Doctors in the emergency department are the major decision makers in nearly half of all hospital admissions, giving them a significant role in controlling healthcare costs, research shows.
Jay A. Kaplan, MD, has been an emergency physician for more than 30 years and over the decades he has witnessed firsthand what he says is the evolving role of the emergency department in providing frontline healthcare.
"When I first started practicing we called it the emergency room," Kaplan says. "Then we got called the emergency department. We have morphed again. We are no longer an emergency department. We are an emergency care and acute diagnostic center."
Kaplan, a board member with the American College of Emergency Physicians, points to a Rand Corporation study commissioned by the Emergency Physician Action Fund which shows that emergency physicians are key decision makers for nearly half of all hospital admissions. Because of that, Kaplan says, emergency physicians are playing a critical role in controlling healthcare costs.
RAND found that hospital admissions from the ED increased 17% over seven years, accounting for nearly all the growth in hospital admissions between 2003 and 2009, offset by a 10% drop in admissions from primary care physicians and clinical referrals. Nearly all of the increase was from "non-elective" admissions from the ED—a rate 3.8 times the rate of population growth.
Hospital inpatient care is a key driver of healthcare costs, accounting for 31% of the nation's healthcare expenses. Because of that the role emergency physicians play in deciding who to admit to the hospital is critical to hospital cost savings, since the average cost of an inpatient stay ($9,200) is roughly 10 times the average cost of a comprehensive emergency visit ($922), RAND said.
"Use of hospital emergency departments is growing faster than the use of other parts of the American medical system," Art Kellermann, MD, the study's lead author and a researcher at RAND, said in prepared remarks. "While more can be done to reduce the number of unnecessary visits to emergency rooms, our research suggests emergency rooms can play a key role in limiting growth of preventable hospital admissions."
Kaplan says RAND shows that office-based physicians are directing some patients to the ED who they previously would have admitted themselves. The study also found that EDs perform complex diagnostic workups that cannot be done in primary care physicians' offices, and that EDs supplement primary care providers by handling overflow, after-hours cases and weekend call.
"Patients who come to the ED are coming either because they have been sent there by their private doctor, or they have no other healthcare provider to turn to," Kaplan says. "Even those who have primary care doctors, when they call them for an appointment, they say 'go to the ED.'"
Rather than a focus on keeping people out of the ED, Kaplan says the emphasis should be on providing EDs with the resources they need to successfully adapt to this new trend.
"That includes more widespread adoption of inter-connectability and interoperability of (healthcare information technology)," he says. "If the doctors have the patient in the ED from a skilled nursing facility, if I can access the patient's history and medications and allergies and test results that helps a lot. The more collaboration, the more we can create effective transitions of care."
"Care handoffs are crucial. Rather than seeing the ED as the more expensive place to receive care, they should be viewed as acute diagnostic centers that provide clinically and economically efficient ways to evaluate complex patients with worrisome symptoms."
Two weeks ago the American Hospital Association came out with its own report that showed that EDs are treating growing numbers of sicker Medicare patients who require more complex and expensive treatment regimens. AHA says data show that between 2006 and 2010, the severity of illness of Medicare patients in the emergency department increased, as did the rate of use, a trend that policymakers fear is leading to higher spending with inadequate reimbursements.
The AHA says the federal government's more stringent inpatient admissions guidelines and growing claims denials are also putting more pressure on hospitals to treat Medicare patients in the ED rather than admit them.
The RAND report found that increased admissions were highest among people ages 65 and older.
"If you look at the increase in admissions, what you see is that it has more to do with the aging population," Kaplan says. "Patients are being sent to the ED with their acute illnesses and with their complex illnesses. Admissions to the ED are 50% of all hospital admissions and 70% of all non-elective admissions. One of the things that we do know is that it is the Medicare patients, the sicker patients, who are admitting. When I first started practicing, if you saw an 80-year-old, that was relatively rare. These days probably half the patients I see are 80 or 90 and with more complex illnesses too."
"It's a function of an aging population and it is a function of the workforce shortage, particularly among primary care physicians," Kaplan says.
"And the truth is it also relates to the fact that there are many primary care physicians and other physicians who will not take Medicaid and for that matter will not take Medicare. They only want patients with private insurance."
A survey of hospital CFOs shows primary care physicians generated a combined average of $1,566,165 for their affiliated hospitals in the last year. Other specialties generated a combined annual average of $1,424,917, the lowest average in five years, data shows.
Primary care physicians have emerged as key money makers for their affiliated hospitals and for the first time are generating more revenues on average than their specialist colleagues, a survey data from Merritt Hawkins (PDF) shows.
"For the first time in the survey's history we have primary care overtaking specialties on an average basis," says Travis Singleton, a senior vice president at the Irving, TX-based physician recruiting firm. "I was pleasantly surprised to see the survey show that. We knew it was happening, but we didn't know if the market had shown that yet."
The survey asked hospital chief financial officers to quantify how much revenue physicians in 18 specialties generated for their hospitals in the last 12 months, including net inpatient and outpatient revenue from patient referrals, tests, prescriptions, and procedures performed or ordered in the hospital.
Primary care physicians—family physicians, general internists, and pediatricians—generated a combined average of $1,566,165 for their affiliated hospitals in the last year. The remaining 15 specialties included in the survey generated a combined annual average of $1,424,917, the lowest average in the five years the survey has been conducted, the data showed.
"It's one more example of the changing balance of power from specialist to primary care, whether you see that as market driven or regulated or however you see that happen," Singleton says. "But as government and payers start to favor that gatekeeper—more preventative primary care practice of medicine—we are going to continue to see these primary care providers ascend over specialists, at least on an average basis."
Singleton says the shift is largely due to the migration of primary care physicians away from private practice and toward the employed model.
"We recognize that the majority of this bump is because more of their physicians are employed now so there is greater control," he says. "These health systems have formulated these vast employee networks and it is no secret that an employed physician is going to be much more apt and even directed in some cases to push a lab or a test or a procedure or a referral down the hall and not down the street. They aren't going to send it to an independent imaging group or an independent lab like they used to. In essence that is not really creating new money. That is just pulling that money within the hospital walls."
"As the primary care physician evolves into this quarterback of the medical home model and if they truly do what they are being designed to do, which is to control the entire flux of that patient, in theory they would dictate what tests happen and what procedures are necessary, what specialist are brought in, what preventative care or home health measures are used," Singleton says.
"In theory, if that happens, then that is where you want to invest all of your dollars, because not only are you controlling the outcome, but you are controlling the expense of your specialists."
Even with the newfound emphasis on primary care, key specialties remain top revenue generators for hospitals. Orthopedic surgeons topped the list of specialists examined in the survey. A single, full-time orthopedic surgeon generates an average of $2,683,510 a year. Invasive cardiologists generate $2,169,643, general surgeons $1,860,655, and neurosurgeons $1,684,523, the survey found.
Singleton says he's not sure how long the trend toward higher average revenues will continue for physicians.
"We know the employed physician sees 17% fewer patients than their private counterpart, and it's greater in some specialties. So it wouldn't surprise me if we looked in two or three years from now and the actual revenue per provider was down in some scenarios," he says.
"That doesn't mean the whole pie is smaller. You may have the same amount of revenue but you just may take more primary care providers to generate the same revenue, or you may see some that are leaked towards a nurse practitioner or a physician assistant as they start to grow these networks. But these are all new networks for hospital to control in a lot of cases."
When the survey was last conducted in 2010, family physicians generated an average of $1,692,832 a year on behalf of their affiliated hospitals. In 2013, that number grew to $2,067,567, an increase of 22%. Revenue gene rated by general internal medicine physicians also increased, from $1,678,341 in 2010 to $1,843,137 in 2013, a growth rate of 9%, the survey said.
"If you want to go 10 years out and say the Affordable Care Act is going to do its job then this whole survey should be in theory turned on its ear," Singleton says.
"Revenue numbers per provider shouldn't be anything more than an internal measuring stick to see how your hospital is running because the vast majority of the profits your hospital realizes will be in shared savings through efficient and effective care, theoretically. You could argue that if in 10 years everything works like how we want it to work, high revenue per provider could be seen as a negative because you don't want to see a lot of imaging and tests and other things. I don't know that we will ever get there, but that is the utopia."
"That is why I think this spike per provider may be a short-lived spike. The ramifications you are seeing now are nothing more than people preparing to have a seat at the table."
The second round of federal Health Care Innovation Awards specifically seeks clinical models that will quickly shrink Medicare costs and improve care for populations with special needs as well as population health.
Nearly $1 billion in grant money will be available to healthcare providers that can demonstrate a high likelihood of success in rapidly lowering costs and improving quality for chronic and special needs populations, the Centers for Medicare & Medicaid Services announced this week.
"Over the last three years, we have seen national healthcare cost growth slow significantly and we want to continue that trend by helping to improve the delivery of healthcare by testing new models of paying for quality care, CMS's newly confirmed administrator Marilyn Tavenner said in prepared remarks.
"These awards will help spur private and public sector innovation in this endeavor."
This second round of Health Care Innovation Awards differs from the first round. This time, CMS said it's looking for innovations in four areas:
Rapidly reducing costs for patients with Medicare and Medicaid in outpatient hospital and other settings;
Improving care for populations with specialized needs;
Testing improved financial and clinical models for specific types of providers, including specialists; and
Linking clinical care delivery to preventive and population health.
Colin Roskey, an attorney at Cozen O'Connor Public Strategies in the firm's Health Law Practice Group, says "results" are the focus of the second round of grants.
"Without characterizing the first round of grants, maybe one might call it more generalized and aspirational. The second round is more results-oriented in asking for models that rapidly reduced spending and improve care for populations with special needs," he says. "So already they aren't just saying population health. They are saying population health with an emphasis on patients with special needs."
"This gets more specific when you look at the models they are looking for," says Roskey, a former health policy advice and counsel to the U.S. Senate Finance Committee. "They want approaches that test specific types of providers to transform their clinical and financial models. CMS is moving in Round 2 towards a grant environment that is going to force participants to show scalable provable propositions that can work in an environment where specificity is the rule and generality is the exception."
Roskey says oncology services for special needs populations is expected to be a focus of the grants as well. "For instance, oncologists or the clinical oncology delivery system in the community, or the academic medical center, or elsewhere maybe we take care of patients with specialized needs," he says.
"Not only do they have some type of cancer, they have other co-morbid conditions. While the Innovation Center has taken on accountable care and post-acute care and the notion of bundling payments, they have not yet taken fully on some of the various manifestations of cancer care."
CMS is also expected to target providers who serve populations with significant health needs, Roskey says.
"These might be dual-eligible (Medicare/Medicaid) patients, patients who are chronically ill or reside in long-term care hospitals and/or patients who have other disabilities that prevent them from being fully functional in the work place that this innovation program could facilitate better community-base care services," he says.
"I see some psychology, I see some psychiatry, and I see a larger emphasis on poor people who are dual-eligible being able to access through their delivery system care that might facilitate improvements in their population health."
Last year CMS awarded 107 round one Health Care Innovation Awards out of nearly 3,000 applications to organizations that are currently testing innovative solutions to improve outcomes and reduce costs. Projects are located in urban and rural areas, all 50 states, the District of Columbia and Puerto Rico, CMS said.
Notable projects include:
The Courage Center in Minnesota, which provides a medical home for people with traumatic brain injury and those in wheel chairs. The patients have lower rates of depression and have reduced rates of hospitalization by 71% - from 10.8 days per year to only 3.1 days per year.
Welvie, LLC in Ohio, which is teaming with Anthem Blue Cross Blue Shield in Ohio to enable Medicare beneficiaries to make better informed decisions about surgery and their treatment options. Since September 2012, nearly 3,500 patients have participated, with 48% considering surgery alternatives and 17% choosing less invasive options, resulting in an average savings of $7,000 for each surgery avoided.
The lack of IT staff with expertise represents the top challenge leaders face regarding their IT group.
Where in the IT group are you finding these shortages, what is the effect on the organization, and what can leaders do to address that?
Jack Kolosky
Executive vice president and COO
H. Lee Moffitt Cancer Center and Research Institute
Tampa
Jack Kolosky
On finding the right people: Even with a higher-than-expected unemployment rate, the issue of trying to find really qualified people who understand the program and who are willing to stick with it through all the trials and tribulations and difficulties in implementations is challenging.
A staffing problem across many industries: We thought we might have been unique in healthcare, but we spoke with one of our board members who runs a major corporation and she was saying the same thing about her business. We all agree that information technology and the usage of it—being able to mine the data—is critically important to our businesses. But we really need to have our schools and our infrastructure—be it government or whatever else—step up and help accelerate the idea of recruiting people into this field.
On building partnerships: We are looking at partnerships with some of the major schools, much as we did in nursing and other areas where we had critical shortages, about helping us to recruit and continually train new qualified people.
On the effect of IT staff shortages: To be perfectly frank, I wish we were able to turn out more people who are qualified and can think outside the box and be a little more innovative. We have a great group here. We just don't have enough of them. We obviously get the job done but it seems to take us longer or we can't do some of the innovative things we'd like to do.
Sam J.W. Romeo, MD CEO
Tower Health & Wellness Center
Turlock, Calif.
Sam J.W. Romeo
The evolution of healthcare technology is behind the curve. It will be self correcting for two reasons: There are an increasing number of physicians who are becoming technical themselves and there are technical people who are beginning to learn the physicians' language.
The biggest barrier is we have third-party and other people including Medicare that basically are saying these are the priorities and they distract us away from the patients and toward the payer mechanisms. That is important because if you don't get paid you can't take care of patients. But it seems like we are putting a whole bunch of balls in the air at the same time and we don't have enough technical people to be able to communicate across those bridges to be able to do it with any efficiency.
We are fixing it. I'm an old man. I am a family doctor for 50 years but I have six children, five of whom as physicians are working on this and who are electronically savvy and much of the culture is different. That is a big transformation. They are head over heels involved in creating software that will support documentation of what happens in the examining room so we will have a relational data base so we can do some things that are meaningful in terms of quality and not just meaningful in terms of payment.
Deborah Gaspar
Chief Nursing Officer
Memorial Hospital Sweetwater County
Rock Springs, Wyo.
Deborah Gaspar
We can't recruit skilled health system administrators who understand how the programs interconnect and how they connect to server capacity and how they connect to wireless capacity; how they are upgraded becomes an issue. This needs to be addressed industrywide
Nursing has always had to deal with shortages and we've learned how to train our own and that is what is going to have to happen in healthcare IT.
The IT people are pretty frustrated about it, too, because so many of the IT people don't have leadership abilities. They don't know how to problem solve. And the people they report to in the organizations often don't have competencies doing that problem solving. So I do think there are going to be more clinical people who delve into that role because it's going to be necessary.
We have a couple of RNs who built our clinical system. They are both in their 20s and they are much more competent and capable at that stuff than I am. I can do the clinical background and the clinical standards and the high-level stuff and they do the technical skills-based stuff. We're creating our own solutions. You have to survive so you do what you have to. Give people the abilities because there are people out there who want to do this stuff. You have to be patient and willing to groom them.
Glenn McElroy
Glenn McElroy
Executive Director
Columbia (Mo.) Surgical Associates Inc.
It is pretty easy to find the guy who can handle the complex hardware networks within the office. However, the complex software—and the nuances and constant updates that are associated with each, often unfixing things you fixed last week—gives you constant new challenges, and finding someone who has a handle on both hardware and EMR is very difficult. I am not sure I know anybody who is really happy with their EMR and practice management products as they interrelate.
It is self-correcting somewhat with the younger doctors coming up, but in the short term we aren't going to outgrow it. It is the switchover from the texted base to a data-based EMR that is throwing everybody for a loop. That consternation is going to lessen as more of the old guard who are used to dictating verbal notes either retire or give up and get on a computer and figure out how to make it work. The younger docs coming up are very familiar with messing with computers and can't think of any other way to do it.
Ali Chisti intends to pursue a career as an internist and a population health specialist providing care in underserved and rural areas—not as a neurosurgeon as he had originally planned. He changed his mind when he came to understand the gap in resources between rural and urban areas.
Medical student Ali Chisti had planned a career as a neurosurgeon when the real world stepped in and offered a decidedly different career path.
A friend and coworker at a Bandon golf course along the rural southern coast of Oregon where Chisti caddied broke his wrist and had to declare bankruptcy because he couldn't pay the $12,000 in medical bills he'd incurred.
"That's when I saw that resources were different in rural versus urban areas," Chisti says.
In fact, there was a community health center, the Waterfall Clinic, serving the Bandon area, but its Web site wasn't working, their phone lines were often busy and they didn't have the staff or the technical support to fix the problem. As a result, Chisti's friend couldn't find out about reduced fee services they provided.
So he had to go with a more expensive option that left him with a huge bill relative to his income and few options beyond bankruptcy.
"It really is a group of good-hearted people that just didn't have the resources of the federally qualified health centers in Portland, where there is a staff of physicians," Chisti says.
"At Waterfall there was one physician who oversaw eight nurse practitioners and the physician comes in one day a week. They were trying to recruit more, but they were having problems getting people to come out there. I was thinking if I was a doctor trying to come out and work at this clinic, the first thing I would do is look for their website. Or if I was a patient I'd want to know if they have the resources so I would look them up on the website to see what they have. But those things weren't there."
Chisti saw where he could help and he volunteered to reboot the clinic's Web presence. "I used to build websites in college to pay for my MCATs, so I could do one thing really [easily] and build them a website, get them some web presence, put in some software that lets you know how long people are sitting on each page—the analytics. That is when I saw that their employment page was the top hit after I launched it, and still is. People sit there for a few minutes and they are reading it. They are getting a lot more people responding."
Chisti also helped to build a referral network, but it didn't quite develop as well as he wanted. "I saw a need to address access issues, programs, and interventions, but I realized I didn't have any formal training," he says. "Some of the initiatives I started failed. And that is when I realized that I am capable of performing these tasks but I couldn't. I wanted to make sure they were sustainable and done the right way."
So he took a year off from medical school at the Oregon Health & Science University to attend the Harvard School of Public Health, where he will earn a master's in public health this month before returning to OHSU for his fourth year of medical school. "The Harvard School of Public Health is good for health policy management, the track that helps me realize how to manage a program and how to study it to know whether or not it is good enough for a policy intervention to upscale it."
When he graduates from medical school next year, Chisti, 27, will pursue a career as an internist and a population health specialist providing care in underserved and rural areas like Bandon. Eventually he hopes to serve on the faculty of OHSU while maintaining an active practice.
Chisti's story is impressive and even inspiring. It is also plainly illustrates the sacrifices that young physicians are forced to make if they want to provide primary care in rural America.
For starters, Chisti is not wealthy. He had to work summers as a caddie and find other odd jobs to help pay for his education. He will graduate from medical school with more than $150,000 in student loan obligations. And he is planning to enter a medical field that will pay significantly less than he could otherwise earn.
Physician recruiter Merritt Hawkins says that the starting salary for a neurosurgeon in coastal Oregon is about $450,000 while an internist can expect to earn about $190,000 or "probably less if they are practicing at a community health center."
Chisti is a notable exception, but it is not realistic to expect too many young physicians already mired in debt to take up a career path that offers long, uneven hours and a huge pay cut.
"For me, I don't really count the hours when I am doing something that is very rewarding," Chisti says. "When people ask you for a favor and you are in a position to do that for them, whether it's helping a friend navigate a healthcare system, it's not something that I consider being on the clock for that. I actually know the answer to these questions so I can help. Or I can help somebody create a program that will help stop kids from taking drugs, if I can do that as a job it's a no brainer."
Chisti says the Rotary Club in Bandon asked him what would make a physician stay in a community. "You can make people feel like it's their community, which it is," he says. "Get them out there and involved and they will realize how special it is and how it is a gem to be there."
What about a family? What about meeting a spouse who'd be willing to settle down in rural America and put up with the longer hours without the frills and distractions of urban life? Chisti says "that's the hard part. Whoever chooses or agrees to be with me will know what is important to me, so that will self-select somebody, I think."
How much of a threat does organized labor pose to healthcare organizations? Hospital and health system leaders weigh in on the sensitive issue, which ranked among their top three concerns in our most recent industry survey.
This article appears in the May issue of HealthLeaders magazine.
In our annual Industry Survey, a majority of healthcare leaders cited organized labor as a threat, placing it among their organization's top three concerns. What is the nature of that threat, and what is the best way for leaders to address this?
John Haupert
President and CEO
Grady Health System
Atlanta
Reduced reimbursements, healthcare reform, and the future role of safety-net hospitals rank way higher for us than do issues related to organized labor. Southern states are big into right to work and are not very organized labor–friendly. I prefer that. It's not that I am anti-union, but I don't want to work in an environment where I have to go through a representative to interact with employees who are providing care to the patients. That isn't good for patient care or safety or workforce relationships, and I personally prefer not to work in that environment.
The best defense is a good offense. We all as employers—regardless of if it is healthcare or any other industry—have a huge obligation to work to create a highly engaged and committed workforce. If you go through the effort of doing that, it creates a much better organization. You fend off the desire of employees to reach out to unions. In organizations where senior leaders don't pay attention to what the front line is telling them about working conditions and the quality of frontline and midlevel leaders, benefits, pay—if you turn a deaf ear to that, you really open up the window for employees to engage unions in a discussion.
No. 1 is making sure you hear the voice of the employee.
Britt Berrett, PhD, FACHE
President
Texas Health Presbyterian Hospital–Dallas
The threat is probably regional in nature. Unions are very limited in the entire state of Texas, but I was very familiar with unions when I was a CEO in the Sharp HealthCare system in San Diego. I'm always concerned when there is a need for a third-party intermediary, such as a union, to represent the interests of members of your team. To have a third-party voice for those professionals seems unseemly.
There is a strong interest by unions to penetrate healthcare because it is filled with professionals who have not been unionized in the past. Healthcare is almost a $3 trillion industry, and healthcare professionals have an ability to move from one organization to another almost seamlessly.
Also, healthcare is in a constant state of change. Unions represent more static industries. We are nimble. The nurse requirements of today will be significantly different 36 months from today. To demand static conditions of employment is unreasonable.
One of our key performance indicators is based on our ability to retain top performers. We measure that every month by department. Yesterday I had a lengthy conversation on why one of the clerical staff left. Yes, really. We are all interdependent, and if we have clerical staff who don't feel engaged, I have to know.
Joseph Pepe, MD
President and CEO
Catholic Medical Center
Manchester, N.H.
It's a top threat, but I wouldn't put it in the top three. Most of the time you can't see this threat. But I tell my senior staff to rest assured that it is always there, hiding in the shadows and ready to pounce if the timing is right. It's best to be proactive and do what's right for employees all the time and not just when the threat comes out of the shadows.
The most important key is open and frequent communication. I have open forums with employees every month. I meet with representatives of the various departments every other month and I meet with the physicians' cabinet every month. It is important in these meetings to make them feel safe to ask questions, and I encourage them to do so.
Respect is another key. This starts at the top with the CEO and senior leaders treating everyone with respect. I expect them to respect not only their supervisors and patients but also to respect each other. This is a place that is opposite from a toxic environment.
It's important to be visible. I round on the floors once a week and I encourage my senior staff to do the same. When there is a crisis, I go there either right away or shortly after that to show my support and ask if everyone is okay. Just being visible shows that you care.
Wright Lassiter III
CEO
Alameda Health System
Oakland, Calif.
On creating a dialogue: Approximately 90% of our employees are represented by unions. When I arrived here it was contentious largely because there wasn't good communication. In the organization at that time, there was a lot of financial strife, and leadership turnover didn't allow leadership to sit down with unions and develop a partnership.
So in our case we have pretty positive relationships with the majority of our labor unions, and they understand that the purpose of the partnership isn't for them to threaten us or force us to do things that aren't economically viable or to be a barrier to creating a culture of excellence. They are really there to partner.
You walk around our organization now and look at the boards for labor unions and you will see things like "Working on a partnership to be an employer of choice" instead of things like "Management is bad" or "Down with Administration!"
On building a relationship: In the past they weren't always sure that some of the stories were as dire as they actually were. We used the phrase, "We are going to open the kimono and you guys can look at what you want to look at." And we are going to include union leadership on committees to fix things.
We had conversations about things that weren't comfortable for either party at times, but I really believe it was in a large part about the sincerity and transparency and open dialogue and not being afraid to say impasse: Let's just stop bickering over this thing because we aren't going to resolve it, so this is how we are going to approach it with a little bit of give-and-take without giving the farm away.
Reprint HLR0513-1
This article appears in the May issue of HealthLeaders magazine.
A tax expert describes how forgiving medical debts that a healthcare provider will more than likely never collect has an "incredibly low cost, generating very high return" for hospitals.
Working with cash-strapped patients to restructure or forgive their medical debts could provide an excellent return on investment for hospitals that probably aren't going to recover the money anyway, one analyst says.
The biggest hurdle, however, is getting the federal government to agree with the idea, says Brian Haile, senior vice president of Health Care Policy at the Parsippany, NJ-based Jackson Hewitt Tax Service.
Haile says focus groups in Tennessee have that found low-income people with huge medical debts say they would be less likely to pay premiums for health insurance under programs such as the Affordable Care Act as long as they are paying older medical debts.
"If they were close to filing for personal bankruptcies, they already had protections against catastrophic medical events and they knew that," Haile says. "In order to make the insurance have significant value for that household you have to remove the underlying medical debt. Otherwise the family looks at the very real possibility that if someone was hospitalized unexpectedly they would, under [the Emergency Medical Treatment and Active Labor Act]get the care they need and then declare bankruptcy."
Haile says some Tennessee families with huge medical debts were trying to pay off those debts as best they could while still struggling with other pressing issues such as buying food, paying rent, and keeping the lights on.
"These families were working very hard to get their lives back together and they were making some very difficult economic decisions," he says.
"Realistically a lot of hospitals and providers are at best going to collect pennies on the dollar. Is there a way to convert that account receivables that will never be received into something that has real value for hospitals in the form of qualified health plan enrollment to make sure that the next time the individual shows up at the facility they are in a commercial plan that pays commercial rates and from which the facility is going to have a realistic prospect of receiving reimbursement?"
Haile says forgiving debts on money that more than likely will never be collected will benefit hospitals in several ways.
"It's a pretty easy case to make. Hospitals have the ability to target this relief to people who sustain enrollment in qualified health plans. It is not like they are writing off all debt. They can limit it to the folks with whom they induce real behavior change. In that sense it is highly efficient," he says.
"No. 2 is there is just a public relations win with this. And thirdly, in terms of how hospitals spend resources, this has incredibly low cost generating very high return. You don't see this kind of thing very much. Because you are working with clients who already incurred debt with you, it is highly likely that they are going to have medical utilization going forward."
"It's a win, win, win all the way around. The hospital is going to have nice PR. You are going to burnish the brand. You are going to help people in terms of being insured, and hopefully there will be some revenue for the hospital because the next time the person shows up they won't be uninsured."
The only problem now is convincing the federal government.
Haile says Tennessee officials have been negotiating with the U.S. Treasury and the Internal Revenue Service since 2011 but have yet to receive a firm commitment on any sort of debt relief that doesn't end up hurting the consumer.
"They count debt relief as a source of income and a taxable event for the consumer and so it becomes one of the things the hospital has to be very careful about," he says. "If the hospitals forgive the debt then you have the IRS pursuing you and you can't extinguish that debt in personal bankruptcy. It's the worst of all possible worlds."
Haile says Tennessee officials worked out a tentative agreement with the federal government that would allow hospitals to forgive any debts above 10% of the adjusted gross income without a tax penalty for the consumer.
For example, if a person earns $35,000 a year and has medical debts of $20,000, the federal government would permit debt forgiveness on any amount above $3,500. However, that $3,500 would be considered taxable income, and Haile says that could create "enormous problems" for struggling consumers. He says hospitals and their professional trade associations must pressure the federal government for a solution.
"This is an issue which is a bit of a sleeper issue and for understandable reasons. It's somewhat smaller than other issues like the [Disproportionate Share Payments to hospitals.] But there is a real opportunity here. This is something you don't need Congressional action on, or even a rule change. You just need an opinion letter," he says.
"It strikes me that there is a lot of room here to get the IRS into a comfortable place that supports where hospitals want to go, which is to get people enrolled."
Hospitals and bond rating agencies will likely spend the next decade adjusting to the transition from volume-based to value-based payments. Moody's Investors Service is trialing 20 new value-focused indicators to evaluate hospitals.
As hospitals move away from volume-based reimbursement models to less-tangible value-based reimbursements bond rating agencies are trying to figure out the best way to measure it.
Moody's Investors Service this year issued a report that outlined 20 new indicators that the rating agency will use to evaluate hospitals. Lisa Goldstein, associate managing director at Moody's, says the new indicators focus on value and measuring demand in ways other than admissions.
"For example, one of the new metrics is called unique patients. In addition to measuring your admissions every year, let's say Mrs. Jones comes to the hospital five times in one year. She would count as one unique patient, not five visits to the hospital," Goldstein says.
"It is a way of measuring market capture and under this new world of population health management, what is the population that comes into your hospital."
The push for value under the Affordable Care Act, Medicare reimbursement cuts, and the resulting tighter margins all are pressuring providers to reduce cost growth. Even though the major provisions of the ACA take effect in 2014, healthcare systems across the nation are in wildly varying states of readiness, says Standard & Poor's Managing Director Martin Arrick.
"This whole value orientation is very tricky for everyone," Arrick says. "Hospitals are moving carefully, and some of the better hospitals are moving faster and want to take full risk because they think they are going to do better. It does amp up the risk but the information around all of this is better than it was 20 years ago."
"But insurance risk is still insurance risk. We are going to find out how you are managing. First and foremost now we are interested in are you prepared for reform? What does it mean in your market? Where is it going? Talk to me about risk in your market. Talk to me about capitation in your market," Arrick says.
Goldstein says hospitals and bond rating agencies will likely spend the next decade or so "operating in two worlds; volume-based and value-based payments" as the transition period unfolds.
"It will be two orbits at the same time," Goldstein says. "It is not as if there is a magical date and everything switches on that date to all value-based no more volume. Hospitals are going to be operating in two different worlds concomitantly. They are going to go through a big transition. We have introduced new ways of measuring this new world."
Even though the reimbursement model is shifting, Goldstein says that doesn't mean that every metric now in use will suddenly become obsolete.
"Much of our analysis is based on the audited financial statements. The audits aren't going to change because healthcare reform is here," she says. "There is going to be a (profit and loss) statement, revenues, expenses, and a balance sheet and a cash flow statement. These are our core financial metrics at this point and we are not anticipating will change. You still look at leverage. You still look at liquidity. You still look at operating margin and profitability, just like we have been looking for 30 years now."
Moody's other new indicators for value-based care include covered lives, employed physicians, Medicare readmission rates, all payer readmission rates, and risk-based revenues. Goldstein says that could change.
"This is just the beginning. There may be more introduced as we learn more," she says. "Some of the 20 we may discontinue. We may learn they aren't showing us what we need to know. This is very organic. We aren't done yet. There is more to come."
In addition, Goldstein says Moody's is pressing four objectives for hospital managers responding to the shifting business model: Achieving breakeven performance with Medicare rates; building scale through non-traditional methods; improved patient experience; and cultivating informed leadership.
Arrick says that despite the upheaval, the healthcare sector is attempting to position itself to succeed under a number of different uncertainties. He says the only certainty now is that change is the new normal in healthcare.
"The secret is if you can lower your costs faster than the revenue pressures coming at you, your numbers are going to be better," he says. "You look at the balance sheets and people haven't been borrowing quite as much. There is more cash on the balance sheets. This is all getting ready for what people perceive will be harder times ahead."
A $39.3 million judgment and the specter of hefty fines hang over Tuomey Healthcare System following a jury's decision that it violated the Stark Law and the False Claims Act. Adventist Health will pay $14.1M to resolve false claims allegations. Both cases were initiated by whistleblowers.
A retrial this week that resulted in a jury's $39.3 million judgment against Sumter, SC-based Tuomey Healthcare System should demonstrate to providers everywhere that federal prosecutors are serious about enforcing anti-kickback laws.
"You look at what happened. This is a small hospital but the government put a lot of resources into this and this could put the hospital out of business and I don't think the government is wild about that," says Al Bassett, an attorney and consultant with Alexandria, VA-based Strategic Management Services LLC,
"There was a trial in 2010. There was an award. A federal appeals court set the verdict aside for a retrial. The government elected to take this to a retrial. In this second go-around you get this verdict and I think people will look at this and say 'look if the government did this to a 242-bed community hospital they will take on anybody.'"
After a four-week trial, the 10-member federal jury in Columbia, SC needed less than five hours to determine that Tuomey violated the Stark Law and the False Claims Act between 2005-2009 with its use of lucrative referral fees for 19 physicians who steered business to the health system. The case was brought forward by a whistleblower.
Tuomey has a month to appeal the ruling, but hospital officials have not said if they will.
In addition to the jury's judgment, the verdict exposes Tuomey to more than $350 million in fines stemming from nearly 22,000 violations of the False Claims Act, which allows the government to claim treble damages. It is not clear, however, whether prosecutors will attempt to collect those fines.
Bassett says law firms and consultants have been warning hospitals for years that anti-kickback statutes in Stark Law represent a significant regulatory risk.
"We have been telling our clients that they need to be very careful about establishing fair market value, about establishing the market need for the relationships with physicians," Bassett says. "They need to have what the government calls an 'arrangements database' where they are monitoring their compliance continually."
As was the case with Tuomey, Bassett says federal prosecutors rely on whistleblowers to ferret out Stark violations.
"It's not like billing. The government is aware of what is being billed to Medicare and Medicaid but the government is not privy to the contracts between hospitals and physicians," he says.
"Typically when there is a problem the government finds out about it through a whistleblower. That is what happened in this case. A physician brought a qui tam action back in 2005. So, this should be a wakeup call that what they have been told by law firms and consultants and the Office of Inspector General is true. This is a high priority."
With the advent of healthcare reform, Bassett says Stark Law violations could become even more prevalent and costly as more hospitals establish relationships with physicians.
"This shows that you need to dot your I's and cross your T's. In all of the contractual relationships with physicians who are in a position to refer patients to the hospital they have to be absolutely certain that they have met all of the requirements of the laws."
Adventist Health Pays $14.1M to Resolve False Claims Allegations
Adventist Health System/West and affiliate White Memorial Medical Center in Los Angeles will pay the federal government and the state of California $14.1 million to settle whistleblower claims that they violated the False Claims Act, DOJ said.
The deal resolves federal prosecutors' claims that Adventist improperly compensated physicians who referred patients to the White Memorial facility by transferring assets, including medical and non-medical supplies and inventory, at less than fair market value. White Memorial also paid referring physicians compensation that prosecutors said was above fair market value to provide teaching services at its family practice residency program, DOJ said.
About $11.5 million of the settlement will be paid back to the Medicare Trust Fund and $2.6 million will be paid to California's Department of Health Care Services, DOJ said.
"Payouts made by hospitals and clinics—as the government alleged in this case—raise substantial concerns about physician independence and objectivity," said Ivan Negroni, special agent in charge of the Office of Inspector General, U.S. Department of Health and Human Services San Francisco region.
"Taxpayers and vulnerable patients rightfully expect such payments to be investigated and pursued."
The whistleblowers in this case will collectively receive $2.8 million of the recovery.
MT Hospitals to Pay $3.95M to Resolve Stark, False Claims Allegations
Two Montana hospitals have agreed to pay nearly $4 million after self-disclosing to the federal government Stark Law and False Claims Act allegations, DOJ announced.
St. Vincent Healthcare in Billings, and Holy Rosary Healthcare in Miles City will pay $3.95 million plus interest to resolve allegations that they gave incentive pay to physicians that made referrals to the hospitals, DOJ said.
Prosecutors alleged that the hospitals paid several physicians incentives that took into account the value or volume of their referrals by improperly including certain designated health services in the formula for calculating physician incentive compensation.
"St. Vincent Healthcare and Holy Rosary Healthcare allegedly put their financial interest ahead of their responsibility to provide cost effective healthcare," Michael W. Cotter, U.S. Attorney for the District of Montana, said in prepared remarks. "This case also demonstrates how the Department of Justice will work with those healthcare providers who disclose their misconduct,"
Physicians and attorneys—uncommon allies—support a Georgia law that creates a barrier between doctors and "ancillary" payer guidelines in the Patient Protection and Affordable Care Act which could potentially be used as evidence in medical malpractice lawsuits.
News that the Medical Association of Georgia and trial lawyers are united in their support of a new law that provides limited malpractice protections to physicians left some observers at the Capitol contemplating biblical prophecy.
"When their lobbyist and I testified together in support of this bill, one House member suggested that the committee should adjourn so that all of the members could get home before the locusts arrived," says William T. Clark, director of Political Affairs with the Georgia Trial Lawyers Association.
"He was joking, I think."
The "Provider Shield" bill (HB499) was signed into law on Monday by Georgia Gov. Nathan Deal. MAG and backers say it creates a barrier between Georgia doctors and "ancillary" payer guidelines in the Patient Protection and Affordable Care Act which potentially could be used as evidence in medical malpractice lawsuits.
MAG President W. Scott Bohlke, MD, said the new law will protect "physicians in the state from some unreasonable and unnecessary standards and legal liabilities."
"These guidelines, including factors like healthcare quality measures and payment adjustments and value-based payment modifiers, don't have any direct ties to the medical profession in Georgia," Bohlke said in prepared remarks. "These are simply cost management tools for the federal government and other third-party payers."
The shield law is being touted as the first in the nation and is based on model legislation crafted by the American Medical Association's Advocacy Resource Center.
AMA board member Patrice A. Harris, MD, said the law "makes it clear that federal standards or guidelines designed to enhance access to high-quality healthcare cannot be used to invent new legal actions against physicians."
"The decisive action of Georgia lawmakers holds the line against medical liability abuse and helps avert more civil actions against physicians, which increase medical liability insurance premiums and reduce access to health care for Georgia's patients," Harris said in prepared remarks.
Under the shield, evidence related to government and private payer guidelines won't be admissible in court, can't be used as the standard of care, and can't be used as a presumption of negligence in any malpractice lawsuit.
Clark says trial lawyers were "glad to partner" with physicians in support the bill because the protections it extends against malpractice suits are limited and should not affect patient safety.
"While we work steadfastly to shield patients from negligent medical care, especially given that 98,000 Americans die annually from preventable medical malpractice, we did not mind helping the physicians enact a bill that will prevent someone from suing a doctor for the doctor's failure to comply with a payment guideline, something that has nothing to do with the real question of whether the doctor failed to comply with the medical standard of care," Clark wrote in an email exchange with HealthLeaders Media.
Bohlke says the law will "ensure that Georgians have access to the highly trained physicians they need by creating a sustainable and more favorable practice environment."
Clark notes that it is "not a safe harbor for physicians who have failed to meet the appropriate standard of care when practicing medicine in Georgia."
"HB499 will not prevent a patient from suing to hold a doctor accountable if he or she fails to follow guidelines relating to the quality of care they are to provide or guidelines relating to best medical practices with which they are supposed to comply," he says.
"The only thing HB499 will do is to prevent a patient from suing a doctor because the doctor did not follow a federal payment guideline. No one in our Association is aware of there EVER being a medical malpractice case based on a doctor's failure to meet a payment guideline. So, restricting the ability to do that through this bill will not create any problems for any patient prosecuting a case of medical malpractice in Georgia."
To win the trial lawyers' support, Clark says Georgia lawmakers made the bill "go both ways so that it does not just shield doctors from having a patient assert that the doctor's failure to comply with a payment guideline was evidence of malpractice. The bill also shields a patient from having a doctor assert that his or her compliance with such a payment guideline is evidence that the doctor provided appropriate care to the patient."
"We took the position that what's good for the goose must also be good for the gander," Clark says. "And fortunately, the General Assembly agreed with us."
The shield law is not the only example of Peach State doctors and trial lawyers working together this year for the common good of Georgians. Clark notes their united effort to defeat SB141, which would have replaced medical malpractice jury trials with administrative hearings.
"It is an unworkable and unconstitutional alternative to jury trials that has failed miserably in some European countries where it has been tried," Clark says.
"And, it is based on a fallacious premise that says doctors spend 25% of their time performing unnecessary medical tests and medical procedures, something that is impossible in this day and time when managed care runs medicine and prevents doctors often from being able to perform even absolutely medically necessary tests and procedures, much less from being able to do unnecessary tests and procedures."
"Moreover, if you buy their premise, then you have to accept that that means doctors are committing insurance fraud, Medicaid fraud and Medicare fraud for billing for all those unnecessary tests and procedures. You and I both know that they are not doing that. And, that was a point we were able to agree on with our friends at the medical association. And, we agreed that the proposal was not going to bring down costs of malpractice insurance or costs of healthcare."
So, cooperation can occur between these two hostile camps. But before we break out the tie-dye shirts and sway together to Kumbaya, remember that trial lawyers and physicians will continue to eye one another with suspicion in state houses across the nation.
"We have worked together on another bill or two but it's rare because they spend way too much of their political capital trying to insulate physicians from accountability," Clark says. "So, there are instances where we work together. But, again, remember the locusts."
