The employer medical cost trend has stabilized at about 6% annually through 2019, but that's still unsustainable and well out of line with the Consumer Price Index and wage increases, PwC says.
The annual rate of growth in employer medical costs has plateaued at about 6%, which is half the rate of growth seen a decade ago, thanks largely to the rise of high-deductible health plans.
However, squeezing cost reductions from reduced utilization that come with high-deductible plans may have played itself out, according to a new study from PwC, which means that employers and health plans looking to slow cost growth will have to focus on medical pricing.
Rick Judy, a partner at PwC, says high-deductible plans largely accomplished what they set out to do, as employer annual medical costs trends have fallen from 11.9% in 2008 to around 6% most recently.
"When you have very low-deductible health plans, consumers operate within the healthcare ecosystem in a way that doesn’t allow them to take costs or utilization into the equation," Judy says.
"As health plans and employers have put high-deductible health plans in place, consumers are becoming better shoppers with their healthcare dollars, and the healthcare medical cost trend has seen a steep decline over the past decade because of the utilization changes," he says.
Now, that savings generated by reduced utilization from high-deductible plans "has sort of played out," Judy says.
"We've seen a plateauing of the adoption of those and the impact that they can have on the overall utilization has run its course as well," he says. "That means that we have to tackle next is prices, and hopefully that won't take 10 years."
Judy identified key "inflators" of medical costs through 2019.
The rise of care venues: "As we put a lot of new care venues in place, whether those are virtual, or alternatives to emergency rooms or other high-cost venues of care, we are finding there is a slight uptick in how readily accessible care is and because of that consumers are utilizing the healthcare system more and more as that care is more readily available," Judy says.
Provider mega mergers: "We are continuing to see that. We've moved to where 93% of metro markets are going to be highly concentrated with providers in 2019," Judy says. "In these larger mergers we saw 10 provider deals over $1 billion this past year. That gives providers better negotiating leverage around prices. So, that is going to continue to put upward pressure on medical cost trends into 2019.
Physician consolidation: "A greater percentage of physicians being employed by hospitals versus being in stand-alone situations," Judy says. "Those situations typically bill out at a higher rate than a stand-alone physician. Also, there is a decrease in efficiency. On an average day, a stand-alone physician sees about 23 patients a day and an employed physician sees about 20 patients per day."
Working to contain costs are "deflators," which Judy identified as:
The rise of care advocates: Employers and health plans are offering their employees and policy holders consumer advocates to who can help them navigate the healthcare landscape to the best care at affordable prices.
High-performance Networks: Limited networks will emphasize quality and patient satisfaction along with savings. Employers are leveraging their buying power to negotiate directly with providers to create these high-performance networks.
In addition, Judy says the just-completed flu season was the worst in years and contributed to rising utilization and care costs. The 2018-19 flu season is projected to be closer to average and should slightly dampen the flu's effect on trend in 2019.
In a 2-to-1 ruling, a federal appeals court said Congress 'through clear intent' suspended the government's obligation to pay health insurers for losses accrued during the ACA rollout.
A federal appeals court on Thursday ruled that the federal government is not obligated to pay about $12.3 billion in "risk corridor" payments that were provisioned into the Affordable Care Act to insulate insurance companies from excessive losses.
Pending any sort of reversal on appeal, the ruling by the U.S. Court of Appeals for the Federal District means that health insurance companies will not get the money they were promised under an agreement to provide ACA-mandated coverage benefits coupled with a provision for limiting financial losses.
"Although section 1342 obligated the government to pay participants in the exchanges the full amount indicated by the formula for risk corridor payments, we hold that Congress suspended the government's obligation in each year of the program through clear intent manifested in appropriations riders," Chief Judge Sharon Prost wrote for the majority.
"We also hold that the circumstances of this legislation and subsequent regulation did not create a contract promising the full amount of risk corridors payments," Prost wrote.
The 2-to-1 ruling overturns a lower court ruling in favor of Moda, Inc., a health insurance company based in Portland, Oregon, that claims the federal government owes it more than $214 million in risk corridor payments for losses incurred when the plan signed on to the ACA.
A U.S. Court of Claims judge in February, 2017 sided with Moda and ruled that the government had to pay the risk corridor adjustments. However, that ruling conflicted with a separate ruling by a different judge that dismissed a similar suit brought forward by the now-defunct Land of Lincoln Mutual Health Insurance Co.
The appeals court ruling this week examined both cases.
Writing in dissent Thursday, Appeals Court Judge Pauline Newman warned that the ruling against the payers could come back to haunt the government, whose "ability to benefit from participation of private enterprise depends on the government's reputation as a fair partner."
"By holding that the government can avoid its obligations after they have been incurred, by declining to appropriate funds to pay the bill and by dismissing the availability of judicial recourse, this court undermines the reliability of dealings with the government," Newman wrote.
Health Plans Cry Foul
Moda, Inc. President and CEO Robert Gootee said he was "disappointed by today's decision" and plans to appeal.
"We continue to believe, as our trial court did, that the government's obligation to us is clearly stated in the law and we will continue to pursue our claim on appeal," he said.
"If it is upheld on appeal, it will effectively allow the federal government to walk away from its obligation to provide partial reimbursement for the financial losses Moda incurred when we stepped up to provide coverage to more than 100,000 Oregonians under the ACA," he said.
America's Health Insurance Plans said the ruling could undermine the individual health insurance market and erode trust between the federal government and the private sector.
"Courts have long recognized that companies doing business with the federal government — including but not limited to health insurance providers — must be able to rely upon the federal government as a fair and reliable partner," AHIP said in a media release.
"This protects not only the interests of the private market and consumers, but also the government's own long-term interest in maintaining strong partnerships with the private sector."
John Baackes, CEO of L.A. Care Health Plan, the nation's largest publicly operated health plan, said the ruling "was decided on a parsing of wording rather than the intent of Congress to provide insurers with a built-in subsidy so they would be able to provide participants on the exchange with affordable access to quality health insurance."
The integrated care network will use two Emory Hospitals in Atlanta for Kaiser Permanente members, with an emphasis on population health management, ambulatory and hospital care.
Emory Healthcare and Kaiser Permanente are developing a joint integrated population health model for KP members in the Atlanta area, the two health systems announced.
The initiative commits both providers to build an integrated care model for KP members at Emory University Hospital Midtown and Emory Saint Joseph's Hospital, with a focus on population health management, ambulatory and hospital care, research and academics.
KP provided an unspecified capital investment for expansion of both hospitals to accommodate the larger volume of patients.
"The long-term benefits of this collaboration will serve as a national model for other health systems and extend beyond our two organizations," Emory Healthcare CEO Johnathan S. Lewin said in a media release.
"Patients and communities far beyond Georgia will benefit from the transformation in care, affordability, research, prevention and health outcomes that will come from this initiative," he said.
Under the model:
The two health systems will develop infrastructure and joint capacity planning, and push collaboration on physician staffing, technology, care coordination, patient engagement, and improving performance metrics.
The Southeast Permanente Medical Group physicians will treat KP patients at Emory University Hospital Midtown and Emory Saint Joseph’s Hospital, with the help of KP care managers and Emory providers.
KP will maintain some existing service affiliations, including labor and delivery services, at Northside Hospital.
Emory will continue its relationships with its affiliated health plans and serve its members and all existing patients without a change in service or access.
'A Different Animal'
Sarah E. Wilson, principal analyst of market access insights at Nashville-based Decision Resources Group, called the initiative "a big deal, given the clout of both entities."
"There appears to be a lot of synergies between the two that would make this agreement a good fit for the everyone, including the patient," Wilson said.
"We have seen academic medical centers partner with health plans for other initiatives, but this feels like a different animal. This could very well set off a new trend as integrated delivery networks continue to evolve," she said.
Simpson said Emory has placed a focus on value-based care in recent years through accountable care organizations, including a recent agreement with WalMart, and other initiatives.
"This coupled with the highly-specialized care that is available through the academic medical system is likely very appealing to KP," she said.
"The increased capital Emory received to make improvements to Midtown and Saint Joseph's will benefit Kaiser patients and those with other health plans, and was likely a contributing factor to moving forward with the agreement," she said, adding that Kaiser's selectivity with hospital partners should increase Emory's national profile.
Editor's note: A previous version of this story misstated the name of the company for which Sarah Wilson works. The company's name is Decision Resources Group.
Policymakers say they need more time to analyze the impact of the changes on hospitals. However, some related metrics will be updated by the end of July.
Citing "stakeholder concerns," the Centers for Medicare & Medicaid Services has once again postponed an update to its Overall Hospital Quality Star Ratings.
"When changes are made to the underlying measures it is vital to take the time needed to understand the impact of those changes and ensure we are giving consumers the most useful information," CMS said Tuesday in a posted notice.
"As part of this process, CMS will seek feedback from a multi-disciplinary Technical Expert Panel, a Provider Leadership Workgroup, and a public comment period," CMS said.
No date was given for when CMS anticipates activating the ratings updates. Typically, the updates are issued every July and December. However, CMS has a history of delaying the updates, most recently in May.
News of the pushback was well-received by hospital stakeholders.
"CMS made the right call," said Tom Nickels, executive vice president of the American Hospital Association.
"We appreciate the agency allowing more time for a fuller analysis of its methodology and measures and to hear from stakeholders, including hospitals and health systems, about concerns found in many preview reports," Nickels said.
Bruce Siegel, MD, president and CEO of America's Essential Hospitals, welcomed the delay and said that stakeholder reviews of the proposed July updates showed "large shifts in overall hospital star ratings from December 2017 to July 2018."
"These changes have created confusion and raised new questions about the reliability and validity of the methodology used to calculate these ratings," he said.
"We remain deeply concerned the star ratings could do more harm than good in their current form. We look forward to working with CMS to ensure patients and their families can make care decisions based on accurate and meaningful data," he said.
CMS said it will update these metrics on July 25:
Outcome measures for 30-day mortality, 30-day readmissions, and CMS Patient Safety Indicators, including:
Outpatient imaging efficiency;
Payment and value of care;
Timely and effective care;
Healthcare-associated infections;
HCAHPS surveys.
CMS will add three new measures to Hospital Compare:
Hospital return days for pneumonia patients (EDAC-30-PN);
Percentage of patients who received appropriate care for severe sepsis and septic shock (SEP-1);
Average time patients spent in the emergency department before being sent home (OP-18c), which will only be reported on data.medicare.gov
CMS is no longer reporting the Pain Management composite 4 on Hospital Compare or in the downloadable databases. This composite measure is also being excluded from the calculation of the HCAHPS Summary Star Rating for the July Hospital Compare release.
In addition, CMS said it:
Will not publish the Overall Hospital Star Rating from the July Preview Reports on Hospital Compare.
Will Post the SAS Pack with the next Star Ratings refresh on Hospital Compare.
Will keep Star Ratings released in December 2017 on the Hospital Compare until the next update.
The Blue Cross Blue Shield of Arizona Shared Savings Program sent more than $148,000 to 148 physicians in the fourth quarter of 2016, in payments ranging from under $1,000 to over $5,000. Stakeholders want to expand on their success.
With encouraging results from their first year of operations, stakeholders in the Blue Cross Blue Shield of Arizona Shared Savings Program say they're looking to expand their model into other states.
The model now includes more than 725 providers treating 45,000 BCBSAZ members. John Wallace, senior vice president at Change Healthcare and president and COO of ACO Partner, spoke with HealthLeaders Media about the model, why it works, and how it will grow.
The following is a lightly edited transcript.
HLM: You describe the Blue Cross Blue Shield of Arizona Shared Savings Program as a "truly unique value-based collaborative." What makes it truly unique?
Wallace: The reason we say it is truly unique are the services, the technology, the total offerings coming through at zero risk to the providers and their patients. How we deliver those services directly for the doctors on behalf of providers to their patients we believe is unique.
I realize there are similar programs across the country, but we launched this with major investments made on behalf of the patients and the providers in the state. We thought that was important to do. Not just the strategy on the business side, but playing a part in improving the healthcare sector.
HLM: Who are the patients?
Wallace: These are commercial patients; folks that are buying health insurance across Blue Cross Blue Shield. We started with commercial because there are plans with ACO Partner to partner with other health plans across the country.
HLM: How is your model different from a traditional ACO?
Wallace: We are not an ACO. I would consider us a value-based transformation vehicle.
Traditionally, ACOs are owned or co-owned by the provider group. Many times that ACO is responsible for footing the bill for the technology the services, etc. That gives the providers a bit more control, but it's a cost.
Ours are two entities coming in and funding that cost risk free on behalf of the providers and their patients, and taking on the financial aspects for all the right reasons. There is clearly a return for Blue Cross Blue Shield, if you can improve quality and reduce overall cost of care.
We look at this as a way to participate more broadly in the value-based transformation in Arizona as a proof point that we can make the investments, and we can put our technology and our services into play through this vehicle to do this much more aggressively across the country.
HLM: Is the model making money?
Wallace: I can't comment on financials. I will tell you that all stakeholders to date, based on the 2016 results and expected results in 2017, will do sufficiently well.
HLM: This model is all carrot and no stick for providers. Why?
Wallace: At this point we thought it was important to be all carrot and no stick so we can teach these providers how to fish and create longer-term sustainability. The risk to the providers is zero. It's very easy in to get into the program and very easy out to get out.
HLM: What's your sales pitch to physicians?
Wallace: We tell them what we are going to do, and here is why we are going to do it. Whether it's a disease management program or HEDIS gaps we are going to close, we explain what we are going to do. We look at projected outcomes, their current benchmarks on how they're doing against the 12 core metrics that we measure and we put a plan together for each of those metrics. We take the responsibility.
Once we are successful with that provider and we write a savings check back to that provider for providing higher quality care we tend to get their interest. They want to understand how they can do better with their other patients. That is why we say it's all carrot when we teach these providers how to fish.
HLM: So, you see this as a transitional model, with the hope that docs will someday take up the risk?
Wallace: We do. The base program is helping independents remain independent. Independent practice physicians may not have the breadth or financial ability to purchase the technology or hire the additional people to be successful.
When we believe this 730-provider network is strong enough, is clinically integrated more than it is today, there is a potential to move down this bridge to a risk model.
HLM: When might this transition occur?
Wallace: I do not know. I'd be uncomfortable saying a timeframe. We believe we can do it, but we have to build a case and create a trend line and move aggressively down the bridge to risk.
HLM: Where do you see this model in five years?
Wallace: First and foremost, we wanted to make sure we could bring all stakeholders to the same side of the table with an aligned vision. We've been able to prove that out.
We're already in discussions with multiple health plans across the country, specifically in four states and we will be in pro forma financial modeling in the next 60-90 days with two of those plans.
We created this joint venture entity for other health plans to buy into, and it is important to have an equity position in the joint venture, which means finding the right partner. Ownership will be diluted down allowing other partners to participate.
The benefit is they have a key structure in place where we have a set of metrics that we know are improving quality and the outcomes are bringing the cost of care down, and it's been proven.
Hospitals that get bundled payments for joint replacements either voluntarily or through Medicare's mandatory programs, vary by size and volume, but not in spending or quality.
Voluntary bundled payment programs engage larger non-profit hospitals, while lower volume hospitals with fewer resources might only participate under a mandatory program, a new study shows.
The results, published in the June issue of Health Affairs, suggest that both mandatory and voluntary bundled payment programs are needed to engage more hospitals.
"Our results suggest that both voluntary and mandatory approaches can play an important role in engaging hospitals across the country, so policymakers should not restrict policy options to one approach over the other," study lead author Amol S. Navathe, MD, an assistant professor in the department of Medical Ethics and Health Policy at Penn Medicine, said in prepared remarks.
Critics of mandatory bundled-payments have called for the programs to be strictly voluntary amid concerns that some hospitals won't see cost savings, and will stop performing these surgeries rather than lose money.
However, the study found no evidence that hospitals in the mandatory program were obviously disadvantaged compared to their voluntary hospitals.
The researchers used data CMS and American Hospital Association that compared organizational characteristics and measures of costs and care quality for 302 hospitals in the voluntary bundled-payment joint-replacement program and 799 in the mandatory program.
The researchers found no large differences in baseline spending, care quality, or financial risk exposure for voluntary vs. mandatory program hospitals.
"The mandatory program does not seem to have disadvantaged its participants compared to voluntary participants on average, with respect to spending and care quality," Navathe said.
Hospitals in the voluntary program were self-selected; they were generally larger, had a greater volume of joint-replacement surgeries, and likely were not representative of hospitals nationwide.
NPs account for 1 in 4 medical healthcare providers in rural areas, but their potential to provide a full spectrum of primary care services can't be realized if states maintain practice restrictions.
Nurse practitioners are expected to play a critical role in alleviating the nation's rural healthcare workforce shortages, but some states continue to place hobbling restrictions on their scope of practice, a new study shows.
Researchers found that NPs comprise one-in-four of clinicians practicing in rural areas, a number that increased 43% from 2008-2016. Currently, of the 248,000 NPs in the country, about 87% are trained in primary care and more are in training.
However, study author Hilary Barnes said the increasing reliance on NPs to deliver a full spectrum of primary care services in rural areas is being hindered in some states by outmoded restrictions.
In some states, such as Pennsylvania, "an NP has to maintain written agreements with a physician to practice and prescribe medication," said Barnes, an assistant professor in the College of Health Sciences’ School of Nursing at the University of Delaware.
"In the most extreme examples, the law states that an NP must talk about every patient with a physician. Or that the physician has to sign for prescriptions," Barnes said, in remarks accompanying the study.
Barnes also described "mid-level" states, such as New Jersey, that provided latitude for NPs, but not autonomy.
"There's an in-between where an NP needs a collaborative agreement to prescribe medication," she said. "The provider can practice independently of a physician, but, without prescriptive authority, you are limited on the services that you can provide to patients."
In contrast, full-practice authority states, such as Delaware, allow NPs to practice primary care without supervision of a physician.
States with fewer NP practice restriction also have more NPs providing primary care services to residents.
Barnes said the reason why is obvious.
"In the states with more restrictive laws, say you are a trained NP in a rural area who wants to practice primary care,” Barnes said. “Because there is no physician in town, you can't have a collaborative agreement. Therefore, you can't practice at the advanced practice level."
If the physician-collaborator moves away or retires, the NP loses the ability to practice.
Anecdotal evidence suggests that many NPs have to pay physicians to sign a collaborative agreement, Barnes said.
In addition, Barnes said, more restrictive laws don't improve care.
"All that they are really doing is putting up barriers to primary care. Removing the practice restrictions can really only be a benefit," she said.
Federal prosecutors said that, beginning in 2005, Allegiance cut deals with hospitals to provide Intensive Outpatient Psychotherapy services to patients on the hospitals' behalf.
At each of these hospitals, Allegiance established an Inspirations Outpatient Counseling Center, where Allegiance employees identify potential patients, created patient treatment plans, and performed IOP services.
The settlement resolves claims that Allegiance provided IOP services to Medicare patients that did not qualify reimbursement because:
The patients' medical conditions did not require IOP treatment;
The patients' treatments were not consistent with an individualized treatment plan designed to address specific mental health needs and achievable goals;
The patients' progress was not being tracked or documented;
The patients received inappropriate levels of treatment;
The therapy provided was primarily recreational or diversional, not therapeutic.
"The Department of Justice recognizes the value of accessible mental healthcare, but will not tolerate companies that seek to exploit our most vulnerable populations by delivering inappropriate or worthless services," Acting Assistant Attorney General Chad D. Readler for the Civil Division, said in a media release.
Allegiance did not respond to inquiries from HealthLeaders Media on Wednesday.
Medicare Trustees in their annual report project that total program costs will grow from approximately 3.7% of GDP in 2017 to 5.8% of GDP by 2038.
Funding for Medicare will be depleted in 2026, three years earlier than what was projected in last year's report by the federal trustees for the program.
By 2026, Medicare's Hospital Insurance Trust Fund will pay 91% of costs, and drop to 78% by 2039, according to a report released Tuesday by trustees for Medicare and Social Security.
"The HI fund again fails the test of short-range financial adequacy, as its trust fund ratio is already below 100% of annual costs, and is expected to decline continuously until reserve depletion in 2026," the report said.
Among the projections:
Medicare Part B, and D will remain adequately funded "into the indefinite future," the trustees reported, because law provides financing from general revenues and beneficiary premiums each year to meet the next year’s expected costs.
The aging population and rising health care costs cause Parts B and D projected costs to grow steadily from 2.1% of GDP in 2017 to approximately 3.6% of GDP in 2037. General revenues will finance roughly three-quarters of SMI costs, and premiums paid by beneficiaries almost all of the remaining quarter.
Total Medicare costs will grow from approximately 3.7% of GDP in 2017 to 5.8% of GDP by 2038.
Social Security and Medicare will experience cost growth substantially in excess of GDP growth through the mid-2030s due to rapid aging of the Baby Boomer generation, and lower-birth-rate generations entering employment.
Social Security's Old-Age and Survivors Insurance Trust Fund, and Disability Insurance Trust Fund will be depleted in 2034, the same year projected in last year's report.
The trustees urged Congress to consider options to reduce or eliminate the long-term financing shortfalls in Social Security and Medicare "as soon as possible."
"Taking action sooner rather than later will permit consideration of a broader range of solutions and provide more time to phase in changes so that the public has adequate time to prepare," the trustees concluded.
For the second time in a month, the Manhattan-based urgent care chain will pay a fine to settle false claims allegations related to government-sponsored health insurance plans.
CityMD will pay New York State $883,000 to settle false claims allegations involving inappropriate facilities fees charged to the state's Empire Plan health insurance program for government workers and their families.
It's the second false claims payout in a month for the Manhattan-based urgent care franchise, which last month agreed to pay the federal government $6.6 million to settle allegations brought forward in a whistleblower lawsuit.
"My office will not tolerate healthcare providers who overbill government healthcare plans," New York Attorney General Barbara D. Underwood said of the latest settlement, in a media release issued Tuesday.
"Today's settlement makes clear that we will hold accountable any entity responsible for false payment claims to the Empire Plan or other government health plans," she said.
In a statement released Tuesday, CityMD said it was "pleased to have reached a satisfactory resolution to this matter, which involved past insurance billing and coding. This matter was unrelated to CityMD's patient care, which has consistently been of the highest quality."
New York State prosecutors found that:
From December 2010 to September 2013, CityMD knowingly overbilled the Empire Plan for facility fees to which they were not entitled.
Because CityMD had entered into Empire Plan contracts with United HealthCare, the urgent care chain's affiliates were prohibited from billing for facility fees – a detail that was explicitly made clear in the contracts.
CityMD ignored United HealthCare repeated warnings that facility fees were not permitted under the Empire Plan. Instead, CityMD claimed that facility fees that were separate from, and in addition to, the fees claimed for professional services.
CityMD admitted that despite the explicit prohibition written into the contract and UnitedHealthCare's warnings, it continued to bill for facility fees.
CityMD also admitted that it violated the New York False Claims Act and paid $706,400 to the state—including the $37,300 that was overbilled and not yet repaid, and over $669,000 in additional damages, fees, and costs.
The settlements come amid CityMD's aggressive expansion in the New York City area. Earlier this year, CityMD acquired STAT Health, an urgent care provider with 12 clinics on Long Island, and FirstMed Immediate Medical Care, an urgent care center in Queens.
CityMD Responds
CityMD issued the following statement: "CityMD is pleased to have reached a satisfactory resolution to this matter, which involved past insurance billing and coding. This matter was unrelated to CityMD's patient care, which has consistently been of the highest quality."
"Throughout CityMD's history, and especially over the past year, we have made substantial investments in strengthening our compliance program, which has included the enhancement and implementation of detailed compliance policies and procedures and the appointment of a new, full-time chief compliance officer."
"We earn the trust of the communities we serve by providing an exceptional experience through high-quality medical care and convenient access, and that includes ensuring everyone at CityMD understands that they are an integral part of our business and adheres to best-in-class compliance practices."
