, but economists said it was mostly because "discouraged workers" have stopped looking.
BLS says 12.5 million people were unemployed in August, which was essentially unchanged throughout 2012. The number of long-term unemployed, defined as those who have been jobless for 27 weeks or longer, remained at 5 million people in July, representing 40% of the unemployed. So far this year job growth has averaged 139,000 per month compared with an average monthly gain of 153,000 in 2011.
If we are seeing the start of a slowing job growth trend in healthcare, it may be mirroring the slowing job growth in the overall economy.
Nonprofit healthcare organizations are gradually shifting traditional investment strategies away from bonds and other fixed income securities toward more highly diverse portfolios that could make them less vulnerable to market swings, multiyear analyses from Commonfund show.
William F. Jarvis, managing director and health of research with the Wilton, CT-based financial advisors, says nonprofit healthcare organizations are taking cues from colleges and universities that have seen generally strong investment returns over the last 20 years using a more diversified "endowment model."
"Healthcare organizations have historically had portfolios that were much more heavily allocated to bonds and fixed income securities than other types of nonprofits, certainly much more allocated to bonds than the typical college or university would have," Jarvis told HealthLeaders Media.
That strategy appears to be changing.
In FY2009, for example, bonds and other fixed income investments averaged 41% of the portfolios of the 86 nonprofit healthcare organizations tracked by the Commonfund Benchmarks Study of Healthcare Organizations. That allocation dropped to 36% in FY2011.
"So we are beginning to see these shifts," Jarvis says. "They don't all occur at once, but it looks as if healthcare organizations are reconsidering whether this endowment model works for them."
Endowment models have been around since at least the early 1990s and Jarvis says they generally have a "higher tolerance for less-liquid assets like real estate, hedge funds, private equity, and venture capital." Higher education institutions, for example allocate about 10% of their investments to bonds.
"Colleges and universities were the leaders in diversifying portfolios into different asset classes that would provide uncorrelated sources of return that don't go up and down together at the same time," Jarvis says.
The endowment model eventually caught on with charitable foundations, then operating charities such as museums and symphonies, and now it is piquing interest with nonprofit healthcare organizations.
Jarvis says that nonprofit healthcare organizations' historical attachment to fixed income investments stems from a reliance on bonds to fund capital projects. "So the rating organizations like to see a large chunk of bonds and cash to maintain the bond rating," he says. "It has been something of a drag on returns and hasn't really protected them in the downturn."
In FY2008, for example, Commonfund reported investment losses averaging 21.2% for the nonprofit healthcare organizations that it tracks. . So that the big shift that we saw this year was healthcare organizations beginning to maybe take a closer look at adopting more closely this endowment model," he says.
With the shift away from fixed-income securities, investments in private capital and real estate have grown from 15% of the average healthcare portfolio in FY2009 to 21% in FY2011, Commonfund analyses show.
"Normally you don't see moves that big," Jarvis says. "That was funded by taking domestic equities down from 24% to 20% of the overall pool. So that is part of the big news here. Historically we have not seen these kinds of big moves in healthcare organization portfolios. Now we are beginning to see more strategic moves. They don't all occur at once but it looks as if healthcare organizations are reconsidering whether this endowment model works for them."
A Commonfund review of FY2011 also found that:
After two years of double-digit gains, the 86 nonprofit healthcare organizations it tracks reported investment returns of zero in FY2011. The flat returns followed net gains of 10.9% in FY2010 and 18.8% in FY2009.
From FY2009-2011 the average annual net return on investable assets was 9.6%, while for the trailing five years annual net returns averaged 1.8 percent – thanks to the -21.2% loss recorded in FY2008 in the midst of the recession.
A further breakdown for FY2011 shows that net returns on nonprofit healthcare organizations' defined benefit plan assets averaged 1.3% compared with FY2010 net averaged return of 12.3%. Three-year defined benefits plan returns averaged 11% and five-year returns averaged 2.2%.
By asset class fixed income provided the highest return in FY2011 with an average of 5.4%, followed by a 3.9% return for alternative strategies, 0.2% for short-term securities/cash, -0.2% for domestic equities and -10.9% for international equities.
Within alternative strategies the highest returns came from private equity real estate at 14.1%; venture capital at 11.1%; and private equity at 10.7%. Marketable alternatives, which include hedge funds, were the largest single alternative allocation for many healthcare organizations and lost -1.8%.
For FY2011, investment returns were correlated to size; the larger the organization, the better the return. Organizations with investable assets over $1 billion realized an average return of 0.6% while the smaller organizations at the opposite end of the size spectrum lagged with a return of -1.9%.
It's getting to the point where hospital mergers and acquisitions aren't really news anymore beyond the healthcare trade publications and the local service areas that are affected by the deals.
According to Irving Levin Associates Inc. there has been a fairly steady increase in the number of hospital mergers and acquisitions over the past several years: up from 38 M&A deals involving 56 hospitals in 2003 to 90 involving 156 hospitals in 2011. That's almost two deals a week.
We've seen this cycle before. Hospital M&A accelerated in the late 1990s along with the advent of managed care. Levin notes that M&A fever peaked in 1998 with 139 deals involving 287 hospitals and steadily declined until 2003.
While it is entirely possibly that we could be at the top of an M&A cycle once more, this time it feels different. We are seeing the broad consolidation of the hospital industry in all parts of the nation and it's difficult to see any market forces out there that will reverse this trend.
Lower payment rates from all payers will invite consolidation as hospitals look to reduce costs and improve economies of scale and market leverage with payers and vendors.
Physician-employees, technology, and regulatory compliance are driving up the cost of doing business.
Accountable care organizations reward integrated healthcare delivery that improves quality at reduced cost.
In the face of these headwinds, scores of otherwise stable and well-managed not-for-profit hospitals have joined with larger health systems in any number of partnership models. The strategy for many of them is to negotiate now from a position of strength rather than waiting for market pressures to force a move.
Last week, for example, Marquette General Health System in Michigan's Upper Peninsula finalized a $483 million deal that will make it the fourth hospital, and the first in Michigan, for investor-owned Duke LifePoint Healthcare, which itself was created two years ago in anticipation of the consolidation trend.
Marquette General CEO/President Gary Muller told me that the Duke LifePoint was one of 16 entities that showed an interest in acquiring the 315-bed specialty care hospital.
"The 16 proposals are pretty unusual because we were in a strong position," Muller said.
"Financially bottom line operating income was building up. All of our quality marks were good," he explained. "We didn't need to do anything but our board was looking ahead and saw that storm clouds are coming in healthcare and they acted preemptively. The analogy is selling your house when the roof is fine and the foundation is good and everything is painted and that is the way Marquette is."
Muller told me that Duke LifePoint was not the highest bidder, but that the Marquette General board picked it because of its mix of business and clinical expertise. Duke LifePoint will invest $300 million in capital improvement projects that will include an outpatient surgery center, cancer center, private patient rooms, new technology and new IT infrastructure. Duke LifePoint will also invest $50 million for physician recruiting over the next 10 years.
In addition, the deal allows Marquette General to retire about $100 million in long-term debts and unfunded pension liabilities, and provides another $23 million for the hospital foundation.
For Duke LifePoint the toehold in northern Michigan provides an opportunity to compete with blue chip providers that include Cleveland Clinic, Mayo Clinic, University of Michigan Health System, and Henry Ford Health System. Muller says Duke LifePoint also sees an opportunity to expand its orthopedic sports medicine program in Marquette, which is the home of a U.S. Olympic Education Center.
The biggest knock on hospital M&As is the loss of local autonomy. Hospitals are often the biggest employers and economic engines in the regions they serve and a source of local pride. No matter what guarantees are put in place the boards at most acquired hospitals are usually reduced to advisory status and their control is greatly diminished.
Muller says the Marquette board will still have a role in strategic planning and credentialing. It is satisfied that any concerns it has will be heard by the new owners. "The board is an advisory board now but it is 12 members and they are all local except for one from Duke and we wanted that," he says. "They don't feel like the community governing role is something they need to hold on to the detriment of the hospital."
And that's just it.
Marquette General and scores of other hospitals across the nation have seen which way the winds are blowing. Increasingly they are willing to forfeit a certain amount of autonomy in exchange for access to the capital and clinical and business expertise that will improve their position in a highly competitive market.
This all makes perfect sense in the nearly $3 trillion healthcare economy that is otherwise huge, bafflingly complex, and in the midst of historic change. There is no reason to think that this trend toward consolidation will reverse itself anytime soon.
