HealthLeaders Media extends congratulations to James J. Bleicher, MD, president and CEO of Verde Valley Medical Center in Cottonwood, AZ.
Bleicher is the 2012 winner of the American Hospital Association's Shirley Ann Munroe Leadership Award, which recognizes the feats of small hospital leaders who have improved healthcare delivery in their communities.
AHA has cited a number of achievements at the nonprofit, 99-bed VVMC since Bleicher, a hospitalist, became CEO in 2009. They include collaborative health initiatives with community physicians, school districts, and an academic center designed to improve community health and access to healthcare, particularly for underserved groups that include Native Americans, Latinos, the uninsured, the elderly, and those with no access to primary care.
Under Bleicher's leadership, cancer treatments are available in the North Central Arizona region that VVMC serves as part of the Northern Arizona Healthcare system. VVMC has also embraced telemedicine and other remote communications that allow for programs and services that include research trials and tumor boards led by expert clinicians.
AHA says the success of VVMC under Bleicher's tenure is measurable. When he became CEO, VVMC's Hospital Quality Alliance measures averaged 65%. Three years later they are average 92%.
VVMC has had no central line infections for three years and no ventilator-assisted pneumonia for four years. Employee engagement has increased from the 18th percentile to the 90th percentile.
Bleicher recently spoke with HealthLeaders Media about his success at VVMC.
HLM: Why did you win this award?
JB: "It was a team effort. We started off as a whole hospital concept and it became our culture. It was involving everybody including the community, all the staff, all the physicians. It really made a difference for this hospital and community, which is the one of the most important things, especially for a smaller community.
Hospitals have to understand that symbiotic relationship; us being the largest employer in town and being in an Arizona retirement community. People will move to a retirement community if they have great healthcare and we put that together for everyone and delivered some results that really made a difference."
HLM: What did you change that allowed VVMC to flourish?
JB: "It was the measure of focus. It wasn't about me or them. It was about all of us. It was about the community. It was about the patient. A lot of places talk about putting the patient at the top of the pyramid and doing everything for them but we really live that.
Every decision we make was based on something for the patient; quality, service, safety, and that is how we based our decisions. That permeated throughout the hospital. Every worker understood that.
When we had forums with the staff, I'd say 'look there is a reason why I'm not talking about finances first because that is not the most important thing.' Every hospital talks about 'no margin no mission' but we really put quality and safety and service above finances appropriately to make the changes. It is easy to get healthcare workers to rally around that because it means something to them."
HLM: What changed at VVMC when you took over as CEO?
JB: "We had a strategic planning meeting with the board about the time I was transitioning from chief medical officer to CEO. They came out of this big session with a big (Strengths, Weaknesses, Opportunities, and Threats) analysis which said that people weren't nice, service wasn't good, quality was low, the community doesn't think we have a good product.
They said 'let's go out and develop service lines and new marketing.' I basically said 'OK,' and then transitioned and said 'no we aren't going to do that. We need to improve all of these other things first. It matters much more.' So it was a 180-degree turn really from where we were going before."
HLM: What special skills are needed to be an effective leader at a smaller hospital?
JB: "It is imperative that you are—and it sounds cliché—a man or a woman of the people. That includes all of the constituents of the hospital as well as the community. It means trying to walk a day in their shoes. I spent a lot of time just walking around, being in different departments and in different areas of the community. Not there to preach or orate, but to listen and get to know people on a personal level.
That is an advantage in a smaller hospital. I have about 800 employees in total and I may not know all their first names but I recognize all of them, talk to all of them, have conversations about their children, about the community, about sports, or whatever happens to be their interest.
But it's about their interests. Not 'Hey I'm Dr. Bleicher, CEO. What are you doing for me?' It was totally flipping it. Obviously if you have 5,000 employees that makes it a lot more difficult. But if you only have 800 you need to do that."
HLM: How has being a physician affected your role as a hospital leader?
JB: "I have to be careful because the people who read this who aren't physicians will say 'wow what the hell does he think?'—but you are running a hospital. There are conversations in every board meeting and staff meeting that involve care, that as a physician I understand at a much deeper level having been a practicing physician.
I can have those one-on-one conversations with a cardiologist or a general surgeon or an internist about what the call or the case is like. When I say we are going to put quality and safety first I can really mean it.
Obviously that is a trend nationwide. There are more physicians running hospitals whereas 20 years ago you had maybe one at Cleveland Clinic and a few academic medical centers. Now people are saying 'well hey it kind of makes sense if you have the right person.' It doesn't mean that every physician should be a CEO, obviously."
HLM: How do you see healthcare reform affecting your hospital?
JB: "It's going to become more of a community asset. We have to work together with limited resources in the community and get the job done together. We are trying to work more closely with the school district and other volunteer groups that normally have nothing to do with the hospital.
We need to be the conduit for all of that and bring everyone together if we are going to improve the health of the community. We can't do it alone. They can't do it alone. We need to do it together. It's going to tighten that relationship even more."
HLM: Will VVMC be part of any mergers or acquisitions?
JB: "The board has evaluated that several times and at this point they don't see an advantage in doing that. But they are always watching to see what is out there and what makes sense.
Because we are so rural and distant from a big city—we are 100 miles north of Phoenix—there may not be that many economies of scale. But the board is keenly aware and every couple of years re-evaluates it."
HLM: How can other hospital leaders emulate your success?
JB: "First, you have to be true to yourself and do what is right for the patient. If you're doing what is right for the patient good things will happen. It simplifies the process. A lot of people say it but they don't necessarily live by it.
You have to put the accountability and all of the processes behind that but when you do it makes decisions a lot easier. Does this make sense for the patient? Whether it is an operational thing or an efficiency thing in the past you'd say 'it makes sense for the nurse or doctor, but look what it's doing for the patient.'
Then you'd say 'we'd better switch back.' But if you are truly doing it with the patient in mind it does make decisions easier. There are things you wouldn't see before because of your own personal biases. If you're a nurse or a doctor or a tech or an administrator you'd think things should go this way but if you follow the patient path it becomes more efficient."
The patient safety movement has made the healthcare workplace safer for employees too, a risk analysis suggests.
"We think the intense emphasis on patient safety has a direct implication on worker safety," Martha Bronson Posey, senior consultant and actuary with the Actuarial & Analytics group within Aon Global Risk Consulting. "The patient and worker safety programs share a lot of the same characteristics. So if your environment is safer for your patients it is inherently safer for your workers."
Aon projects that healthcare systems across the nation will experience an annual loss rate of $.79 per $100 of payroll in 2013, which continues the stability that has been in place since 2008. That loss rates will continue to increase at a 1% annual rate.
Posey says the stability in workers' compensation loss rates is linked to the decrease in claims frequency, which has experienced a steady decline over the past decade.
In addition to patient safety programs, Posey says the decrease in workers compensation claims frequency could be credited to new technologies, including beds and patient lifting devices.
In addition, low nursing staff turnover in a weak economy has meant the retention of more experienced and competent staff. "So the recession in the economy has had an impact. The average experience and competency has risen, so we are seeing that as a driver for claims frequency decreasing," Posey says.
The biggest source for healthcare sector workers compensation claims revolves around patient handling.
"Workers compensation is in every industry but because of the unique exposure of healthcare workers you don't have other environments with patient handling," Posey says.
"I did the research and some lifting injuries and patient handling injuries can be more costly than some of the injuries you see in the construction and manufacturing industries. We realized from the survey that that was the No. 1 issue of the risk managers. We looked and 25% of the claims were attributed to some sort of patient handling risk. It is a considered a top concern and that concern is warranted."
Posey says risk managers in healthcare settings cannot simply assume that their workers are using patient lifting devices. "We are hearing about some of the pushback where ‘it is so cumbersome to use it' or ‘it's not where I need it to be.'"
"Risk managers want to know ‘are my employees using this?' They have this lifting device available. It's assumed that it is being used, but is that the case? The report was interesting in that risk managers need to dig a little deeper on their own to see how it is working in their facility."
Posey says she was surprised to learn that two-thirds of the survey respondents either do not have a return-to-work program or a way to test the effectiveness of their return-to-work program.
"Without a measure of efficiency and effectiveness, the health and productivity of the workforce is suffering," she says. "It has been illustrated time and again that return-to-work programs keep business and premium costs down as well as benefit injured workers. It's a win-win for both the healthcare system and the injured worker."
"If someone is injured on the job bring them back on light duty and into work rather than just continue to pay out indemnity as they sit home and recuperate," she says. "Bring them back to work and put them on light duty as they continue to recover."
While claims frequency has declined, claims severity including medical, indemnity and expense costs, has been steadily increasing, and projected to continue at a rate of 2% per year. Posey says the increase is linked primarily to outside influences such as the weak economy that has made it more expensive to close outstanding workers compensation claims.
As millions of American consumers re-enroll for healthcare coverage in 2013 and grimace over interminably rising costs, provider associations, retailers, drug makers, and health plans are trying their best to deflect responsibility onto one another.
By various estimates, the nation's workers may receive compensation increases averaging between 2% and 3% in 2013. However, health insurance costs are projected to increase by 5% –6%.
Although that is the lowest increase in premiums in six years, it's a decades-long trend, and rising healthcare costs have been blamed as a key factor in wage stagnation. As the discontent among consumers grows, the major players in the healthcare sector have become increasingly adept at making sure they don't get pegged as the bad guys.
The Express Scripts 2012 Q3 Drug Trend Quarterly issued last week stated that prices in a market basket of the most highly used brand-name medications increased 13.3% over the year ending September 2012, far outpacing the 2% inflation in the larger economy. At the same time, generic drug prices fell 21.9%. Express Scripts says the 35.2% point net inflationary effect is the largest widening of brand and generic prices since it began tracking in 2008.
"The patent cliff has fueled a growing price disparity between brand-name and generic medications," Express Scripts CMO Steve Miller, MD, said in a media release. "The trend emphasizes the nation's continued need for the tools we employ to help patients make better decisions, including generic use when appropriate."
America's Health Insurance Plans flagged the Express Scripts report and issued its own press release.
"To make healthcare coverage more affordable, the nation must address the soaring cost of medical care, including prescription drug prices, which continues to increase at an unsustainable rate. Health plans are working with providers and consumers to help control rising costs through a variety of innovative ways, such as increased utilization of lower-cost generic drugs," AHIP said.
These attacks on drug prices prompted a quick response from the Pharmaceutical Research and Manufacturers of America.
"By cherry-picking a subset of specialty medicines used by a small number of patients, Express Scripts gives a misleading impression of prescription drug spending," the drug makers' lobby said. "While representing a small share of overall health spending, some of these medicines represent the newest and most innovative therapies, giving hope to patients who previously had few treatment options."
Earlier last week, the American Medical Association issued its annual report detailing what it says is a widespread lack of competition among health insurers across the nation.
"The new data demonstrate that most areas of the country have a single health insurer with an anticompetitive share of the market," AMA President Jeremy A. Lazarus, MD, said in a media release.
The lack of competition among insurers, AMA says, has resulted in increased premiums, watered-down benefits, and increased insurers' profitability, which the physicians' association says demonstrates that highly concentrated markets harm patients and physicians.
"Families and employers in every state have multiple choices of both insurance plans and types of coverage. Moreover, research clearly demonstrates that provider consolidation—not concentration of health plan markets—is driving up healthcare costs for consumers and employers," AHIP said in the statement.
Last week was particularly busy for AHIP. In addition to glomming onto the Express Scripts report and calling out as "fatally flawed" the AMA report, AHIP made public its November 21 amicus brief filed in the Court of Appeals for the Sixth Circuit in support of the Federal Trade Commission, which had challenged the merger of two hospitals in Ohio.
"Anticompetitive hospital mergers harm consumers by leading to higher prices and diminishing hospitals' incentives to innovate and improve quality," AHIP wrote in the brief. "Health insurance plans bring a unique and important perspective to the antitrust review of hospital mergers. They represent millions of individual consumers of healthcare and as such are a relevant customer whose insights and experiences are important to the antitrust review. Health plans have been directly affected by anticompetitive hospital mergers. It is the health plans who may be forced to accept higher prices and who may lose their ability to implement innovative approaches to improving quality."
"And of course," AHIP continued, "anticompetitive hospital mergers have also affected health plans' members. The individuals and employers who receive insurance from health plans, or who self-insure with their assistance, have seen tremendous increases in prices without corresponding increases in quality as a result of anticompetitive hospital mergers."
The federal appeals court has yet to assess blame.
Health plans and physicians pointed fingers at one another this week, with each side blaming the other for market consolidations that they both claim are driving healthcare costs.
However, impartial observers say both sides are to blame and consumers are bearing the cost.
The American Medical Association on Wednesday released the 2012 edition of Competition in Health Insurance: A Comprehensive Study of U.S. Markets. The physicians' association says the report shows widespread anticompetitive health insurance markets in most regions of the country for point-of-service plans, health maintenance organizations, and preferred provider organizations. The report details commercial health insurance market shares and market concentration levels for 385 metropolitan areas in 50 states and the District of Columbia.
"The broad scope of the new AMA analysis provides the most complete picture of the consolidation trend in health insurance markets," AMA President Jeremy A. Lazarus, MD, said in a media release. "The new data demonstrate that most areas of the country have a single health insurer with an anticompetitive share of the HMO, PPO, or POS market."
The release of the AMA report prompted a swift rebuttal from America's Health Insurance Plans. The health insurance industry's lobbying arm published a statement on its website Wednesday that called the study's methodology "fatally flawed" and laid the blame for rising healthcare costs on provider consolidations.
"Families and employers in every state have multiple choices of both insurance plans and types of coverage. Moreover, research clearly demonstrates that provider consolidation—not concentration of health plan markets—is driving up healthcare costs for consumers and employers," AHIP said in the statement.
Mark Pauly, a healthcare economist at the Wharton School at the University of Pennsylvania, says both sides are correct. "Insurance markets aren't very competitive and healthcare services markets, particularly hospital markets, are not very competitive," he says.
"It's like two devils pointing the finger at each other from the point of an economist interested in competition, but they are both right. In economics, we have a name for the situation where you have a monopolist buyer and a monopolist seller. It's called bilateral bargaining, and consumers are left in the middle. So it's doubly bad for consumers."
That sentiment was echoed by Anthony Wright, executive director of Health Access California, a consumer advocacy coalition.
"This is one of those rare cases where I agree with both sides, just probably not the way either of them wants," Wright says. "Clearly, provider consolidation does have an impact on healthcare costs, but so does the consolidation in the health insurance market. That is true at the insurer level and the provider level. When a provider has such a huge foothold in a given market, then every insurer to do business in that area has to contract with that provider and they are in a privileged position to demand a higher reimbursement, which is reflected in cost."
"At the same time, if there are only a couple of prevalent insurers in a market, like Kaiser and Blue Cross and Blue Shield in California, there is not the robust competition to bring down prices. You need to look at other means of looking at rates, including more vigorous rate review and regulation."
On the health plan side, Pauly says the dominance of the insurance markets has existed since World War II, while the consolidations on the provider side are more recent phenomena.
"There has been a tendency more worrisome to economists that hospitals have been consolidating. That has been more of a change," he says. "The insurance market has been bad but it is not getting worse. But the provider market is getting worse, and on top of hospitals consolidating in many cases, now large physician groups like the orthopedic surgeons are organized into a few large groups that probably also aren't as competitive as they would be if they were individual doctors that insurers could play off of one another."
Pauly says the best solution would be to break up the monopolies, but that probably isn't going to happen. "The next solution, which is probably where we are more likely to go, is to control or regulate the monopoly," he says. "The rules in the Affordable Care Act about minimum medical loss ratios are an attempt to get insurer profits and excess profits down by regulation. Medicare is big enough that it can push doctors and hospitals around, and the hope is that these new health insurance exchanges will somehow convert a whole bunch of insurance midgets into a giant that will somehow be able to deal more effectively with healthcare providers."
The AMA study found:
A significant absence of health insurer competition in 70% of the metropolitan areas it studied. These markets are rated "highly concentrated," based on the 2010 Horizontal Merger Guidelines issued by the U.S. Department of Justice and Federal Trade Commission.
In 67% of the metropolitan areas studied, at least one health insurer had an HMO market share of 50% or greater.
In 68% of the metropolitan areas, at least one health insurer had a PPO market share of 50% or greater.
In 68% of the metropolitan areas, at least one health insurer had a POS market share of 50% or greater.
The top 10 states with the least competitive commercial health insurance markets are (in order): Alabama, Hawaii, Michigan, Delaware Alaska, North Dakota, South Carolina, Rhode Island, Wyoming, and Nebraska.
"It appears that consolidation has resulted in the possession and exercise of health insurer monopoly power," the study says. AMA says those monopolies have increased premiums, watered down benefits, and increased insurers' profitability, which the physicians' association says demonstrates that highly concentrated markets harm patients and physicians.
Pauly says he'd be more sympathetic to the complaints of physicians if they "are willing to break up some of their doctor market power as a quid pro quo."
"Of the two kinds of non-competitiveness, I'm more worried on the non-competitiveness on the seller of services side than on the insurers' side, because insurers can be replaced fairly easily," he says. "There is nothing special about a Blue plan other than some consumer loyalty to the trade name. But there is something special about your own doctor, and hospitals are not so easily interchangeable."
Wright believes the AMA study and the AHIP response inadvertently say more about what is wrong with healthcare delivery than the two sides' accusations and counter-charges about monopolistic practices.
"The sad part is that our healthcare costs are more dictated by the healthcare market than they are the actual delivery and quality of care," he says. "Healthcare prices and healthcare premiums are much more a function of the providers' and insurers' relative market positions than they are about the cost of providing care of the quality of the care provided. Under our current healthcare system, that is what dictates our prices more than cost and quality, which are the things that people would presume would dictate the costs."
Rural healthcare concerns usually don't top planning agendas for politicians and policy wonks at state and federal levels. They're more interested in bang for the buck.
"If you are at the state and national level, the focus is on ‘Where can I make the biggest difference most quickly if my goal is related to quality or cost savings?'" says Prof. Keith Mueller, who leads the University of Iowa's Department of Health Management and Policy. "So of course you are going to gravitate towards the biggest population concentrations because ‘I can make the biggest splash there first.'"
As a result, the special needs and smaller economies of scales that rural providers face can often get shoehorned into programs and policies designed for larger urban settings.
"I wouldn't call it an afterthought. I'd call it a lack of awareness," Mueller says.
With that awareness gap in mind, the National Rural Healthcare Association formed the Rural Health Foundation in September with $110,000 in seed money that was donated by individuals, with some help from NRHA. As the foundation evolves in the coming months and years, it will provide funding for scholarships, seminars, and other training opportunities for rural healthcare providers and administrators to give them the know-how to adapt national healthcare policy into rural settings.
"The foundation will generate funds that can help in what I would call the continuous training and education for leaders at the local level in rural America who are helping to manage the transition in healthcare delivery and finance," says Mueller, who is a co-chairman of the foundation.
The foundation will address such questions as "How do we adapt to those changes when the scale of the system is somewhat different? Instead of a 600-bed hospital, you are talking about anything from six inpatient beds to maybe into the lower hundreds of beds. How do you take an insurance plan payment change that is based on what they have learned from large hospitals and adapt that to the small hospital?" he says.
The foundation will also help rural healthcare leaders identify and tap into the "natural assets you have locally and use those well in healthcare delivery," Mueller says."In a local rural community you are closer to the population that is being served. Changes that focus around keeping populations healthier take on a different feel when it's a smaller population where people know each other and the providers are closer to the population. There are ways to use that as an asset to implement what the payers want, which is keeping people out of the most expensive forms of acute care because they are getting better services and staying healthy in primary care."
Some of the operational details for the foundation have yet to be finalized. For example, there is no annual budget or locked-down funding source beyond the seed money.
NRHA CEO Alan Morgan says that creating a separate foundation provides a locus that could otherwise get blurred with all that is going on in rural healthcare. "For us at NRHA, we do educational programming, networking, advocacy. There are a lot of activities within the broader nonprofit parent organization, and we wanted to make sure for the purposes of the foundation that the goals and expectations were very targeted toward leadership development," he says. "We felt that creating this separate entity would ensure that that will be able to happen."
Mueller calls NRHA's involvement "exciting," adding that "the affinity between a foundation focused on rural health leadership and its roots in the leading voice for rural America in policy issues will be tremendously beneficial."
Mueller says eligibility standards for foundation scholarships and other awards will likely be "very open and inclusive"—from CEOs to clinicians to middle managers.
"We need to be inclusive, because you are talking about the objectives in healthcare delivery, which include better care at lower cost and better health for the population," he says. "With those overarching goals, you have to be flexible and open about who plays key roles, particularly for that better health objective in the community."
So how will we know if the foundation is a success?
"As all foundations do, we will track the participants as we go forward," Morgan says. "The people involved in these leadership activities, how do they translate that into success in their communities? And how do we translate that at a national level? How do we cultivate these leaders so they can be the future spokespeople for improving access to healthcare in rural America?"
With the training and expertise that rural providers attain with foundation support, Mueller expects that they will become strong advocates for rural healthcare at the state and national policy-setting level.
States that expand their Medicaid rolls under the Patient Protection and Affordable Care Act would see only modest increases in their share of the costs when compared with the windfall in federal funding that would come with it.
That's according to a new report released Monday by the Kaiser Family Foundation that also suggests that some states could net budget savings under the expanded Medicaid rolls, as millions of poor and uninsured people gain coverage.
According to the analysis, which was written by the Urban Institute for KFF's Commission on Medicaid and the Uninsured, if all 50 states expand their programs, state Medicaid spending nationally would increase by $76 billion from 2013 to 2022, an increase of less than 3%.
For the same period the federal Medicaid match would increase by $952 billion, or 26%. With the expansion, an additional 21.3 million people could gain Medicaid coverage by 2022 and with other coverage provisions of the PPACA that would cut the uninsured by 48%.
Alan Weil, executive director of the National Academy for State Health Policy, told reporters in a KFF conference call Monday that the funding for the Medicaid expansion has to be put into its proper context.
"We are talking about healthcare and healthcare is expensive," Weil says. "It's fairly easy to have a little sticker shock at the potential costs of various policy options in this area. But what this report does very effectively is place the spending burden that states would face if they choose to expand Medicaid in the context of overall spending."
"Many states will be surprised at the results showing that the cost to them of the coverage expansion in the Affordable Care Act comes largely from things they must do, and that the choice about expanding Medicaid is a very small share of the ultimate cost that states may face," Weil says. "But that finding is also a reminder of the importance of not just looking at total cost but disaggregating where they come from. Many states, when they talk about potential costs of Medicaid expansion, are actually lumping together all costs and not just looking at the effect of the expansion."
When the U.S. Supreme Court upheld key provisions of PPACA last June, it also struck down as overly coercive the federal government's demands that states expand their Medicaid rolls. Resistance to expanding the rolls, particularly among Republican governors, reached a crescendo in July when Texas Gov. Rick Perry sent a letter to Health and Human Services Secretary Kathleen Sebelius. Perry, who was running for president at the time, explained that the Lone Star State stood "proudly with the growing chorus of governors who reject the PPACA power grab. ... Neither a state exchange nor the expansion of Medicaid under the Orwellian-named PPACA would result in better patient protection or in more affordable care."
President Barack Obama's reelection may have caused some governors' to reconsider their options. But many Republicans see the Medicaid expansion as merely throwing good money after bad to fix a dysfunctional program.
"Even President Obama has recognized Medicaid is broken," says Mike Schrimpf, spokesman for the Republican Governors Association. "For many states, placing more individuals into a broken system would be like adding more passengers to the Titanic. And regardless of whether it's federal dollars or state dollars, taxpayers are still on the hook."
Weil concedes that even a 1% increase in Medicaid spending could prove difficult for a lot of states that are still recovering from the recession. "States have not fully recovered, even though the trend lines now are quite positive in the majority of states," he says. "But it means there is a lot of deferred attention to other priorities like education, infrastructure, and public safety that have been lining up for years. So even though the relative shares are small, the absolute demands on state governments are quite substantial."
Drew Gonshorowski, a policy analyst in the Center for Data Analysis at The Heritage Foundation, says the report is hobbled by "the uncertainty around how much savings you can expect from your uncompensated care reduction at the state level."
"The study is assuming right away a 33% reduction in state spending on uncompensated care for the uninsured as a result of the expansion. They claim that is a lowball estimate but there isn't any research that exists that shows that will be the case, or anywhere near the case," he says. "So ultimately this study hinges on that being true."
Gonshorowski says governors and state lawmakers—who unlike Congress have to balance their budgets every year—should be concerned about the long-term effects of the expansion on their budgets.
"Even in some of the more friendly state-specific estimates on the expansion, a lot of states are seeing cost even as early as 2019," he says. "You have this case where the states see the expansion as a great deal because the federal government is picking up almost all of the bill in the early years. But when the rubber hits the road, they are going to start paying for the expansion in the long run. Then the question is, can the state actually pay for the expansion at that point?"
However, Richard "Buz" Cooper, MD, director of the Center for the Future of the Healthcare Workforce at New York Institute of Technology and a Senior Fellow in the Leonard Davis Institute of Health Economics at the University of Pennsylvania, says the assumptions in the report are "reasonable."
"Costs at the federal level will be larger than I believe are generally being considered: $800 billion plus the costs of insuring those individuals who leave Medicaid (in states with eligibility levels above 138% of poverty) in the exchanges," Cooper said in an email exchange with HealthLeaders Media.
"I don't believe that those costs are in the report, and I expect they would be hard to calculate, since I don't think that we know the premium for policies in the exchanges or the amount of federal subsidy that will be provided. This is not my area of expert knowledge, but the REAL number is Medicaid + subsidies for old Medicaid patients in exchanges + subsidies for others in exchanges. What we know now is that it's going to be a lot more than $800 billion."
Weil also acknowledged that governors and state legislators are justifiably concerned that a fickle Congress could go back on its promises to fund the expansion, which would leave states holding the bag.
"These estimates are built around a financing model that is in current statute, and that is the appropriate model to use. But states are very nervous about the possibility of those formulas changing," he says. "Although it is possible that states can change their mind and adopt the Medicaid expansion at one point, and then if the federal funding becomes more limited they can reverse that position, that is a painful course of action and states really do want to be able to plan ahead. So the sooner we can come to closure on whether or not the financial arrangement in the Accountable Care Act is going to be stable, the easier it will be for states to make decisions in the long run."
Gonshorowski says that shifting the cost of Medicaid to the federal government really isn't much of a long-term solution. "All the expansion is going to accomplish is a massive expansion of federal spending and a shift in cost from the states to the federal government," he says. "Even in this most recent study, you're looking at $1 trillion in spending—$950 billion of which is federal spending. That is a massive increase in federal spending."
In the end, however, Weil says the Medicaid expansion isn't just about the numbers.
"We all know that this is far more than a fiscal exercise, and looking at the cost in the context of the numbers [of people] that would gain coverage is critical," he says. "We know that being uninsured leads to excess illness burden and premature death. We know that many states for decades have been working using either their own funding or options provided by the federal government to try to reduce the numbers of people who don't have health insurance. So while figuring out the cost of this policy is very important, there is a human dimension that needs to be part of the discussion far beyond the dollars."
New proposed rules for wellness programs that were released last week under the Patient Protection and Affordable Care Act don't break much new ground, but they will likely provide the framework and clarity that will encourage more employers to participate, observers say.
"It's a good starting point," says Stephanie A. Mills, MD, president and CEO of Baton Rouge, LA–based Franciscan Health and Wellness Services, Inc. "It's the floor, and maybe a few walls, [and] some more structure and definition. I believe that it can be instrumental in providing clarity for the path forward for employers and decreasing that anxiety to jump into this by addressing the top concerns that employers have."
Within the overall framework of the wellness program guidelines, Mills says she has so far found "no major surprises."
"Overall, for those of us who are supporting wellness programs, this is well in line with the best-practice approach," she says. "There are pros and cons, as there are with any new regulations, and we will learn more as we go into the details, but at first glance it seems to be a positive for employers and individuals."
In particular, Mills supports the clarity around the outcomes-based incentives for metrics. "That will be very welcomed by employers and will drive participation. It diminishes a lot of the anxiety that employers are feeling around discrimination and what sorts of limits should we have around the incentives and what parameters."
For employers, the proposed rules increase from 20% to 30% the maximum permissible reward for the cost of health coverage, and increase the maximum reward to up to 50% for tobacco cessation programs.
"I don't expect a lot of employers will rush to impose 50% penalties on smokers or 30% penalties on somebody who doesn't get their cholesterol under control," says Roger Reed, senior vice president, clinical services at wellness services provider Health to You, a subsidiary of HCA. "It's just another way to say to the consumer, 'Look, we are going to let your employer impose incentives but we are going to cap it so this is as far as they can go.' In working with employers across the country, we aren't seeing a lot of people saying, 'Boy, when these rules come out, we are going to hammer our employees with these incentives.'"
For individuals, the proposed rules require that the wellness programs and their incentives be laid out simply so that participants can understand them, and that protections and appeals processes are in place for individuals who have legitimate reasons for failing to meet specific metrics.
"They have to accommodate the consumers who can't meet the standards," Reed says.
Brenda L. Rooney, medical director for Community and Preventive Care Services at Gundersen Lutheran Health in La Crosse, WI, says the federal government was smart to require no baseline incentives for wellness programs and to impose a reasonable ceiling for those incentives.
"Incentives are good but they are not the be-all and end-all. Incentives can backfire on you as well," she says. "That there is a limit is probably good. People start to expect incentives and then they tend to use the incentives to reward a behavior change. Pretty soon, if you to pull the incentive away, will the behavior change go back to the beginning?"
Rather than relying too heavily upon incentives, Rooney says wellness programs should focus on changing the environment so that it supports positive outcomes, such as banning smoking in public places.
Mills called the proposed guidelines "a big deal" and a watershed moment in the wellness movement.
"When you break it down and look at the statistics of the many chronic diseases and risk factors America is facing, we really do need to shift the focus to prevention and awareness," she says. "It's a new role for providers as we take off our acute care hats and ask, 'How do we get ahead of this curve?' It is important when we look at the health of this country with the aging population and limited resources across the board to ask how do we implement new and innovative care programs to stop this progression of chronic diseases? It's getting back to the basics of good primary care, working on prevention and lifestyle and changing behaviors."
Reed is less sanguine. "My personal opinion is it will have no real influence. The only thing it will do is add clarity and guardrails."
Standalone cancer centers may be particularly vulnerable to shifting market pressures and healthcare reforms, and if they hope to survive they must demonstrate value and align themselves with the right partners, a new report says.
"It's the basic blocking and tackling response. How do you deliver greater value of quality and cost, and what is the strategic response, what is the right alignment to preserve long-term viability?" says Andy Ziskind, MD, a cardiologist and author of the brief Can Standalone Cancer Centers Survive?, published by Huron Consulting Group.
Ziskind believes that standalone cancer centers will have a harder time finding patients with the advent of integrated care.
"As health systems are integrating themselves more to create truly integrated delivery systems and they are hiring oncologists, they are trying more and more to keep their patients in the system," he says. "There is more resistance to cancer patients traveling to freestanding cancer centers. Also, a less but still relevant piece is the insurance models of narrow networks are growing. Narrow networks are here to stay, and that may limit access for some patients from an insurance perspective to go out of network."
The competition for patients will increase in an environment of continued downward pressure from government and private payers. And even as those reimbursements decline, cancer centers and other healthcare providers will see costs continue to rise. "So, there is a need to be more efficient operationally. That is in terms of basic nuts and bolts and in terms of reassessing how to create better clinical care processes," Ziskind says.
While the need to improve value and efficiency isn't limited to standalone cancer centers, Ziskind says the centers are particularly vulnerable because of their size. "In theory, if there were a large orthopedic or cardiovascular hospital, the same dynamics would apply," he says. "But for the most part, the imaging centers, the behavioral health centers, even the orthopedic ambulatory centers, tend to be smaller and more responsive to local market dynamics, whereas a cancer center might get referrals from a multistate region."
Over the next five years, Ziskind says he anticipates that standalone cancer centers will follow the rest of the healthcare sector and consolidate. In the meantime, he says, cancer centers have to return to the basics around clinical and financial alignments.
"The first thing is there has to be a rigorous, disciplined focus on becoming cost-effective and generating value in the sense of quality over cost—true clinical value and cost-effectiveness. That has to be embedded into the way they do their work," he says. "The other is reevaluating their affiliations and alignment models. That may mean affiliations or mergers or acquisitions. But the cancer center needs to be assured that there is a primary and a specialty referral source that is durable."
While healthcare reform and market pressures will create challenges, Ziskind says they will also produce opportunities for high performers, particularly specialists.
"Under healthcare reform and payment reform and accountable care, the ideal is that the patient should go to the right place at the right time for the right treatment by the right people," he says. "That will tend to favor the highly specialized treatments, like bone marrow transplants or stem cell transplants or potentially proton therapy. What it will discourage is routine cancer care being delivered at the freestanding cancer center—things that can be done locally."
The average growth in per capita cost of healthcare services slowed over the past year by nearly 0.7%, but the overall pace of that growth continues to easily outstrip inflation in the larger economy, according to Standard & Poor's Healthcare Economic Indices.
For the 12-month period ending in September, S&P reports that the average per capita cost of healthcare services covered by commercial insurance and Medicare programs rose by 5.06%—a slight deceleration from the 5.7% annual growth rate recorded in August.
Inflation in the overall economy was 2% for the same 12 months, as measured by the Consumer Price Index.
David Blitzer, managing director and chairman of the Index Committee, S&P Dow Jones Indices, says the decelerating healthcare cost growth is likely due to the continuing sluggish economy.
"I don't see specific health-related stuff that is national in scope to have this impact," he says. "It is still too soon for most of the 'Obamacare' stuff coming along. There may be some peculiar shifts because we've changed the age composition of people covered, because we now cover students up to the age of 26. So in some areas there could be some strange effects. The average age of that covered population in commercial insurance comes down and therefore the average health goes up. But at the same time, the kind of injuries is probably going to change, too. Bring the age down and you raise the proportion of young adults who have automobile accidents proportionately ... and you have less chronic illness than you used to. But I don't think any of that is big enough in a macroeconomic scale."
The indices show that healthcare costs covered by commercial insurance plans increased by 7.05% over the year ending in September, down from the 7.81% annual increase reported for August. Medicare claim costs growth slowed to 2.04%, compared to 2.48% in August.
Blitzer says the sputtering economy may be depressing volume for elective procedures.
"In a weak economy and with people concerned about job losses, there is some downward movement in elective treatments," he says. "If someone is afraid of losing their job, do they get the elective work done right away, or do they delay it because they want to be seen in the office and they don't want the boss to put them on the wrong list?"
"The other thing that shows up in a weak economy and low inflation is that salary and wage increases will be less than otherwise," he says. "When hospitals set their salary standards and the inflation rate is 2%, they aren't going to hand out 10% across-the-board raises. They probably would bargain harder for anything they buy from vendors, from aspirins to MRI machines, because money is a little tighter and they are concerned about where the next dollar is coming from."
All nine S&P Healthcare Economic Indices posted decelerating annual growth rates in September. Professional Service Medicare and the Hospital Index posted their lowest annual rates since January 2005. The Hospital Commercial Index hit a new recent low with an annual growth rate of 5.12%—its lowest since May 2010. The Professional Services Index annual growth rate was 6.13% in September 2012, down from the 6.67% August 2012 level. The Hospital Index's growth rate fell to its seven-and-a-half year historic low of 3.84% in September, from 4.54% recorded in August 2012.
Blitzer says that, given the peculiarities of healthcare today, it is unlikely that the sector's cost growth will be brought in line with the CPI anytime soon.
"On a grand scale kind of thing, there are two difficulties that healthcare faces," he says. "One is [that] most people, when they go to the doctor, are not informed customers with easy freedom to go buy another product. You don't have the option to go across the street, and most of us don't know the difference."
"The other problem is that delivering healthcare is tied to labor, and that is very hard to reduce," he says. "We tried to do that a little with healthcare, where physicians' assistants replace physicians and nurses replace physicians' assistants, and so forth. But it is very difficult to squeeze down the labor component or to raise the labor productivity enough."
"That's the long-term problem—getting labor productivity gains," he adds. "We are trying to do some things. The average hospital stay has been dramatically reduced from 20 years ago, [for] one example. Another is things like laparoscopic surgery. But there's an extent to which you can do these things. So, I would love to be optimistic but I think we are stuck with a margin of a few percentage points above the general rate of inflation for healthcare. It's not because people are getting cheated. There is no evil element to this. It is just a fact of life."
The S&P Healthcare Economic Indices estimate the per capita change in revenues accrued each month by hospital and professional services facilities for services provided to patients covered under traditional Medicare and commercial health insurance programs. The annual growth rates are determined by calculating a percent change of the 12-month moving averages of the monthly index levels versus the same month of the prior year.
Healthcare costs began to accelerate in May 2009 and peaked in May 2010, before decelerating through the first half of 2011. An acceleration trend began again in October 2011 but tapered slightly in June 2012.
In 2011 S&P reported that the average per capita cost of healthcare services covered by Medicare programs and commercial insurance grew by 5.28%, including 7.11% for commercial insurance plans and 2.51% for Medicare.
The healthcare sector got a little more concentrated last week with the announcement out of Louisville that University Hospital and James Graham Brown Cancer Center have signed a joint operating agreement with KentuckyOne Health.
Officials say KentuckyOne Health will invest about $1.4 billion in infrastructure improvements, research, and program development over the next 20 years.
The joint announcement was made by leaders from the University of Louisville and University Medical Center, which are the parent organizations for University Hospital and the Brown Cancer Center, and from KentuckyOne Health.
"Our Joint Operating Agreement ensures that we not only maintain our current academic and medical services, but that we have the financial resources and statewide network to continue to expand and innovate those services for the future," UMC President and CEO Jim Taylor said in prepared remarks. "This venture will put us at the forefront in our field to create an aligned organization that has both the breadth and depth to address the coming challenges of healthcare reform."
The agreement caps a year-long effort by UMC and the University of Louisville to find a suitable partner while allowing them to retain local control of the facilities. All UMC policies for women's health, end-of-life care, and pharmacy remain unchanged. UMC will continue to manage and operate University Hospital's Center for Women and Infants. All women's health services, which includes the full range of reproductive services, will continue to take place at CWI, at the same location and provided by the same people.
The JOA is scheduled to take effect on or before March 1, 2013. KentuckyOne will oversee most of the day-to-day operations, while UMC will retain ownership of its assets. UofL, UMC, and KentuckyOne Health have also entered into an academic affiliation agreement.
The JOA has the support of Kentucky Governor Steve Beshear and Attorney General Jack Conway, who said his review of the plan addressed concerns raised about transferring ownership of a state asset.
"The executive branch of the Commonwealth of Kentucky retains authority to oversee the new agreement. It also appears that the same health services will continue to be available on-site at University Hospital," Conway said in prepared remarks. "This partnership will help University Hospital secure financial stability, protect care for the indigent, and continue the excellent research and teaching that is conducted at our hospital."
Highmark, West Penn Allegheny leaders meet to resurrect merger
The on-again, off-again merger talks are apparently on again between Highmark and West Penn Allegheny Health System, the two systems jointly announced.
Highmark CEO William Winkenwerder, Jr. and West Penn Allegheny Chair John S. Isherwood said in a joint statement that they'd "held productive discussions" last week just days after a judge ruled that West Penn could not leave the merger.
"A very productive session was held that focused on efforts the parties could take to address the financial condition of WPAHS to secure approval of their affiliation agreement by the Pennsylvania Insurance Department. Both parties realize there are significant issues that must be addressed and that prompt action is essential," the joint statement read. "Highmark and WPAHS continue to believe that an affiliation between them is in the best interests of both organizations and of the greater community. The parties agreed to work diligently in the days ahead to finalize their efforts and to work together to gain PID [Pennsylvania Insurance Department] approval.
"The parties and their advisors met recently with representatives of bondholders of WPAHS. Further meetings are planned. In addition, both parties are committed to initiating actions now that can improve the operating performance and finances of WPAHS. In particular, the parties agreed to focus on assisting and supporting the physician retention and recruitment with WPAHS, and to improving ongoing communications and coordinated actions prior to any regulatory approval."
Piedmont, WellStar form Georgia Health Collaborative
Metro Atlanta's Piedmont Healthcare and WellStar Health System have formed the Georgia Health Collaborative.
The collaborative intends to develop innovative healthcare delivery models, economically aligned physician relationships, and service line cost savings.Under the deal, the two not-for-profit health systems will remain independent but will use the collaborative to serve a primary service area population of more than three million people across north Georgia. With a combined 2,393 hospital beds, 10 hospitals, seven urgent care centers, and more than 700 physicians in the Piedmont Physicians Group, Piedmont Heart Institute, and the WellStar Medical Group, the Collaborative will redefine the delivery of healthcare services in metro Atlanta, the two companies announced jointly.
"Even the strongest health systems recognize that creating a sustainable healthcare industry is going to require significant change," Piedmont President and Interim COO Gregory A. Hurst said in prepared remarks. "A collaborative allows us to create both scale and efficiency without the same debt and integration challenges that come with expansion or acquisition. Our systems seem perfect for this type of partnership."
ID hospitals seek injunction against medical group acquisition
Boise, ID–based Saint Alphonsus Medical Center–Nampa and Treasure Valley Hospital announced last week that they had filed a petition for an injunction asking a federal court to delay the acquisition of Nampa's Saltzer Medical Group by St. Luke's Health System.
The filing alleges that the planned acquisition of Saltzer Medical Group by St. Luke's will create a monopoly of primary care physicians in Nampa who regularly see commercially insured patients and will have a long-term detrimental impact on the Nampa community, its citizens, and the hospital that has served the community for more than 100 years, Saint Alphonsus and Treasure Valley said in a joint statement.
The Federal Trade Commission and the Idaho Attorney General's Office began an investigation into St. Luke's actions under federal antitrust laws and Idaho's Competition Act late last year. The Idaho AG's Office has asked St. Luke's to hold off on the purchase of Saltzer until their investigation was complete. St Luke's recently stated its intent to close the deal. This has compelled Saint Alphonsus Health System to act.
The injunction papers allege the acquisition would seriously harm the two hospitals and healthcare in the community. "Our complaint further states that St. Luke's has a demonstrated pattern of cutting off referrals to nearby hospitals after it purchases physician groups like Saltzer Medical Group," the media release stated. "The injunction papers allege that this action would damage the ability of Saint Alphonsus Medical Center–Nampa to serve its long-held role of 'safety net' hospital for the community of Nampa."
Kansas regulators OK Coventry sale to Aetna
Kansas Insurance Commissioner Sandy Praeger has approved the sale of Coventry Health Care of Kansas to Aetna, her office announced. The action follows a public forum and a formal hearing conducted by the Kansas Insurance Department November 5 in Topeka.
However, the acquisition still has to be approved by regulatory authorities in 20 states. Aetna announced its agreement to purchase Coventry Health Care in a deal worth $7.3 billion on August 20.
According to KID statistics, Aetna had $57.7 million in premium sales in Kansas in 2011, and Coventry registered $187 million in Kansas premiums. Aetna provides health insurance to 18 million people nationwide, dental insurance for 13.6 million people, and has 8.7 million pharmacy benefits members. Nationally, Coventry has 3.8 million medical insurance policyholders and 1.5 million Medicare Part D policyholders.