Over the past three years, Charles Ornstein has led several initiatives that have created easier access to critical healthcare data on quality and costs while working at the independent, nonprofit news organization, ProPublica.
This profile was published in the December, 2013 issue of HealthLeaders magazine.
It's hard to make an argument against transparency in healthcare.
When pressed, hospitals, insurers, nursing homes, physicians, and government officials all say they're "for it" and go on about how transparency will play a critical role in "bending the cost curve" by allowing patients to become wise consumers of their healthcare dollars.
When it's time to go public, however, that altruism often evaporates, as few really want anyone else to know how much they charge for something, or how much they get paid for it, or if they're having quality issues. So that heralded release of information is delayed, or it's hidden in a massive data dump, or it's placed into a context that most consumers could never fathom.
Charles Ornstein and the investigative reporters at the independent, nonprofit news organization ProPublica—often also working with the nonprofit Association of Health Care Journalists—have led several initiatives in the past three years that create easier access to critical healthcare data on quality and cost.
"The goal of transparency is first to ensure that the public is informed, that they have all of the information easily at their disposal when they have to make important and personal healthcare decisions," Ornstein says. "Secondly, it is to create discussion about if our healthcare system is as safe as it can be, and if it is not, what can be done to make it safer. Finally, the importance of putting the information out in an easy-to-use and easy-to-analyze way is that you provide a level of context that wasn't necessarily there before."
In 2010 Ornstein and his ProPublica colleagues launched the Dollars for Docs online tool that allows the public to see if their physicians have a financial relationship with pharmaceutical companies.
"We created that because drug companies had begun putting in online information about their payments to physicians but they didn't do it in a way that was easily searched or aggregated or analyzed," Ornstein says. "We thought we could do it in a way that brought transparency to the topic rather than translucency."
In August, 2012 ProPublica launched a site that facilitates public access to nursing home inspection reports. "The goal was to take the data the federal government was collecting on its Nursing Home Compare website about nursing home inspections but make it much easier for people to search through information," Ornstein says.
Earlier this year Ornstein, who serves as an AHCJ board member, and the AHCJ finalized a two-year effort to make hospital inspection reports readily accessible online. "Up until now people have had to file Freedom of Information Act requests with the Centers for Medicare & Medicaid Services for their local hospitals' inspection reports," Ornstein says. "You would not expect a member of the public to do that.
Even many journalists wouldn't do that because it takes time and you don't know what you're going to get. The idea was the federal government collects this information. It may not use it. It may not look at it. But journalists certainly should have this information at their disposal so that they could assess the quality of their local hospitals and rather than just judge them on reputation or patient satisfaction they can actually see what health inspectors found."
Ornstein says the transparency movement in healthcare is accelerating. "Part of the reasons for that are the changes in our healthcare system," he says. "As additional costs and decision making are pushed to consumers, they have to have the information available to make a decision. They have to have cost information if they are on the hook for a greater share of the cost, and they will also want to have quality information so they can determine if the trade-off is worth it."
That growing public demand for access to healthcare information is still running into resistance from some in the medical establishment.
"There are those who still have a very paternalistic view of the healthcare system, which is [that] nobody is smart enough to understand the way it works except for those who run it and they should be putting in place whatever they believe is necessary to protect the patients and it is not the role of pesky journalists or inquisitive patients to take them to task," Ornstein says. "But these initiatives, which are putting information in the public domain, necessarily require hospitals to look at these things themselves and to hopefully correct problems before they harm patients."
Ornstein believes those objections will dissolve as transparency demonstrates that it can help improve quality and patient safety even as it reduces costs. "When reporters write about problems within the healthcare system, the goal is that the problems will be fixed," he says. "If you are able to write a story about hospitals that make mistakes, you would hope that not only would the hospital you are writing about fix the problem but that other hospitals would read about it and would make sure it doesn't happen at their hospital."
Offering patients extended recovery time by keeping them overnight in an ambulatory surgery center may comply with CMS regulations, but Maryland's Office of Health Care Quality and the Maryland Hospital Association are voicing concerns about patient safety.
An ambulatory surgery center in suburban Washington, D.C., is taking federal regulations down to the final minute.
The Massachusetts Avenue Surgery Center, LLC, in Bethesda, MD, says it will fall within Centers for Medicare and Medicaid guidelines when it hold patients overnight because the stays will be no longer than 24 hours.
"Under CMS rules a surgery center may keep a patient for no more than 23:59," says Randall Gross, executive director at MASC, which provides mostly orthopedic, GYN, and general surgery services.
"There are a lot of procedures our docs have not been able to do, [such as] total knees and total hips, that are done at the hospital and then the patients are either sent home or sent to a rehab center and sent home the next morning. All we are really doing is extending the recovery time and creating an environment where our patients can spend 12 more hours here approximately."
Gross says he requested clarification from the state of Maryland and was assured that any recovery periods within the 24-hour window were acceptable under CMS regulations. MASC is negotiating with payers now and hopes to begin offering procedures that may require extended recovery times by March.
"Everyone is going to win here," he says. "Patients are going to win because they don't have to go to the hospital and be subjected to that environment. And the extra rates that they are paying, their co-insurance and deductibles, are much higher in the hospital. Payers win because they pay us a lot less money and we win because we get the ongoing business."
Quality Concerns
Barbara Fagan, program manager of ambulatory care services in the Maryland's Office of Health Care Quality, confirmed that MASC will be operating under the federal guidelines. However, she says that doesn't necessarily make it a good idea.
"We don't have a policy. We enforce the CMS regulations and I am going to tell you if you were to be a lawyer in court, [that] technically because it says it can't be 24 hours, 23:59 would be within that definition for an ASC," Fagan says.
"But I always tell anyone who asks that if you are going into an ASC and you are there for 23 hours for a procedure, I would question whether that is the safest place to have a procedure done."
Fagan says ASCs are not designed for prolonged stays. "The hospital is going to have housekeeping and changing linens and food service and none of that is required at an ASC. Me personally, I wouldn't want to be in a surgery center if I had to be there for 23 hours."
The Maryland Hospital Association has raised also concerns about overnight stays at ambulatory surgery centers. MHA spokesman Jim Reiter says any number of potential problems could arise when patients stay overnight in ambulatory surgery centers.
"Their very name implies that they are not equipped to keep patients overnight. They are designed for outpatient treatments," Reiter said in an email exchange with HealthLeaders Media.
'A Hospital is a Hospital'
"The issue is not how much volume hospitals might lose. The issue is the safety of the patients involved. Investing in meals, linens, and other things does not make an ASC a hospital. What happens if something goes wrong? The patient will be taken to the nearest full-service hospital, where he or she probably should have been anyway if the treatment required an overnight stay."
"And how likely are these places to accept uninsured and Medicaid patients, as hospitals do? Not likely. Will they "cherry pick" the patients who have coverage, leaving the others for the rest of the state's consumers to pay for through our unique system of paying for hospital care in Maryland, which ensures that all get the hospital care they need whether they can pay or not?"
"In short, a hospital is a hospital. If these places want to be hospitals, they should go through the regulatory process, open an emergency department, have 24-hour professional health care provider coverage, and do all the other things that ensure care is available for everyone who needs it, 24 hours a day, 7 days a week."
Gross says he's not overly concerned about what hospitals think of the idea.
"I don't think the hospitals have anything to say about it. This is Medicare law. This is CMS regulation," he says. "As the technology has changed, there is so much more shifting out of the hospital and so much more we can do on an outpatient basis."
"This is procedure driven. Anyone having a particular procedure, we would plan on having them overnight. It does not change the profile of our patients. They are still healthy patients. The people who would have issues that would keep them in the hospital, we don't want them."
Now that the rules of healthcare delivery have changed so dramatically, we need to be clear about our new relationship. If you thought haggling with insurance companies was rough, just wait until you hear my expectations.
Greetings Providers! By way of introduction, we've met before. I am one of the hundreds of millions of people out there who were once referred to as your patients. Going forward, however, it'd be more accurate if you thought of me as a healthcare consumer. This is a business, after all, and you're selling me a product. So we need to be clear about our new relationship.
Let me assure you, now that the rules of healthcare delivery have changed so dramatically, the idea of the healthcare consumer is not a mere buzzword. This is now a matter of my "skin in the game" and my cold hard cash.
For years healthcare policy wonks have said that the best way to reduce cost growth in healthcare is to educate patients and make them smarter consumers. And the fastest way to educate anybody on anything is to make them pay for it.
And that's where I am now.
For as long as I can remember I was in a traditional health insurance plan where I paid a certain amount in premiums, a certain amount in co-pays, and a certain amount in deductibles. It was a pleasant enough relationship, however insupportable. I didn't understand how it worked because I didn't have to.
I was sorry to see it priced out of existence. My employer and I both saw our health insurance premiums skyrocket over the decades and it was clear that we had to change the way we paid for coverage. So, I bumped into a high-deductible health plan. Now my premiums are lower, but my co-pays and deductibles are higher – a lot higher. All of those various payments and services that you used to haggle over with my insurance company have been dumped into my lap.
Now that I'm the one who will be paying the freight on the first $5,000, or $7,000, or $8,000 and higher of my healthcare costs, here's what you can expect from me.
1. I Want Transparency
Tell me why I need it and what it's going to cost, up front. Make it easy for me compare your costs with the hospital/practice/walk-in clinic down the street. Transparency is highest on my list of priorities because without knowing how you do business, when you do business, how much you charge for your business, we can't do business.
2. I Want it Cheap
Surveys say that healthcare consumers value "quality care." But now that I have to pay more for that quality, I want it cheaper. If your prices are higher you'd better be able to explain why, but I'll still probably go elsewhere.
If you want me to pay $3,000 for an MRI, you'd better be able to explain why I need it. And if the doc-in-the-box down the street can do the MRI for less, I'll have them send you a copy of the images. If it's 2 AM and the emergency department is my only option, you'd better be prepared to provide a detailed list of charges when you present my bill, and you can expect that I will haggle.
I will not pay $100 for an ice pack or $30 for an aspirin. And don't slap me with a "facilities fee." What it costs you to keep your doors open and your lights on is not my concern. Finally, don't expect me to pay additional fees six months or a year down the road when you correct a mistake on my bill.
3. I Want it Now
Don't make me take time off from work to sit in your waiting room for an hour for a harried 15-minute visit with a physician's assistant and a $150 bill. Drug stores are open 24/7. Banks are open later. Even airlines are more consumer friendly than providers!
Extend your office hours later in the day and on weekends to accommodate my schedule. Provide easy Internet access to my personal health account. Improve office scheduling so that I don't have to wait long. Have someone available for telephone consultations. Ensure that your office is easily accessible and close to my home.
I don't see my demands as unreasonable. I am merely asking the healthcare sector – a $2.8 trillion industry that consumes nearly 20% of the gross domestic product – to be as accountable and transparent with it products as any other retail industry.
Here's where I get unreasonable: Even if you deliver on transparency, quality, access and price, I may not pay you.
Maybe I am a deadbeat who never had any intention of paying you. It's more likely that I simply can't afford it. A $5,000 deductible might not seem like a lot of money to docs and healthcare executives with six-figure incomes. However, the median income in the United States in 2012 was about $51,000 and the $5,000 deductible that comes out of my pocket represents at least 10% of my gross pay.
I switched to the high-deductible plan for its lower premiums and as protection against a catastrophic illness or injury. I'm rolling the dice on everything else. So we'd better come to some E-Z credit terms on a payment plan. You've already provided the service, which takes away almost all of your leverage and gives me less incentive to pay. If the haggling gets nasty, you can send bill collectors after me, but they'll probably have to wait in line.
And rest assured that any number of websites and consumer action groups will blossom for people like me who don't really understand how all of this healthcare reform works and what we have to pay for and what the charges cover. We newly informed and suspicious healthcare consumers will be vigilant against perceived rip offs. We will read the stories about price shifting and gouging in healthcare – whether real, fabricated, or exaggerated – and we'll be determined that it won't happen to us.
So, I hope we are clear on what you can expect from our new relationship in the coming years. Most encounters won't devolve into nickel-and-dime haggling over who pays how much for what and why, but a growing number will. If you thought it was rough haggling with insurance companies, wait 'til you get a load of me.
Healthcare spending in 2012 grew more slowly than the growth of the overall economy, says CMS. While the Obama administration was quick to credit the healthcare reform law, federal actuaries cite other factors—chiefly the economic recession.
Healthcare spending grew 3.7% in 2012 to $2.8 trillion, marking the fourth straight year of relatively slow growth and the slowest sustained period of healthcare cost growth in the 53 years that the statistic has been tracked, the federal government announced on Monday afternoon.
An analysis by the Office of the Actuary at the Centers for Medicare & Medicaid Services shows that the $2.8 trillion spent on healthcare in the United States in 2012 represented 17.2% of the gross domestic product. That's a decline from 17.3% of GDP in 2011 because healthcare spending in 2012 grew more slowly than the 4.6% growth in the overall economy. The report appears in the January issue of Health Affairs.
Obama Administration officials were quick to credit the Patient Protection and Affordable Care Act for the slowest growth rates ever recorded in the 53-year history of the National Health Expenditure Accounts.
"For the second straight year, we have seen overall healthcare costs grow slower than the economy as a whole. This is good news," CMS Administrator Marilyn Tavenner said in prepared remarks. "We will continue to work with tools given to us by the Affordable Care Act that will both help us control costs for taxpayers and consumers while increasing the quality of care."
The authors of the report noted, however, other factors were at play, mainly the nationwide economic recession.
"The low rates of national health spending growth and relative stability since 2009 primarily reflect the lagged impacts of the recent severe economic recession," Anne B. Martin, an economist at CMS and lead author of the study said in prepared remarks. "Additionally, 2012 was impacted by the mostly one-time effects of a large number of blockbuster prescription drugs losing patent protection and a Medicare payment reduction to skilled nursing facilities."
In fact, the study said that the ACA had "minimal impact on aggregate health spending through 2012." However, several provisions of the sweeping reforms affected "certain subcomponents" of national health expenditures, namely the increase in the Medicaid rebates for prescription drugs, the Medicare "donut hole" drug coverage gap program, the expansion of coverage for dependents under the age of 26, and minimal medical loss ratios for commercial plans.
The slower growth tracked with personal healthcare spending on healthcare goods and services, which the study said accounted for 85% of total national healthcare spending and which grew by 3.9% in 2012 – up .4% from 2011. The slight uptick was linked to accelerated growth in hospital, physician, and clinical services.
Offsetting that growth, however, was slower growth in spending for prescription drugs and nursing home care. Out-of-pocket spending for Medicaid grew faster in 2012 than in 2011, while private plans and Medicare saw lower spending growth than in 2011, the report said.
CMS offered this detailed breakdown of healthcare cost growth in 2012 compared with 2011:
Hospital spending (4.9%)
Reached $882.3 billion in 2012, an increase of 1.5 percentage points over the 2011 growth rate due to faster growth in both price and non-price factors. Price growth (as measured by the Producer Price Index for hospital services) picked up slightly in 2012 to 2.5%, compared to 2.1% a year earlier. Non-price factors, which include use and intensity of services, also grew faster than in 2011.
Physician and clinical services (4.6%)
Growth increased from 4.1% in 2011 to reach $565 billion in 2012 due primarily to increased growth in non-price factors, such as the use and complexity or intensity of services. Physician services, which accounted for 80% of this spending, grew by 4% in 2012, up from 3.5% growth in 2011.
Medicaid expenditures (3.3%)
Growth increased from 2.4% in 2011 to reach $421.2 billion in 2012. Nevertheless, these were the two slowest annual rates of growth in the history of Medicaid, excluding 2006 when Medicare Part D was implemented and changed the way Medicaid paid for some beneficiaries' prescription drugs. These slow growth rates were due primarily to slower enrollment growth and efforts by the states to control costs following the expiration of enhanced federal matching rates.
Out-of-pocket spending (3.8%)
Spending growth increased faster in 2012 compared to 2011 when growth was 3.5% due mainly to increased cost sharing for physician and clinical services. The growth was moderated by reduced out-of-pocket spending on previously expensive prescription brand-name drugs that had lost patent protection. Total out-of-pocket spending reached $328.2 billion in 2012.
Retail prescription drugs (.4 percent)
Spending growth slowed from 2.5% in 2011 to reach $263.3 billion in 2012. This reduced growth rate was driven largely by a slowdown in overall prices for prescription drugs as an unusually large number of name-brand drugs such as Lipitor, Plavix, and Singulair lost patent protection in late 2011 and in 2012.
Nursing care facilities and continuing care retirement communities (1.6%)
Spending growth slowed from 4.3% in 2011 to reach $151.5 billion in 2012. This slower growth was primarily due to a one-time Medicare payment reduction to skilled nursing facilities to adjust for a large increase in payments in 2011.
Private health insurance (3.2%)
Continued slow growth in total premiums (following 3.4% growth in 2011) was mainly due to low growth in enrollment in 2012, which remained 9.4 million enrollees fewer in 2012 than in 2007. Net enrollment gains in high-deductible health plans, which generally have lower premiums and higher cost sharing than other more popular plans, also contributed to the slow premium growth in 2012.
Total private health insurance premiums reached $917.0 billion in 2012. For medical benefits, per enrollee spending accelerated slightly, from 2.9% growth in 2011 to 3.2% in 2012, both near historic lows, and was primarily due to increased growth in spending for hospital care and for physician and clinical services.
Medicare spending (4.8%)
Growth slowed slightly (compared to 5% growth in 2011) to reach $572.5 billion in 2012. Growth in fee-for-service expenditures, which accounted for nearly three-quarters of total Medicare spending, slowed from 4.3% in 2011 to 2.7% in 2012. Medicare Advantage spending accounted for the remainder, increasing 10.9% in 2012 (compared to 7% in 2011).
Total enrollment in Medicare for all beneficiaries jumped 4.1% in 2012--the largest one-year increase in 39 years, as the oldest members of the baby boom generation became eligible to enroll in Medicare in 2011. Slower growth in total Medicare spending in 2012 was primarily due to a one-time payment reduction for skilled nursing facilities.
With the growth in high-deductible health plans accelerating, "the healthcare business model is starting to turn from wholesale to retail," says the managing director of PwC's Health Research Institute. That means insurers must be ready to offer new products in a different way.
For all the talk about the Affordable Care Act, population health, value-based reimbursements and Accountable Care Organizations, arguably the biggest "curve bender" for healthcare costs will be growth of the high-deductible health plans that force patients to become smarter consumers.
Savvy healthcare consumers bearing higher deductibles and co-pays will bring with them a list of expectations that come from the retail sector, including price transparency, access, convenience, and value.
"The big shift for 2014 is that the healthcare business model is starting to turn from wholesale to retail," says Ceci Connolly, managing director of PwC's Health Research Institute. "Instead of insurance companies selling to one large employer for thousands of employees, you now have individuals going online one-by-one and shopping. That means creating different products and creating different product plans. It means education and outreach and advertising that is very different."
The growth in high-deductible health plans is accelerating. Connolly points to annual PwC surveys of about 1,000 employers and coverage options for employees. In 2012 13% of the companies said they were offering only high-deductible plans for employees. That figure grew to 17% in 2013 and 44% in 2014 and 2015.
"That is major," Connolly says. "The consumers just by virtue of the fact that they are spending more of their own money are beginning to take a much harder look at what they get for their healthcare dollars. They're also bringing their expectations from their other shopping experiences to healthcare. So they are saying, if I can do my banking in my pajamas at midnight on my couch why can't I make my doctor's appointment then or why can't I get my lab results on my smartphone? Consumers are starting to demand better pricing or at least transparency in pricing and 'what am I getting for my money?'"
The shift toward retail medicine means that traditional healthcare providers will have to rethink their roles and business models in the new healthcare economy, and perhaps look at how other industries have adapted to fundamental changes in the way they do business, Connolly says.
"This is not going to happen overnight. This is a tough nut to crack, but we have been through this with the banking industry and the travel and hospitality industry so we know the pattern and we can see that when you start getting this consumer pressure, that is when things start shifting," she says.
"So much is going on in the remote monitoring space as well as with the big box retailers that we saw embrace the flu shot trend a few years ago. These players are thinking to themselves about many other opportunities beyond just a flu shot," Connolly says.
"We are seeing that consumers are willing to not necessarily go to the hospital or even their primary care doctor now because they are thinking about price point in the high-deductible plan and they think to themselves this is pretty basic, it is more of a commodity. So maybe for an X-ray or lab work they can find alternative care venues that are much cheaper."
Connolly says some traditional healthcare providers have seen the writing on the walls.
"There are some that have picked up on this very quickly and are putting logical pricing information right out in the public because they feel very good and confident about their value. There are some that are clearly struggling with this idea," she says.
"Part of it with the hospitals and health systems is the arcane chargemaster. They are still grappling with what do to with that. People don't realize hospitals negotiate discounts for larger purchasers. All of that is true, but there is going to have to be some real simplification here and some very savvy communication for the average consumer."
In the meantime, we should expect a bumpy period as healthcare transitions away from mostly fee-for-service and toward value-based payment models and population health management.
"This is going to be the difficult challenging transition period for everybody involved, for consumers, insurance companies, providers, all of us," Connolly says. "The mile marker I sometimes look to when is we moved from pensions to 401(k)s and that was about a decade until we had the vast majority of Americans in 401(k)s. We are already a year or two into this shift and things today happen a little faster but it's hard to say."
So what are traditional healthcare providers supposed to do in the next few years to weather the transition?
"We often advise the smaller- to medium-sized systems in particular to look for the smart partnerships and relationships and alliances," Connolly says.
"Can you affiliate with a larger entity that takes some of your more complex cases or that maybe has capital available to help you invest? Maybe you partner with a retail entity in your region and you share in the most basic care. It's really starting to head in that direction with population health, thinking about value and looking honestly outside of your own four walls for the smart partnerships."
Connolly recalls meeting with a group of primary care physicians recently who expressed unease about their role in the changing healthcare delivery landscape.
"I said to them, we want to be heading into a world where you are doing fewer procedures over and over again, but there is going to be a care team in the community and you are going to be the ones to direct the other players. That is where more physicians need to orient themselves in the future. They'll no longer do every single procedure. Patients are going to do a lot of it in their own homes but they will still look to the doctor as a trusted advisor."
Many providers who've been on the forefront of the movement away from fee-for-service may find themselves at a disadvantage with payers as healthcare transitions into value-based payment models such as bundled payments and gain sharing, says one analyst.
Uncertainty and rapid change were hallmarks of the healthcare landscape in 2013, and there is no indication that things will be much different in 2014. In all probability, many analysts believe this historic transitional period could accelerate and get even rockier as the healthcare sector continues to undergo profound changes in how healthcare is delivered and paid for.
Curt Whelan, managing director at Huron Healthcare consultants, says that many providers who've been on the forefront of the movement away from fee-for-service may find themselves at a disadvantage with payers as the healthcare sector transitions into value-based payment models such as bundled payments and gain sharing.
"It is going to be more of the same in '14 than it was in '13," Whelan says. "The key questions are how much traction are the exchanges going to get and how much more robust and aggressive are the payers going to get on not allowing even the bigger market share leaders to get markedly more fees? If they can't at least get enough, because they are still cost-shifting, expenses are going to still outpace revenues and that is going to pinch margins. Success in this market is so much more difficult because you have to find the pockets of growth in a non-growth revenue market and go after them."
Whelan says many health systems are at an inflection point where they have compressed their costs and in some cases compressed utilization, but the financing system is not there to support what they've done. "The commercial payers are saying they aren't ready and the only thing they are telling providers is 'you aren't going to cost shift and you aren't going to get an increase on your commercial contract,'" he says.
"If the incentives and the payment system were aligning at the same time, the markets would be moving smoothly in that direction. But some hospital systems are finding themselves out in front and they're doing the right things but damaging themselves financially. It's all about appropriate care and utilization and taking waste out of the system, but when it is still dominantly a fee-for-service arrangement and it's all about transactions, they are taking transactions off the table."
Whelan believes that 2014 will "test the mettle" of healthcare providers who've made a commitment to value-based care and a serious investment in their accountable care organizational competencies.
"This is going to be a big year for them and whether the market is going to start moving with them," he says. "Otherwise, it's hard for them to back off at this point. They've got their physicians on board. It's either going to create more financial distress or some of them may starting looking to unravel what they are doing and going back to where they were before or stopping the momentum."
"We aren't suggesting that they unravel, but they have some core economic issues that they are going to have to deal with. So, they are going to have to understand that they are going to have to finance the transition because the commercial markets are not moving aggressively with them as they would like them too."
Bad Debt Rising
Exacerbating the problem, Whelan says, will be an expected rise in bad debt from growing numbers of patients with high-deductible health plans. "People are going to walk in the door where typically they may have had a $1,000 or $2,000 deductible now they have a $5,000 deductible and that is going to stress the system in '14. The bad debt is going to soar. Providers are going to do what they can to mitigate it, but in reality for that patient who used to walk in and have a reasonable deductible, now it's four or five times larger."
Tighter margins will prompt providers to rationalize the care they deliver.
"Health systems try to do everything for everybody but in reality they are going to have to choose those things that ultimately drive the most value for population health," Whelan says. "They are going to have to let niche providers or technology companies fill the gaps on some of these more invasive issues. Hospitals don't rationalize their business portfolios like a regular company does in a consistent manner."
Pacing the shift toward value-based care models leads the Huron Healthcare's list of the top five healthcare challenges that providers will face in 2014. Other challenges include:
Responding to the Economic Dynamics of Local Markets : As healthcare organizations continue to operationalize value-based care delivery models, they are grappling with what can be achieved given the economic dynamics of their local markets. Gordon Mountford, Huron's executive vice president, says that high quality care at a lot cost is a national goal for healthcare providers "but there's not a national solution for how to get there. Local market dynamics create unique challenges and opportunities that drive the need for different strategies for success."
Securing and Growing Market Share: Regardless of the pace of payment model change, securing market share remains a primary concern. "Volume still pays. Even under value-based payment systems, volume through the system will remain an important driver of revenue," Whelan says.
Developing Alternative Revenue Streams: Healthcare organizations with cash reserves and strong margins are better-positioned to make investments that are related to, but not directly in support of, their core business of patient care. Jeff Jones, managing director at Huron, says that direct patient care will always be the largest percentage of revenue for most hospitals and health systems, "however, executives are looking at options that supplement declining revenue from third party payers through alternate revenue streams."
Containing Core Operating Costs: Executives continue to seek ways to contain the costs of core operations, tackle fundamentals, and reduce utilization through standardization, care variation management, and other next-generation approaches.
"Every health system on a go-forward basis likely over the next five years needs to target 6% to 10% annually in improvements, either to revenue top line or expense management," Whelan says. "That is a pretty daunting task if you look at an organization and a 6% to 10% improvement for them is tens of millions of dollars a year. The metrics in which you are going to manage yourself are really about how to drive this core strategy that is very dynamic, that is going to move quite a bit on you, but the key metric is annual improvement of 6% to 10%. That is what you are going to have to have to survive."
At least two physicians groups are expressing concern about a provision to a Senate bill that would repeal the Sustainable Growth Rate formula. The provision calls for the creation of a database that would include all payments made to physicians by Medicare.
Almost lost in the brouhaha over the expected repeal of the Sustainable Growth Rate funding formula is a provision that would make a physicians' Medicare claims database available to the public online and at no cost.
House and Senate versions of the "doc fix" bill repealing the SGR include language from the Medicare Data Access for Transparency and Accountability Act (Medicare DATA Act), legislation sponsored by Sens. Chuck Grassley, (R-IA), and Ron Wyden, (D-OR).
The database would include all payments made to physicians by Medicare. Patients' privacy would be fully protected, and providers would have an opportunity to correct payment information before being posted online. Currently, access to the Medicare payment database is limited to government officials and academics despite a federal judge's ruling in favor of greater public access, Grassley and Wyden said in a joint media release.
"Transparency draws in the public and invites analysis of policy and spending," Grassley said. "More transparency has made a difference in accountability in the tax-exempt sector, and it does the same wherever it's applied in healthcare."
If the language is not stripped from the budget, the transparency provisions for physicians would take effect on July 1, 2015, and on July 1, 2016 for other healthcare professionals.
Ardis Dee Hoven, MD,
President of the American Medical Association
The transparency language was greeted with caution by the physicians' lobby. American Medical Association President Ardis Dee Hoven, MD, lauded the demise of the SGR, but offered guarded praise for the transparency provisions.
"With certain safeguards, the AMA supports expanding physician access to Medicare claims data from Qualified Entities and qualified clinical data registries to support quality improvement activities," Hoven said in prepared remarks.
"The AMA has concerns about requiring the Department of Health and Human Services to publicly release raw Medicare physician claims data without similar safeguards as currently applied to QEs. These safeguards include appropriate attribution and risk adjustment, timely correction of errors with appeal rights, and explanatory information to best inform patients."
Shari M. Erickson, vice president, Governmental and Regulatory Affairs, American College of Physicians, says the college shares the AMA's concerns.
"In general we are supportive of having transparency of quality and pricing information. It is useful for a wide range of stakeholders. It can help patients and their families make important decision," Erickson says. "But it has to be paired with transparency in the process – how that information is calculated and how it is reported out, and there needs to be appeal mechanisms in place."
"It will be challenging because it is a bit confusing when you get into prices and charges and costs," Erickson says. "They all mean slightly different things in the healthcare system. Something may have one price but the actual charge is a little different based on what your health plan charges and what folks pay out of pocket may be even different still given co-pays and coinsurance, etc."
The American College of Surgeons issued a statement on December 10 supporting a repeal effort, but opposing "the current Senate Finance and House Ways and Means Committees' proposal, because it calls for a 10-year physician payment freeze and provides inadequate incentives for providing value-based care."
Lawmakers have until March to repeal or fix the SGR.
A raft of amendments to the Senate version of the bill to repeal the SGR should make life a lot easier for rural hospitals, says a National Rural Health Association official.
The move in Congress to repeal the much loathed sustainable growth rate funding formula for physicians got most of the attention from the healthcare sector in the past few weeks. That's understandable, especially when we remember that physicians were staring at a 24% cut in Medicare reimbursements on Jan. 1 if the SGR had actually kicked in.
Now it appears that rural healthcare advocates have more to cheer about.
The Senate has included amendments in its version of the bill that should make life a lot easier for rural hospitals. The National Rural Health Association's blog, in a succinct breakdown of what's included in the Senate's version of the SGR Repeal and Medicare Beneficiary Access Improvement Act of 2013, tells us that:
Amendment 117 would return supervision requirements for outpatient therapy services furnished at Critical Access Hospitals back to "general supervision." This was the supervision level observed at nearly every CAH prior to 2009.
Amendment 121 would ensure that the new Alternative Payment Models do not interfere with or inhibit the development of telehealth technologies that are critical to the future of delivering care in rural America.
Amendment 18 would permanently extend, at current levels two crucial rural hospital payments, the Medicare Dependent Hospital program and Low Volume Hospital Adjustment.
Amendment 82 would set a permanent floor on the work component of the Geographic Practice Cost Index at its current level of 1.0 creating a stable and more equitable reimbursement rate for rural physicians.
Amendment 118 would establish demonstration project for tile-health remote patient monitoring services. This demonstration would help show the efficacy remote patient monitoring in keeping patients in their homes rather than in hospitals.
Amendment 90 was withdrawn by its sponsors after a number of Committee Members promised to petition CMS for regulatory relief from the certification requirement of physicians admitting patients to CAHs that the patient would be discharged or transferred within 96 hours.
Maggie Elehwany, NRHA's vice president for government affairs and policy, spoke with me this week to detail the Senate action, provide some context, prognosticate on the chances that the rural health amendments will survive the budget negotiations early next year, and describe other challenges that rural health faces at the Capitol. The following is an edited transcript.
HLM: Can you give us a sense of how rural healthcare is faring under these various budget bills?
Elehwany: On the Senate side are many important rural healthcare provisions that have long tracked with the SGR. The biggest was the critical access hospital program and others that were temporary were the Medicare dependent hospital program and the low-volume hospital adjustment. Those were extended every time we put the patch on the SGR. But they did expire last Oct. 1 at the end of the fiscal year.
That is why we felt it was so important for Congress to extend those. Not only did the Senate extend the payments but they made them permanent for the low-volume hospital adjustment. The initial Senate Finance Committee mark made the payments permanent but they did modify and cut the reimbursement levels. Senators (Charles) Schumer, (D-NY), and (Chuck) Grassley, (R-IA), restored the payments in full and made them permanent. So, we couldn't be happier.
HLM: Will these amendments pass in the final budget resolution?
Elehwany: This is a big step, an important step but certainly only one step in a long process. The Senate included the important rural amendments, but the House did not include them at all. The House knew the doc fix was going to happen sooner and they did a three-month patch on all of these provisions.
So, the bottom line is, the House and Senate have a continuing resolution as a temporary patch until the end of March that continues level funding for three months. We will fight the bigger fight for a permanent fix for both the doc problems and the rural provisions later on early next year. We are grateful because it is the season to be grateful, however, we know that we have a long fight ahead of us.
HLM: Are you concerned that the House did not include this language in its budget bill?
Elehwany: It is very troubling. There are a number of rural hospitals whose members of Congress's sit on the key committees—Ways and Means and Energy and Commerce—and we are urging these hospitals to let them know how absolutely critical these payments are. They are making the difference in many hospitals of whether they can maintain certain services and staff and in many cases whether or not they can keep their doors open.
The problem is that rural just doesn't have, obviously, the volume of urban centers so there are only a little over 200 of these Medicare-dependent hospitals across the country. It is a very critical payment. They are payments for hospitals that have a higher percentage of Medicare patients and seniors. It has to be at least 60% but for some of these hospitals it's 70% to 80%.
If they lost these payments, they would have to make up a 19% margin from the few private insurers they have and that is just not possible. Plus, the senior population in rural America is unusually challenging. There is a higher percentage per capita of poor seniors with higher percentages of chronic disease.
HLM: Will the feds attempt to strip some rural hospitals of their critical access status?
Elehwany: Maybe. That is a big concern we have. The reason we say 'maybe' is this very large proposal for fixing the SGR that sounds good on paper, but they don't have a pay source for it yet. That is where the sticking point is going to be – a lot of the 'pay fors.' President Obama has proposed cuts to critical access hospitals in three or so of the last administration budgets. We are worried that that could be on the chopping block— that it could be viewed as a piece of low-hanging fruit.
Our strong message to Capitol Hill is that first of all, these payments to rural hospitals are not bonus payments that you get simply because you are rural. Members of Congress need to look back in their history and see why these payments were established. They were not to give hospitals bonuses but to keep services going and keep doors open. That is part of the big education battle we are dealing with in Congress, specifically on the House side.
Congress arbitrarily came up with the 35-mile outline of where critical access hospitals should be at a distance from each other, but they knew that rural Iowa, rural Texas, rural Montana, and rural Alaska are very different animals.
So they said they would leave it up to the states' discretion to deem certain facilities within the states as critical access points. So states developed their criteria and it was the federal government that approved that designation. We're frustrated that the federal government said 'OK we agree with you that they are necessary providers,' but now they could rescind on that in an arbitrary manner.
The other big point we're making is that these small rural hospitals are actually a huge value for the taxpayer. Congress is not losing money on these facilities. Rural hospitals provide 18% of care but only get 15% of Medicare reimbursements.
If you compare apples to apples, a common treatment in a rural setting, pneumonia or something like that, compared with the treatment in an urban or suburban setting it is 3.7% less expensive because you are reimbursing at primary care levels. Almost everything in rural areas is primary care. Urban and suburban is much more often specialty care at a higher reimbursement rate.
Our message to Congress is really look at the math before you do these things. If you close these rural hospitals you are obviously causing a hardship for seniors who would have to travel further for care but you are also shifting the cost to a more expensive area.
HLM: What are the biggest challenges for these rural amendments as they are debated next year?
Elehwany: It's all about how to pay for these things, both the SGR and all of these rural provisions. It sounds like we are going to fight that fight early next year. But if I had to summarize we couldn't be more thrilled about our champions.
The Senate Finance Committee really understands the challenges of delivering healthcare in rural America and the importance of these rural payments. We appreciate that and we are ready to stand with them as they wage the long fight to get a permanent fix bill.
The five-member National Labor Relations Board is sharply pro-labor, and could provide favorable rulings that will make it easier to organize next year. Expedited elections are "the biggest concern that employers should have," says one expert in labor and employee relations.
The uncertainty and shifting landscape in the healthcare industry continues to favor organized labor's efforts to unionize hospital workers, and there is no indication that the trend will slacken in 2014.
"We have seen a tremendous increase in union activity and petition activity since mid-summer," says James Trivisonno, president of Detroit-based IRI Consultants, which tracks organized labor activity in the healthcare sector for theAmerican Society of Healthcare Human Resources Administration.
"The catalyst is change as a result of the Affordable Care Act. Hospitals are scrambling for ways to reduce costs and improve processes. Those translate into change. People don't like change. Even if it doesn't result in cost reduction, the thinking is it's my job and the way I do it is changing. I don't understand it unless it is communicated properly. I liked the old way we were doing things even though it was inefficient, and I was used to it and that is the way we did it for 10 or 20 years. Unless properly implemented and executed, change can result in uncertainty. Uncertainty leads to poor quality and turnover or they get a union to promise that it won't happen again."
IRI's 2013 Labor Activity Report for ASHHRA found that:
36% of this year's survey participants reported having unionized employees. That's a 6% increase from the 2012 survey. Healthcare service workers and other non-professionals and nurses are the most commonly targeted employees.
Unions' success in organizing healthcare continued with more than 68% of representation elections resulting in union recognition in the first six months of 2013.
The Service Employees International Union (SEIU) won 55% of its representation elections in healthcare in the first six months of 2013. The union was involved in more elections than any other union, accounting for more than 40% of all representation elections held in healthcare in the first six months of 2013.
The American Federation of State, County and Municipal Employees (AFSCME) won 57% of its elections in healthcare in the first six months of 2013.
National Nurses United (NNU), which won 100% of its elections in the first six months of 2012, had limited election activity in the first six months of 2013. However, the union continues to grow through organizing and acquisitions of other nurse unions, and continues to push an active legislative agenda in many states and Washington, D.C.
The states with the highest number of representation elections filed to represent healthcare employees were (in order): Pennsylvania, California, New York, New Jersey and Ohio.
Trivisonno says the makeup of the five-member National Labor Relations Board and its advisory staff under President Barak Obama is also sharply pro-labor, and could provide favorable rulings that will make it easier to organize.
"Look for NLRB go back to the rulemaking and look for expedited elections," Trivisonno says. "That is the biggest concern that employers should have. When you get a petition you have to communicate as an employer the implications and consequences of unionization. If you only have 10 to 14 days to communicate your message to thousands of people, it is going to be extremely difficult, particularly because you can't shut the place down with healthcare. We have had situations with six months and barely prevailed. I don't know how we are going to do it in two weeks."
In addition, the NLRB will review dozens of decisions it made from 2008 to 2010 when the board contained only two members owing to Republican objections to Obama's candidates. The U.S. Supreme Court in Process Steel vs. the NLRB in 2010 ruled that the two-member NLRB did not have the authority to decide cases, so many of those cases will be reviewed again by the five-member board.
With the current pro-labor makeup on the full board, Trivisonno says "there are a bunch of cases lined up that they are waiting to hear and they will overturn previously decided cases and change the way the pendulum swings."
While much of what happens at the federal level is beyond the control of most hospital executives and administrators, Trivisonno says steps can be taken to deflect union organizing efforts. It starts with being proactive and communicating your hospital's stance on organized labor and why you oppose it.
"You have to assume that any time you implement any change or cost reduction you are also creating uncertainty," he says. "Unfortunately a lot of employers wait until that change is about to occur before they communicate with employees. You have to explain it well in advance through business literacy what the environment is and where you are in the marketplace. It is about being proactive in communication and then creating a compelling case for why you have to make the changes you do."
Trivisonno says unionization efforts are rarely about wages and hours.
"The union turns it into treatment and respect," he says. "They haven't treated you properly. They don't respect you enough to give you a pension that is going to support you when you retire. That is how they flip it. They turn it from a rational issue to an emotional issue and that is in their wheelhouse. Without the emotion the union's got nothing."
He says unionization drives fall short when they run up against hospitals that have spent years building trust and communication between leadership and staff.
"Create a culture where people say 'Hey, I'm good. My problems are being solved. They're listening to me.'You can't do that overnight," he says. "The union messages sort of clang rather than ring true – to use a bell analogy – when you have a situation where someone says 'that doesn't sound right. I know this guy. He wouldn't break that way.' So for those organizations that try to suddenly overnight create this communication mechanism and engagement mechanism it becomes much more difficult."
With all the change occurring in healthcare, Trivisonno says hospital leadership should just assume that at some point they will face some sort of organizing effort.
"Be prepared. Make sure that your management team is ready because the unions are not backing off. There are three more years with this administration in Washington and now that they have a full board complement they are coming," he says.
"Most employers' positions are very rational. Talk about it from orientation all the way through and make sure your managers have the skills, because this is a subject that people often have different opinions on. Managers don't like walking into a room where there could be conflict. So having them comfortable with the issue and seeing that they have their little elevator speech about the organization's position on unions is essential."
"You should be talking proactively with your staff about your positions on unions. People are afraid of talking about the 'U' word. The thinking is that if we talk about unions we will stimulate union activity. Wrong! It's like talking to your children about drugs and sex. You have to get out there and get ahead of it."
Most of the states that are rejecting or noncommittal on Medicaid expansion also rank near the bottom in population health in an annual survey. Conversely, the residents in many of the states that have embraced the expansion are among the nation's healthiest. America's Health Rankings for more than 20 years has ranked state population health on measures that include diabetes, obesity, smoking, and physical activity. States at the bottom of the list include: No. 50, Mississippi; No. 48, Louisiana; No. 47, Alabama; No. 44, Oklahoma; No. 43, South Carolina; No. 42, Tennessee.
"It is amazing," says Sara R. Collins, vice president, healthcare coverage and access, at The Commonwealth Fund. " States that are not expanding have among the highest rates of diabetes and obesity among lower income families. These are people earning less than $25,000 a year. These are families, many of them are uninsured, who would significantly benefit from the insurance coverage provided by the Medicaid expansion if those states were to expand."
"These states also have among the highest rates of uninsured in the country. Texas has the highest rate of uninsured, or more uninsured as a percentage of the population than any other state. So, the taxpayers in the states are contributing to the cost of the Medicaid expansion. It's important that all states expand their programs not only so that their residence can benefit but so that they can get the benefit from the federal spending that is leaving their states in the form of tax revenues."
