Healthcare executives responding to a survey say the nation will see major changes in the way healthcare is delivered and paid for in the next five years as providers and payers struggle to do more with less.
Most of those executives, however, also believe that the fee-for-service-based business models they're using now will be at least "somewhat sustainable" or fare even better in the face of new challenges brought on by healthcare reform.
KPMG LLP consultants surveyed more than 200 senior leaders in healthcare and found that 73% of health systems executives, 81% of health plan executives, and 79% of drug makers said their business models were somewhat sustainable or better over the next five years.
Brad Benton, national account and advisory leader for KPMG Healthcare, says that despite the acknowledgement that huge changes are underway, a significant number of executives may be falling back on old reliable models in the face of uncertainty.
"There are some very contradictory observations in this survey that go to the idea that it is really complex and these executives are at some level uncertain about what this is going to look like," Benton told HealthLeaders Media. "We have a hardwired healthcare system that is for all intents and purposes driven by fee-for-service and the transition to these value-based models is complex, it's threatening and it's really hard work."
For example, the survey shows that 82% of health system executives understand that they will have to reduce costs anywhere from 14% to 32% over the next five years if they hope to break even on reduced Medicare reimbursements.
"The 'do better with less' mantra seems to be coming more into focus. It is that path to effective execution that gets us there," Benton says. "Clearly this is going to be about how we practice medicine and do it in a way that recognizes that there are not unlimited resources."
However, many of those health system executives also say in the survey that can leverage their market position to maintain or increase payments from commercial plans. Benton says health plan executives say that's a non-starter.
"Effectively, what the health systems are saying is 'we know to retain our traditional profitability we have to maintain or increase commercial reimbursement rates.' Four out of five say 'we have the market power to do that,'" he says. "How can you map out that against the results from the health plan perspective and what the employers are saying in the marketplace? You cannot connect the dots."
"Looking in the mirror is very difficult because the real work is around clinical integration, driving value out of technology, and thinking about sites of service," Benton says.
Even with suspect business models in place, KPMG found that 47% of health system executives and 49% health plan executives said they would prefer to see a rapid implementation of value-based payment models over the next five years. In roughly the same percentages, however, those executives believe that the process will be more incremental.
"They desire rapid integration even though they may not be sustained after five years in terms of the dollars," Benton says. "Because of what we think is the lack of sustainability in the U.S. economy in terms of overall spending we still think the drivers are in place to move us more quickly to something that is more economically sustainable and that will be some kind of value based purchasing."
Benton says heath systems executives would be well advised to generate a number of financial and budget models within the traditional planning and budget cycle.
"It's not really sexy, but one thing we strongly believe is that the depth and level of financial modeling and how you use spreadsheets to make sure the planning you are doing contemplates the future we are talking about and this transition to value-based payments," he says.
"I think of it as war-gaming and scenario planning. What we're really talking about is understanding your revenue at a level that a largely fee-for-service world has not had to contemplate. It's not just inpatient, outpatient and payer."
Successful modeling will drill down into operations to speculate on how they might be affected by the shift away from fee-for-service. "It's segmentation," Benton says.
"It's getting into a much more complex level on the demographic and understanding what do the levers and switches look like as you begin to think about owning value-based payment; having the data points and understanding the range of scenarios and understanding your market, where the large employers are, who is coming into the marketplace, what are the innovative projects that could emerge?"
Benton concedes that the modeling could be hobbled by considerable unknowns and guesswork on new markets and new players in the region and hybrid business models that meld payers and providers. However, he says uncertainty shouldn't be used as an excuse to do nothing.
"With modeling at least you have a basis for discussion across all stakeholders, whether it's clinical staff or governance at the board level," he says.
"All of these folks are all deeply invested from a mission perspective in one fashion or another and they have to have the information to be able to think about these issues in an intellectually honest fashion."
We are not yet at the point where factors and prompts that consumers weigh for healthcare purchases are driven by the same incentives as buying furniture or a new set of tires.
At the same time, providers and payers would be unwise to think that basic consumer values that include price, quality, selection, convenience and service don't apply to healthcare.
The rise of the high-deductible health insurance plan and other economic forces are increasingly turning patients into healthcare consumers. Common sense says that more "skin in the game" will reduce utilization as healthcare consumers will rethink elective care or shop around for the best deal.
When they opt for a course of treatment they will be more demanding and less forgiving of bad service when they're paying more of the cost. That's the way it is with all other goods and services and healthcare, after all, is close to consuming 20% of the Gross Domestic Product.
A report released this summer by the Health Research Institute of PwC US provides some insights into the mind of the healthcare consumer. Based on a survey of 6,000 people, the report found that consumer expectations in healthcare follow other industries. For example:
Provider staff attitude was the main contributor to positive experiences by 70% of consumers, compared to 38% of retail shoppers and 33% of bank, and airline customers.
Price was the top driver of purchasing decisions for consumers in every industry except healthcare. Personal experience is the top reason for choosing a doctor or hospital, and it's more than 2.5 times more important than to consumers in other industries.
When asked about the conveniences and services they value from providers, 69% said they want facilities that offer multiple services in one location; 65% want to exchange information through online and mobile channels; 57% place a high value on patient education during a visit; and 53% value the cafeteria and access to Wi-Fi and other entertainment.
Choice of physicians and quick claims payment topped consumers' demands from insurers.
Only 44% of insurance consumers and 54% of provider consumers tell anyone within a month of having a positive experience compared to 70% of retail and 66% of banking customers.
Six of 10 negative consumer experiences are more likely to be remembered for longer in the provider industry compared to other industries.
PwC principal Paul D'Alessandro says the survey shows that healthcare consumers are becoming more aware of their care options and more willing to exercise their choices. In short, they are acting more like consumers and less like patients.
"We have seen across many different industries a cohort of customers that often vote with their feet given the right experience, let's say it is on the order of 25%-33%. If you don't give them the right thing they will move to the next solution provider. Traditionally we have found the healthcare industry to be much stickier—less than 20%—because ‘I have a doctor who knows me and my history, yada yada yada,'" D'Alessandro tells HealthLeaders Media.
"What we are seeing is an increase of up to 36%-38% of respondents who are willing to switch providers given the right opportunity. The only industry that differs like that is the hotel industry where people switch on the order of 60% given the right hotel opportunities."
Economic forces, the Internet and social media are causing that traditional bond between providers and patients to come unglued. Rather than gnashing teeth about the rise of the healthcare consumer, D'Alessandro says smart providers are preparing for new opportunities.
"There are providers that have taken steps to be more empathetic, to understand my needs, understand that it goes way beyond the interaction with the clinician and understand it goes all the way back to the check in," he says.
Focusing on consumer values can be a time- and money-saving opportunity for providers.
"When I am in the hospital it is things like how many times to they clean my room every day or how many times do they come in and bother me. Oftentimes we show that is more important than the amount of time the doctor spends with me," D'Alessandro says.
"Providers are focusing on the wrong things now and amazingly there are opportunities to focus on things that are less expensive but more meaningful." Consumer interaction with clinical staff, for example, should stress quality over quantity.
"There are specific clinical environments that are pursuing things like more interaction with the clinician – how can we increase the frequency of the floor nurse visit to the room or the doctor coming in the morning and evening? We find that is not what the consumer is looking for," D'Alessandro says.
"They want one interaction that is meaningful with two-way conversations and then for the rest of the day it is more like a hotel room. Have the maids visit once a day and do a nice job. Have the trays taken away at a consistent time. Meet my dietary needs and don't frustrate me with crazy stuff that was meant for another patient."
D'Alessandro concedes that much of this is commonsensical.
"What is the big surprise? The big surprise is people aren't doing anything about it yet," he says. Providers and payers could take a lesson from the travel, leisure, and hotel/hospitality industries which D'Alessandro says went through a similar churn 10 years ago.
"There were some who realized that information transparency and all the things that came along with customer expectations were going to have a commoditizing effect on them. What did they do? They tried to cost-cut their way to that environment," he says. "There were others who made investments in the last 10 years on experience. They realized that every touch point with their product or service was one that defined them and allowed them to get a higher price point and enjoy greater retention."
None of this rise in healthcare consumerism should be a source of trepidation if providers understand the motivation and values behind it. For the most part those motivations are based on common sense which means they can be easily understood and implemented by staff.
"The reality is the providers who move quickly and focus on experiential drivers will not suffer what we expect to be a much greater of churn in the healthcare industry," D'Alessandro says. "Those who don't move quickly will end up facing a consumer who will vote with their feet."
Consumer safety advocate group Public Citizen has a difference of opinion with the Texas Medical Board.
Public Citizen says its review of data from two decades shows that physician oversight in Texas is weak. The spokeswoman for the board disagrees and says comparative data with other states suggest the board is among the strongest in the nation.
TMB letter
to Gov. Rick Perry
In a letter and report sent Wednesday to Texas Gov. Rick Perry, Public Citizen urged him "initiate immediate action to improve the performance of the Texas Medical Board … and thereby protect patients in Texas from physicians who should have been, but were not, disciplined."
Public Citizen said it analyzed 21 years of data from the National Practitioner Data Bank and found that 459 physicians in Texas who were sanctioned by hospitals, HMOs and other healthcare facilities, for posing a serious risk to patient health, and in some cases for multiple infractions, have yet to be disciplined by the state medical board.
"These violations are not minor," Sidney Wolfe, MD, director of Public Citizen's Health Research Group, said in a media release accompanying the report. "In our investigation we've identified physicians who have committed gross breaches of medical and ethical standards, yet they have not been sanctioned by the state medical board, the institution whose primary duty is to make sure practitioners taking care of Texas patients are qualified to do so."
In his letter to Perry, Wolfe blamed the board's problems mostly on underfunding and understaffing.
"Currently, the Medical Board brings in about $60 million from licensing and renewal fees over a two-year budget period. Because of a state legislature policy decision, the Medical Board gets to keep only one-third, $20 million, of the licensing and renewal fees over the two-year period, while two thirds, or $40 million, is turned over to the state general revenue fund," Wolfe said in the letter.
From 2006 to 2011, Wolfe said that there has been a 57% increase in the number of complaints to the board. "But during this interval, the board's budget, adjusted for inflation, increased only 12%, and the number of staff increased by only 16%," the letter said.
Texas Medical Board spokeswoman Leigh Hopper disputed Public Citizen's findings.
"Public Citizen's findings do not track with any of our current concerns. We are not understaffed. We are not underfunded," Hopper told HealthLeaders Media. "The talk about funds being diverted into the General Fund is how it always works. I don't know how other state agencies operate but at least in Texas this is how it is done with the Medical Board. Our funds and fees that we bring in through licensing go into the General Fund and we write an appropriation request to get back what we need to run the agency."
"Like anybody, of course we would always like more money. But we haven't been dealing with a budget crisis so the agency is healthy and it's effective," she says. "Does that mean there is room for improvement? There is always room for improvement. There are always public hearings that we would welcome Public Citizen to participate in."
Hopper says the 459 physicians cited by Public Citizen "is not a figure that we are tracking."
"We get roughly 7,000 complaints a year and we are complaint-driven, which mean we don't launch investigations in the absence of a complaint to our agency," she says. "When hospitals take an action against one of their own physicians they are supposed to report that to us and we will decide whether or not we are going to pursue it. The same is somewhat true with medical malpractice cases. We get that information as well but it doesn't automatically translate into a Texas Medical Board case."
Rather than being a laggard, Hopper says that Texas Medical Board is "considered a leader" among state medical boards with "processes (that) are emulated by others." She says the Federation of State Medical Boards data puts Texas at the top of the list when it comes to doling out discipline.
"I hate to say we are No. 1 because it makes it sound like we are competing which we are not," she says. "But when you look at the number of disciplinary actions in the physician population we've taken the last couple of years Texas has taken more action per physician than other states."
Public Citizen urged Perry to:
Allow the medical board to keep all—not just one-third—of the revenue it generates so it can hire more staff and complete more investigations in a timely manner.
Appoint an independent medical board enforcement monitor to evaluate the disciplinary system and the board's enforcement procedures, as well as play an active role in maintaining integrity of these processes into the future.
Institute random practice audits of physicians, as recommended by the Health and Human Services' Office of the Inspector General, to identify practice deficiencies.
HealthLeaders Media's calls to Perry's office seeking a response were not returned on Wednesday.
Can transparency improve a hospital's quality of care?
Johnson City, TN-based Mountain States Health Alliance has been awarded the 2012 National Quality Healthcare Award by the National Quality Forum. A critical component of that success is transparency contends a quality leader.
Tamera Parsons, MSHA's vice president of quality and patient safety, says the award is an acknowledgement of the years of hard work that the not-for-profit health system has invested to improve quality and enhance patient-centered care for the patients it serves at 13 hospitals in 29 counties in the mountains of Northeast Tennessee and Southwest Virginia.
"When we first designed our patient-centered care culture we identified 10 guiding principles and we use those principals to guide behavior and form the foundation for all the processes we put in place," Parsons tells HealthLeaders Media. "Number 8 on the list, and not in order of importance, is 'Transparency is the rule in the care of the patient.'"
It starts at the bedside.
"We solidify that transparency by being open and honest with all the information patients need to make the right choices for their healthcare," Parsons says.
"That includes involving them in the discussion, having report out and exchange among caregivers at the bedside so the patient is involved and can participate in that exchange of information. Whoever they designate as their very important person in their care is involved as well in the information exchange."
From the bedside, MSHA's transparency efforts expand to engage employees and improve outcomes.
"We take the transparency to a different level within the organization by giving everyone at Mountain States access to our results at the system and facilities and service line levels," Parsons says.
"Results are posted on our Intranet and anyone can see those results for any facilities in the system. We also post them on walls and bulletin boards and they are very visible."
MSHA also shares outcomes data "outside the walls of the organizations so we can compare results and practices so we can all improve together and we take it to an Internet level by placing our results on our Web site," Parsons says. "We were one of the first organizations in the country to do that in 2007."
Rather than throwing out reams of data that might otherwise confuse and frustrate healthcare consumers and their families, Parsons says MSHA uses simple graphics to illuminate findings, puts data in comparative context nationally, by state, and by region, and explains what the data means in plain English.
"Our goal is to be transparent, but there is so [much] conflicting information on Web sites on healthcare, and scores and results and some of it is competitively driven, [that] it can't help but make it difficult for people in our region to understand where they need to go for information," she says.
"So our main motivation was to be transparent to our patients in a way that is easily understood. We gave it the 'mom test.' We figured if our moms could understand it and they aren't healthcare executives, it's at the right level for folks to get the information they need without having to work too hard."
MSHA's success is more evidence of the good things that happen to healthcare providers who share their data—both warts and wonders—with patients, staff, and the outside world.
It's all common sense. When you provide people with healthcare data you provide them with the opportunity to make choices on critically important decisions. It's a buy-in. If patients and their families understand and have a voice in their care regimens they will more likely follow those regimens when they leave the hospital.
If you want engaged and accountable staff, share your data. Brag on the successes but don't shade the problem areas. When staff see data that clearly demonstrates you have a problem they will rally to fix it. Data provides accountability and empowerment for everyone from the CEO to the environmental staff.
"An environment of transparency not only makes information available for people but also creates an environment where folks can ask for information and challenge and ask questions. It is that challenging of our status quo that takes us on the steps to improvement," Parsons says.
"We want people who are engaged with the mission and vision of Mountain States—where they are not only intellectually tied to delivering healthcare but they are also emotionally invested in the work we do.
Transparency allows us to further the engagement as well and the sharing of information allows us to break down silos so we can work together and integrate what we do and truly put the patient at the center of everything we do."
Do you have what it takes to be the CEO of a major metropolitan safety net hospital?
Probably not but don't feel too bad. Most people – most CEOs – don't either.
After reading the 12 pages of "position specifications" for the potential CEO candidates at Parkland Health & Hospital System in Dallas, it may be that there are only a few dozen resumes in the United States that would contain the experiences, credentials, and personal charisma needed to turn around a venerable healthcare system that serves the Big D's poor and vulnerable citizens.
With remarkable understatement, the specs sheet created for Parkland by executive recruiters Korn/Ferry International notes that the safety net faces "several significant challenges."
Those "challenges" include keeping the doors open and the lights on. The federal government has very publicly suggested that it will no longer pay the 835-bed system for Medicare and Medicaid services if hundreds of quality and safety measures are not improved upon.
Korn/Ferry says that federal mandate and the threat of lost federal funding combined with the construction of a New Parkland Hospital, and the demands of the Affordable Care Act "make the next few years perhaps the most critical in Parkland's storied 117-year history."
On the other hand, adversity builds character. The Korn/Ferry specs note that "these challenges have galvanized Parkland's employees, medical staff, board and community, as the leadership team seeks to guide the institution through this difficult period. The new CEO will lead motivated constituencies, both internal and external, to help Parkland return to preeminent status..."
There are reports that the job comes with an annual compensation package in the high six-figure range, but Parkland officials did not return calls on that topic.
The personal qualifications listed by Korn/Ferry are what we'd expect and hinge largely upon a C-suite record of success at a complex academic medical center or integrated delivery system that includes a history of strong financial and operational management.
Along with those tangibles, Parkland also wants a CEO who can "emanate a contagious sense of mission, purpose and focus." And what does the job demand?
A lot!
Korn/Ferry's list of "specific responsibilities" and "professional experience/qualifications" for Parkland CEO candidates includes:
Gain an understanding of the system's organization, challenges, and opportunities among key constituencies which include the board; senior management; academics; physicians, local, state and federal politicians; community leaders and patients; donors and potential donors.
Develop a strategic plan that leads to a high performing, best-of-class healthcare system which successfully grows clinical volume and captures market share.
Attract and retain a "best-in-class" senior leadership team.
Develop system infrastructures, including financial and information systems.
Partner with academic constituencies to build upon educational and research programs.
Achieve financial results through planning, improved operating and financial performance, fundraising and external involvement with legislative and payer relationships.
Inspire people to engage, set, and execute performance goals.
Experience working with a medical school to develop clinical, academic and research programs is preferred.
Experience with multiple aspects of the spectrum of clinical care delivery, from prevention to outpatient and inpatient acute care to rehabilitation and home care ideally including experience with an integrated healthcare delivery system.
Able to create and communicate a compelling picture of how the organization and healthcare overall will evolve, tying current initiatives to longer term strategies and the organization's value.
Experience building cultures of accountability that reward initiative while sharing credit for successes and responsibility for failures.
Can solve the most complex of problems; great at gleaning meaning from whatever data is available; is a quick study of the new and different; adds personal wisdom and experience to come to the best conclusion and solution, given the situation; uses multiple problem-solving tools.
Can separate the mission-critical from the trivial; focuses on the few tasks that add value and puts aside or delays the rest.
Is a person of high character; is consistent and acts in line with a clear set of values and beliefs; deals and talks straight; walks his/her talk.
Ordinarily I'd say that a list of job demands such as this is drawn up for public consumption. In this case, however, a case could be made to justify each of the skills and qualifications that Korn/Ferry has identified.
The fact is that this is a tough and demanding job. Whoever is eventually hired to lead Parkland will immediately find himself or herself pulled in any number of directions by people and issues and limited resources that in many cases will be beyond their control.
We often hear complaints about overpaid executives. If the person picked to lead Parkland can turn around the fortunes of this critically important health system, however, it will be a bargain.
Two recent studies have bolstered the argument that the so-called "weekend effect" exists. Like earlier studies, however, neither new study can say exactly why it's happening.
A Johns Hopkins study published this month in the Journal of Surgical Research reviewed more than 38,000 patient records of older adults who sustained head trauma over the weekend and found that they were 14% more likely to die from those injuries than patients with similar injuries who were hospitalized Monday through Friday, even after accounting for other factors.
"The underlying mechanism responsible for this disparity may be related to differences in weekday versus weekend staffing," the study concluded. "However, this must be studied further so that the factors driving disparities in outcomes can be thoroughly understood and the increased risk associated with weekend treatment for head trauma can be eliminated."
The study's lead author, Eric B. Schneider, an epidemiologist at the Johns Hopkins University School of Medicine's Center for Surgical Trials and Outcomes Research, said "there isn't a medical reason for worse results on weekends."
"It's more likely a difference in how hospitals operate over the weekend as opposed to during the week, meaning that there may be a real opportunity for hospitals to change how they operate and save lives," Schneider said in prepared remarks.
A separate study published last month in the Archives of Surgeryreviewed 31,832 patient files and found worse outcomes for patients undergoing urgent surgery for left-sided diverticulitis who were admitted on the weekend versus weekdays.
"Patients undergoing urgent surgery for left-sided diverticulitis who are admitted on a weekend have a higher risk for undergoing a Hartmann procedure and worse short-term outcomes compared with patients who are admitted on a weekday," the study concluded. "Further research is warranted to investigate possible underlying mechanisms and to develop strategies for reducing this substantial weekend effect."
Previous studies have documented the weekend effect for heart attack, stroke, and aneurism, but none say precisely what is driving the phenomenon.
A March 2010 study from the federal Agency for Healthcare Research and Quality found that patients admitted to a hospital on a weekend are half as likely to get procedures they need on the same day they arrive than if they were admitted on a weekday. That study also found that 2.4% of patients admitted on the weekend died in the hospital, compared to 1.8% of patients admitted during the week.
The AHRQ study did not draw any conclusions from the data about the quality of care provided on weekends versus weekdays in the nation's hospitals because the results were not adjusted for severity of illness. "This report does raise the issue that there could be a 'weekend' effect, but that further study is needed," lead author P. Hannah Davis said at the time. "We can't conclude that there is a weekend effect."
Robert O'Connor, MD, chair of emergency medicine at the University of Virginia and a board member of the American College of Emergency Physicians, told HealthLeaders Media "it's hard to say" whether the weekend effect is real.
"Do I think it exists? It has been reported in a number of disease states from data registries and we need to find out if this is real or not," he says.
"A lot of these studies are retrospective looking at databases that weren't designed to collect data prospectively. While I am very concerned about what they might be showing, I'd be very worried that if there is a difference it is something we would need to identify and correct as a healthcare system."
While lower staffing levels on the weekends might be an obvious hindrance for many medical services, O'Connor says many emergency departments maintain consistent staffing levels throughout the week. He says the findings in the Johns Hopkins study might be more dependent upon how the data was measured.
"I'd like to see it broken down by trauma center, either level one, two or three. I would like to see more data collected on the patients to make sure that they absolutely are comparable in terms of their Glasgow Coma Scale and other injuries," he says.
"The authors did a nice job with the retrospective database but we would have to collect the data prospectively, that is look at whether the patient came in on the weekend or the weekday and make sure as much data is collected from both groups to help sort out this problem."
O'Connor says arguments about the existence or extent of the weekend effect will remain until better data shows whether or not it's real. "The reason it is still a question is that this has been reported for a variety of other conditions such as aneurisms, strokes, and cardio vascular emergencies. But they have all been from retrospective databases. There are also a number of studies to the contrary that point out no difference," he says. "The reason this issues still sticks around is that we are trying as a profession to get a handle on whether this is real or not."
The average per capita cost of healthcare services grew at more than three times the rate of overall inflation for the 12-month period that ended in June, with the cost of services covered by commercial health plans growing four times faster than those of Medicare, new data shows.
Standard & Poor's Healthcare Economic Indices show that per capita cost growth covered by commercial insurance and Medicare programs increased by 5.78% over the 12-months ending June. In the larger economy inflation rose by 1.7% as measured by the Consumer Price Index for the same period, federal data show.
A further breakdown shows that healthcare costs covered by commercial insurance plans increased by 8.09% over the year ending in June, down from the +8.4% annual increase reported for May. Medicare claim costs growth slowed to +2.27% when compared to May’s +2.5% growth.
"The remarkable thing we are seeing, no matter whether the prices have gone up or down over the years, has been how much has been shifted in terms of the annual rates of change into commercial usage as opposed to Medicare," Maureen Maitland, vice president of S&P’s Dow Jones Indices, told HealthLeaders Media.
"We've noted that for June they reached a difference of almost six percentage points. This is a trend we have seen for the last two years. We have seen costs deceleration across all indices in most of 2011 and then they reversed and accelerated at the end of 2011 and into 2012. What we have seen all along the way is the gap between Medicare and commercial plans has been fairly stable if not widening."
Robert Zirkelbach, spokesman for America's Health Insurance Plans, does not dispute the S&P data. "As far as why there are two big things to keep in mind," he says. "First, Medicare simply dictates the price they will pay for service. Those payments are often below cost. It gets shifted to consumers and employers and private coverage."
He pointed to a study from Families USA which estimated that the average family of four paid a "hidden premium" of $1,017 in 2008 to subsidize uncompensated care. "There is the situation where doctors and hospitals are losing money providing services to Medicare and Medicaid patients and as a result people with private coverage will cover that loss," he says.
Second, Zirkelbach says, provider consolidation is raising costs. "In some cases hospitals have the ability to simply dictate the prices that are charged to insurance. They are able to charge what they want and they do," he says. "There is a lot of research showing that the increase of provider consolidation leads to higher prices for services."
"Cost-shifting and consolidation both need to be looked at within the context of healthcare costs," he says. "What's important about this data is that is shows clearly that it's the rise in prices for medical services that are driving the rise in healthcare cost growth. There needs to be more focus on the prices that are being charged and why if we are going to have a system that is sustainable."
Even though healthcare costs are easily outstripping the CPI, the S&P indices showed a slight deceleration in June. The 5.78% average per capita costs increase of healthcare services actually slowed slightly for the 12 months ending in June compared with +6.06% in May and +6.11% rate in April.
The Professional Services Index annual growth rate also slowed from its May +6.28% rate to June's +6.07%, and the Hospital Index annual growth rate fell to +5.22% in June from +5.56% in May, S&P reports.
The S&P Healthcare Economic Indices estimate the per capita change in revenues accrued each month by hospital and professional services facilities for services provided to patients covered under traditional Medicare and commercial health insurance programs. The annual growth rates are determined by calculating a percent change of the 12-month moving averages of the monthly index levels versus the same month of the prior year.
Healthcare costs began to accelerate in May 2009 and peaked in May 2010, before decelerating through the first half of 2011. An acceleration trend began again in October, 2011 but tapered slightly in June.
In 2011 S&P reported that the average per capita cost of healthcare services covered by Medicare programs and commercial insurance grew by 5.28 %, including +7.11% for commercial insurance plans and +2.51% for Medicare.
Maitland says much of the deceleration in healthcare cost growth over the past two years was "a little lag effect on the recession of two years ago. In 2011 prices and utilization started increasing. The economy was getting better and people were using more healthcare."
It's been six years since the federal government provided $418 million in grant money to the Rural Health Care Pilot Program as part of an effort to bring broadband to rural providers.
This week the Federal Communications Commission issued an upbeat and somewhat obvious 98-page report that highlights the progress made by the pilot project since its inception in 2006, offers obvious commentary on the benefits of telemedicine, and details the lessons learned.
A brief history: The pilot program was created as part of the FCC's statutory mandate to implement universal communications services to rural providers. The idea was to improve access to quality care and reduce costs for rural providers by giving them remote access to the broader array of services and resources available to many urban providers.
The FCC awarded the $418 million to 69 rural projects, giving the providers one-time funding to cover 85% of the cost of construction and deployment of broadband networks to providers in urban areas. The pilot now supports 50 projects in 38 states, Guam, American Samoa, and the Northern Mariana Islands. The information gleaned from the pilot project will be used to shape the permanent RHC program.
Not surprisingly, the report found that broadband healthcare networks and telemedicine "improve the quality and reduce the cost of delivering healthcare in rural areas…. In addition to delivering needed medical care to patients in remote locations, telemedicine lowers the cost of providing healthcare, reduces travel time and expense for patients, providers and doctors, and brings needed revenue to endangered rural clinics and hospitals. Broadband networks also facilitate other important telehealth applications—such as the transmission of medical images, exchange of electronic health records, remote consultations with specialists, and training of rural medical personnel."
This is not news. All of this makes perfect sense and for the most part the FCC is stating the obvious. There are large parts of this report that can be skimmed over. Most readers will find that the more interesting findings were about what works.
For example, the report found that consortium applications are more efficient because they allow several providers to share the administrative, network design and other costs.
Consortiums foster coordination of care networks and give smaller providers access to access to experts and resources of larger providers. In addition, the consortiums used bulk buying and competitive bidding to provide leverage for large numbers of geographically disperse provider sites that can usually result in higher bandwidth, lower prices and better service.
While the stated purpose of the project is to improve quality and reduce costs in rural areas, the pilot found that the urban partners are a critical piece of the puzzle. "Broadband networks often bring to patients in rural areas the additional medical expertise, creativity, technical know-how, and innovation available in large urban medical centers. The leadership, technical and medical expertise, and administrative resources provided by urban health care providers also have proved central to the success of many Pilot projects."
What other gems were uncovered in the FCC report? Well, commission also determined that most providers don't have the technical expertise to manage broadband networks and that, as a result, they don't want to own the networks. "The majority of Pilot projects have created successful broadband networks by purchasing broadband services from a third party, rather than constructing and owning their own broadband facilities.
Mechanisms such as long-term leases, prepaid leases, and indefeasible rights of use of facilities for specified period of time help many projects obtain the bandwidth and service quality they needed," the report said.
And finally, even with billions in federal seed money, the report acknowledged that funding challenges for broadband remain a key issue for rural providers that operate on thin margins or in the red.
As for accomplishments to date, the study noted that:
2,107 providers were "on target" to receive $217 million in universal service support by January 2012, with the average award of about $100,000 per provider.
Project sizes range from fewer than 10 to more than 150 provider sites; about one-third of the projects each have more than 50 provider sites receiving support through the pilot.
The five largest projects are statewide networks in California, Colorado, Oregon, South Carolina, and West Virginia. So far, these networks are on target to receive funding to connect more than 800 providers.
Forty-four of 50 projects that receive pilot funding include urban providers. Approximately 35% of all providers that received funding commitments in the pilot as of January 2012 were classified as urban, or 733 of the 2,107 total.
Pilot leaders often come from large medical institutions and universities in urban areas, which often serve as hubs for the network receive support for the equipment that enables the entire network to operate.
Pilot project participants purchase higher bandwidth connections than do participants in the FCC's existing program, which defrays the cost of telecommunications and Internet access services for rural providers. Most Pilot Project participants purchase 10 Mbps or faster connections, which are much faster than the connections that typically are purchased in the permanent RHC Program, the vast majority of which are 3 Mbps or less.
Most pilot projects purchase broadband services from commercial providers rather than build and own their own networks.
As we've already noted, this is a status report and most of the findings are self-evident. Don't expect much breaking news as you skim through these 98 pages.
However, it's interesting to read the report as a measure of how far we have come over the past six years toward the acceptance and promotion of telemedicine. In 2006, the FCC was raising questions about the value of access to broadband and telemedicine as critical components for improving quality, maximizing limited resources, and reducing costs. In 2012, those questions have been answered. The value is inarguable.
It might be the challenge of being on the playing field for the rollout of the Patient Protection and Affordable Care Act. Or, it might be a lack of qualified successors, or a board of directors that just can't say goodbye, or even something as mundane as a gutted 401(k).
Whatever the reason, many healthcare CEOs age 55 and older say they're in no hurry to retire.
A May survey of 200 CEOs by executive search firm Witt/Kieffer found that only 24% are planning to retire within four to five years. Of those, 14% will retire within three years and 8% plan to retire within one year.
Nearly half of respondents?42%?are more than five years away from retirement and 12% have no retirement plans in place.
Most surprisingly, of those in the age 55-59 group, 71% either have no retirement plans, or plan to retire in more than five years.
Elaina Genser, senior vice president/managing director at Witt/Kieffer's western region says 88% of the CEOs say they have goals achieve before they retire and 83% said they wanted to help with the challenges ahead in healthcare, including PPACA.
"There are a lot of them thinking 'this the biggest thing since Medicare. I want to be part of it, and then I can leave,'" Genser tells HealthLeaders Media.
Three out of four CEOs say their boards don't want them to leave, and 52% say no one at their hospital is qualified to replace them.
Genser says the survey points to the need for succession planning in the C-suite, even for CEOs who aren't ready to retire. "As people get older, things happen health-wise. You have to balance it," she says. "You always want to train more than one successor. If they leave to go somewhere else, you wouldn't have anybody. This is about protecting the organization."
While noting that hospital boards usually name successors, Genser says that doesn't mean CEOs should play no role in the planning.
"The CEO should have a conversation with the board and say 'it is the fiduciary responsibility of the board and myself that we take a look at this. I don't have any plans to retire. This is my personal timeline, but we ought to start taking a look,'" she says.
Succession planning shouldn't necessarily be limited to the CEO.
"Maybe the entire executive team is aging in place and you need to start to look at succession planning around the organization as a whole," she says. "Then it does not become a situation where 'Oh we are worried the CEO is going to leave' and that gives a signal that others should start looking because who knows what will happen? It's more of a mindful approach to prepare for the future at all levels, just in case and to be prepared."
Succession planning allows hospital leaders to evaluate the skills, and skills gaps, of their would-be replacements to determine what experiences and exposures they need before taking over.
Genser says it's important for senior CEOs who are nearing retirement to understand that the demands in leadership have changed considerably over the decades since they launched their careers.
"We have a lot of bright young people coming out of graduate programs that are not getting the same opportunities that people had 20 years ago," she says. "It used to be that 20 years ago you could walk into an assistance administrative role and essentially be in the C-Suite in some role. Now you are lucky to get a director-level position for one department."
Genser says most current CEOs were younger than 35 when they landed their first leadership jobs. "If you look now at the number of people who are CEOs under 35 it is a very small number," she says. "In that time, I will grant you, healthcare has become more complex. But I also think people are reluctant to give those responsibilities to younger people as fast as they were given them themselves."
In addition, she says, the consolidation of the hospital sector is "radically" changing the role of the C-Suite and that could make it harder to find well-rounded and experienced senior leadership in the coming years.
"For example a hospital finance position, which before had responsibility for debt and treasury and bond issuances and even revenue cycle, may be part of a system now where all of those things are corporate," she says. "So, in some functional areas there is going to be a shortage, particularly of independent CFOs who can go the whole gamut."
"That is true even for CEOs who are probably called presidents in some of these systems. They are really more like operating officers," Genser says. "We are seeing a shift in the whole dynamic of organizational structures and where that is going. There will always be good talent. The question is can you attract it based on how you are structured if you need to go outside your organization? Or, can you grow and build it and develop it inside your own organization?"
Spending more on trauma care does not necessarily improve survival rates, a national study suggests.
Research published in The Journal of Trauma and Acute Care Surgery finds that the cost of treating trauma patients in the western United States is 33% higher than the cost for treating similarly injured patients in the Northeast.
Researchers, however, don't know why.
"Spending more doesn't always mean saving more lives," said study leader Adil H. Haider, MD, a trauma surgeon, associate professor of surgery at the Johns Hopkins University School of Medicine and director of Hopkins' Center for Surgical Trials and Outcomes Research. "If doctors in the Northeast do things more economically and with good results, why can't doctors out West do the same thing? This study provides a potential road map for cutting unnecessary costs without hurting outcomes."
The Hopkins study analyzed three years of data from the Healthcare Cost and Utilization Project's Nationwide Inpatient Sample. They identified 62,678 adults with a primary injury in one of five areas: blunt injury to the spleen, collapsed lung and bleeding in the chest, shinbone fracture, mild traumatic brain injury and liver injury.
The Hopkins researchers note that trauma-related disorders are among the five most expensive medical conditions. After controlling for variables such as chronic diseases that could bias the findings, the researchers estimated that the average per-person cost in the Northeast for trauma care for all five injury types combined was $14,022.
The cost was 18% higher in the South, 22% higher in the Midwest and 33% higher in the West.
The most expensive care was for liver injury and the average cost of care in the Northeast was $16,213. The cost was 18% more in the South, 22% more in the Midwest and 35% more in the West. The Northeast had the lowest costs for all five injury types while the West had the highest, even after factoring differences in the consumer price index.
Michael F. Rotondo, MD, FACS, a trauma and acute care surgeon, chair of the department of surgery at the University of North Carolina in Greenville, told HealthLeaders Media he "was not surprised" by the study's findings "by virtue of the fact that the healthcare practice in the country is incredibly variable."
"All politics are local but all healthcare is local as well," says Rotondo, who is also and chair for the Committee on Trauma at the American College of Surgeons. "As someone who worked in an urban environment at the University of Pennsylvania for 10 years and now for 13 years have been in a rural environment, that is clearly the case in terms of style of practice, and that is true, but also in the economics of practice. It is very different from one region of the country to another."
While he called the study "thoughtful and provocative" Rotondo says its value is limited because it relies upon "high level administrative databases" that don't delve into the specifics of each case.
"By virtue of the methodology available to the investigators they were not able to say what is driving the expenses," he says. "The message I get out of this and exactly why the College of Surgeons supports this sort of research is that we have to focus on hard-edged comparative effectiveness where we are looking at the quality of the outcomes and the cost."
Rotondo says there could be any number of reasons for the price variance. "There is tremendous advantage to having hospitals near each other and lots of physicians in a region because it allows the providers to do collective bargaining in essence with suppliers. This could be strictly a difference in pricing related to implants or it could be pharmacy costs. It may not have anything to do with physician fees or practice patterns," he says.
"When we look at our supply costs in rural environments, they are much higher because of the way contracts are drawn. We have a lot more work to do to sort out and get down to answer these sorts of seminal questions and this is the kind of research that spurs on us."
Ricardo Martinez, MD, the former director of the National Highway Transportation Safety Administration, told HealthLeaders Media that trauma care has made great strides in improving survival rates, "and now we have to look at what is the most cost-effective care." He says the Hopkins study provides an excellent reason to promote evidence-based medicine.
"With all the growing data we have to look at the information coming out to see what is truly of value and what doesn't make a difference," says Martinez, an emergency physician who is now CMO with Atlanta-based North Highland consultants.
"For example, the growth of ultrasound has eliminated a lot of CT scans, but that takes years to disseminate and become adopted. Trauma care is one of the programs that has the best data so can we use that data to be more cost effective. We know it saves lives and we can use it to save money too."
Martinez says the growth in the use of telemedicine, more sophisticated databases, and the Internet is creating and spreading knowledge at a dizzying rate. "The problem is being overloaded with information so we have to maintain our focus," he says. "What is best for the patient and what is the best cost-effective way to do that?"
Haide said researchers looking to cut costs must not look only at survival rates alone to make sure the more expensive care isn't better in some way. He said higher-cost regions may have patients with less pain and fewer disabilities after recovery.
"If surgeons are fixing tibia fractures in the West in a way that's more expensive but makes patients more comfortable, that would not be a trivial finding," Haider said. "We really need to drill down and figure out what parts of care improve outcomes and what parts drive up costs without improving any outcomes or aspects of care important to patients."
The study was funded by the National Institutes of Health's National Institute of General Medical Science, the American College of Surgeons and the Hopkins Center for Health Disparities Solutions.
