Most consumers have no idea how much they pay for healthcare beyond premiums and co-pays.
Until they do it will be difficult to temper the rate of cost growth in healthcare, says Paul H. Keckley, PhD, executive director of the Deloitte Center for Health Solutions.
"Our surveys show that about 53% of consumers are oblivious to costs and tend to go along with whatever is suggested. Only one in 10 is inclined to be price sensitive," Keckley says.
"That is a pretty bad starting point for reducing healthcare costs, especially if the incentives in the system are for doing more, which leads doctors and providers to recommend tests and surgeries that shouldn't be done, or even medications that don't work."
Government spending accounted for 40% of the spending. Of this, Medicare accounted for 16% ($527 billion); Medicaid, around 13% ($404 billion); and other public spending just under 11% ($346 billion). Private insurance paid for 27% of expenditures ($861 billion).
"Understanding healthcare spending through the lens of the household is completing the picture," Keckley says. "We hear about national health spending, but it tends to conveniently fall into buckets that are defined by Medicare or commercial health insurance plans. And yet much of the impacts on the households' spending are the things that are not showing up in claims."
The Deloitte study estimates that 60% of healthcare expenditures are "necessary expenditures" that include: $829 billion for physician, clinical, and other professional services and account for 26% of total expenditures. Hospital care accounted for $814 billion, or 25% of total expenditures, and prescription drugs accounted for $259 billion, or 8% of total expenditures.
The remaining 40% of total expenditures are in long-term care, retail products, supervisory care, and direct administrative costs, the study estimates. Direct and indirect discretionary costs for healthcare totaled $2,898 per capita in 2010.
Major categories included out-of-pocket spending by consumers on professional services (24%), retail products and services (19%), long-term care (10%), prescription drugs (8%), and hospital care (4%). For the average household earning around $50,000 out of pocket direct costs average about $1,300 per-capita.
Keckley says the healthcare industry needs to give consumers a true picture of their healthcare costs, both what is covered and what is not.
"Most of the information that is out there for consumers is not very useful," he says. "If you think about it, we should be able to, with the technologies we have now, before you walk up to the prescription counter know what the alternatives are for medications and what the cost would be for my insurance product."
"We should know before elective procedures what the over/under is based on some simple figures. If you are having a colonoscopy or some of the more simple things even that level of transparency of cost available to people in a way they can use it is virtually non-existent. And the industry pushes back on it."
"Joe SixPack wants to know the cost. Tell me what the anesthesiologist, the surgeon, the OR, are going to cost. Tell me what it is going to be out of pocket. Don't send me an explanation of benefits 10-30 days after the event and tell me what I am going to owe. That is not rational," he says.
While educating healthcare consumers and providing price transparency have to be a priority Keckley says they're not enough.
"There have to be consequences for those behaviors. Both reinforcing positive behaviors and punishing wrong behaviors. The challenge there is the science. What is the right combination of sticks and carrots in a complex consumer environment?" he says. "It is not a simple environment the way people think. If you have limited resources or a difficult risk profile the sticks and carrots may be quite different than if you are a young healthy strapping flat belly."
"There is an interesting domain emerging in health services research called behavioral economics where we are really trying to map this to individuals with certain characteristics and what is the right blend of sticks and carrots and how do you deliver it and how much is technology and how much is money," Keckley explains.
"So it is the science around sticks and carrots that our policy makers don't have in place now and for a variety of reasons our ideological divides force overly simplistic and sometimes counterproductive results. That is what we ought to have a holy war about. The system has the money but doesn't spend it the right way to get the right results."
The study also found that:
Healthcare costs for seniors (65+) dominated health expenditures in 2010, comprising 37% ($1.19 trillion) of total healthcare spending.
The value of supervisory care provided to a friend or family member, an indirect cost, was estimated at $1,592 per capita. And that cost appears to impact seniors, small families and low-income groups the most.
Direct and indirect out-of-pocket spending is highest among seniors, at $440 billion or 37% of the total spending in this age group. Under-25 year olds spent $157 billion (25%); those aged 25–44 spent $121 billion (22%); and 45-64 year olds spent $179 billion (21%).
35% ($1.12 trillion) of total healthcare expenditures are attributed to individuals living in families with annual incomes of <$25,000. Highest-income families with annual incomes of $100,000 or more account for 17% ($534 billion). Hospital care is the largest expenditure for all income groups (26%) with the exception of the highest income group (20%).
Indirect and direct OOP costs comprise a higher percentage of healthcare spending for lower-income individuals than higher-income individuals. Thirty-two percent of healthcare spending for the lowest income group is paid out of pocket compared to 24% for highest-income families.
Nearly 80% (an imputed $492 billion) of costs for healthcare goods or services additional to the NHEA were for the key area of supervisory care. Supervisory care is the contribution made by family members and community caregivers – caring for individuals with chronic health problems or disabilities at home – which replaces care that might have otherwise been performed by paid professionals such as nurses or home healthcare workers.
The total value of the provision of supervisory care ($492 billion) is more than three times the total spending on nursing homes ($143 billion) and on home healthcare ($70 billion).
Almost all supervisory care is provided to individuals living in lower-income families and those living in two-person family units. Supervisory care is most evident in the seniors age group.
In our annual HealthLeaders 20, we profile individuals who are changing healthcare for the better. Some are longtime industry fixtures; others would clearly be considered outsiders. Some are revered; others would not win many popularity contests. All of them are playing a crucial role in making the healthcare industry better. This is the story of Jim Withers, MD.
This profile was published in the December, 2012 issue of HealthLeaders magazine.
"The idea of going to where people were always stuck with me: Joining patients in their reality and respecting their reality."
The value of the house call and taking the care to the patient's environment was a lesson learned early in life for Operation Safety Net founder and medical director Jim Withers, MD.
As a youth, Withers accompanied his father, a physician, and his mother, a nurse, when they travelled to Nicaragua, Guatemala, and St. Lucia on healthcare missions.
"I had the benefit of growing up with medical parents and making house calls as a kid," says Withers, an internist who teaches medicine at The Mercy Hospital of Pittsburgh. "The idea of going to where people were always stuck with me: Joining patients in their reality and respecting their reality. As I was trained it became more and more obvious to me that knowing the patients' reality was central to all you were going to build subsequently in terms of a medical interaction."
Twenty years ago Withers was looking for an avenue to teach his medical students "the way into someone else's reality." He had tried medical volunteer work overseas for resident students, which was rewarding but difficult to coordinate.
"I thought: 'I need a classroom that is conveniently located, that has people who are living in a different world, who are in need, and who are hopefully really stubborn people who will force me to bend my skills to their world and not the other way around,' " he recalls. "It occurred to me that street people were good candidates."
In May 1992, Withers teamed up with outreach worker Mike Sallows, a one-time denizen of the streets, to take healthcare delivery to the curbsides, back alleys, and bridge bottoms where many homeless people live. "Without a handbook on how to do this I used to dress up like a homeless person and go out with Mike at night. He allowed me to visit the camps and abandoned buildings, which just opened a whole world for me," Withers says.
"Mike chastened me that I better not look like a doctor. I just wanted to start fresh. I didn't want to come in with my own answers or presumptions. For me it was my own personal frame of reference that I really wanted to start with a clean slate," Withers recalls of his first days practicing "street medicine."
"It didn't take long before I realized I had a moral obligation to respond to unmet medical needs—and they were profound. So I began to put things into a backpack. It made sense to have some antibiotics and bandages and some referral information, and I could see how cost-effective it was to not have these folks cycle through the emergency room over and over."
In his two decades of outreach Withers has learned that reasons for homelessness are as varied as the homeless people themselves. "Each individual is different. You just don't know until you ask someone," he says. "There are certainly things that are common in the street population: Mental health problems that are untreated; addictions that get you on the street and that people pick up when they find themselves in that situation. There is a lot of history of abuse and particularly child abuse in their past."
Withers says many homeless people have undergone severe psychological trauma from life on the street and the issues that brought them there.
"They feel like they are an outsider and they adapt in a really deep way to not being part of us," he says. "It is an endlessly fascinating spectrum of the human condition, but there are people who are thwarted by survival instincts that kicked in when they were younger—someone was molesting them or hurting them when they were younger. They stood up to it and the pattern becomes one of defiance. You tend to use the tools you have in your toolbox. I do think that there is a survival mode, that a lot of people have gotten to where they just focus on what is in front of them."
In the 20 years since Withers and Sallows teamed up, Operation Safety Net has grown to include 20 employees and more than 100 volunteers, including physicians and nurses, all of whom have served thousands of homeless patients on the streets and in clinics.
The mission has expanded, too. "A lot of things have grown off of the initial house call vision of taking medical care under a bridge," Withers says. "We have housed more than 800 individuals in apartments over the past eight years. We have a severe weather center that we run and a lot of volunteers help serve food and other activities. Plus we have people who donate material goods."
There is even talk about building a curriculum around street medicine for medical students. "They are beginning to understand how popular it is and all the incredible intrinsic lessons it teaches for patient-centered care and meeting people where they are," Withers says. "An organization like ours creates a fabric within the street communities that lets people attach themselves and say, 'When I am ready, there is an option. There is someone who is not going to judge and dismiss me because I was having a bad day. They actually are accepting my reality, and who I am is okay.' "
In our annual HealthLeaders 20, we profile individuals who are changing healthcare for the better. Some are longtime industry fixtures; others would clearly be considered outsiders. Some are revered; others would not win many popularity contests. All of them are playing a crucial role in making the healthcare industry better. This is the story of Lori Swanson.
This profile was published in the December, 2012 issue of HealthLeaders magazine.
"There is a time a place and a way for a hospital to collect money but the ER isn't it."
For Minnesota Attorney General Lori Swanson, the case against Accretive Health Inc. started out as a straight-forward HIPAA violation investigation.
An employee at the Chicago-based revenue cycle management and debt collection firm lost his company laptop in a smash-and-grab while his car was parked at a Minneapolis restaurant. The unencrypted computer contained health records for more than 23,500 people.
As prosecutors began investigating the theft they also began to hear troubling reports from patients and Accretive employees about the company's business practices at three hospitals it had contracted with in Minnesota.
"I personally met with over 60 patients who were asked to pay money in the hospital. It was just unbelievable what was being asked of them," Swanson says. "There was a lady who just had her baby and she was literally told before you can take your baby home you have to put $800 on your credit card. She did.
"Another woman, we call her Jane Doe No. 3 in the papers, she was having a miscarriage. Pregnant with her first child, she went to the ER and they demanded right there in the middle of the miscarriage that she pay on a credit card. She did lose her baby that night. That kind of conduct has no place in an American hospital," Swanson says.
"In one case a child had swallowed a bottle of pills, didn't want to live anymore. The mother whisked her child to the ER in the middle of the night. They administered a charcoal solution to start absorbing the overdose," Swanson says. "Mom was literally taken from her daughter's side at that point even though the doctors needed to talk to the mom to get information about the daughter's mental state. She didn't know if she was going to live or die. The mom was asked to pay $500 on a credit card so she could return to her daughter's bedside."
Oddly, in almost every case, the patients did have health insurance. "The hospital would get paid eventually," Swanson says. "There is a time a place and a way for a hospital to collect money but the ER isn't it," she says. "When you go to the ER you don't have a wallet with you. You are fleeing your home for emergency treatment. It just was unconscionable what these patients were put through."
Swanson says she understands the financial constraints that hospitals are under and that they have the right to pursue outstanding debts. But she says there is no excuse for Accretive's tactics.
In July, Accretive agreed to pay the state of Minnesota $2.5 million, which will be put in a restitution fund to compensate patients. Also as part of the settlement, Accretive is banned from doing business in the state of Minnesota for at least two years and cannot re-enter the state for six years without the consent of the attorney general. The attorney general had alleged violations of state and federal health privacy laws, and of state debt collection laws. The settlement contains no admission of liability or wrongdoing, Accretive noted in a statement.
Swanson says she believes the investigation and the widespread publicity it received struck a nerve with the public, and that the settlement sent a message to other hospitals and debt collectors.
"When you go to the ER you want to enter a sanctuary where they are going to care about treating your medical condition and stabilizing your emotional suffering," she says. "Anybody can have a heart attack or be in a car accident and have to go to the ER. It is people's worst nightmare that it would happen to them or a family member, and at the worse time in your life a bill collector comes at you as a number on a balance sheet instead of a patient who needs care. There is a consensus that there is a time, a way, and a place for hospitals to collect money but this was the wrong place, time, and way to go about it."
In our annual HealthLeaders 20, we profile individuals who are changing healthcare for the better. Some are longtime industry fixtures; others would clearly be considered outsiders. Some are revered; others would not win many popularity contests. All of them are playing a crucial role in making the healthcare industry better. This is the story of Bob Malizzo.
This profile was published in the December, 2012 issue of HealthLeaders magazine.
"We don't want this tragedy to go in vain. Something has to happen to prevent this from happening again."
Bob Malizzo expected that executives at University of Illinois Medical Center at Chicago would blame anyone but themselves for the death of his daughter Michelle during what was supposed to be routine bile duct surgery at the hospital.
Malizzo, a Hobart, Ind., businessman and a former mayor of the city, and his wife, Barbara, were angry, confused, saddened, and looking for answers when they met with Tim McDonald, MD, UIC Medical Center's chief safety and risk officer to find out what had gone so horribly wrong during the April 2008 surgery.
Instead of excuses McDonald accepted the blame and offered an apology.
"Going in, obviously we were very skeptical that we were going to get the truth, but then when we sat down and they shared the truth with us it kind of defused the anger," Malizzo says.
When the Malizzos met with McDonald a few days after the surgery, Michelle, a 39-year-old mother of two young children, was on life support. She would die a few days later. An internal investigation determined that clinicians supervising the operation to implant a bypass tubein a clogged bile duct failed to notice that Michelle had stopped breathing during the surgery. It was later determined that she had been over-anesthetized and that she had suffered massive brain injury from the subsequent loss of oxygen.
"You still have that anger in you but not like it would be if they came in and said, 'Oh, it's not our fault. We didn't do anything wrong,' " Malizzo says. "Obviously you wouldn't trust anything they said after that and your anger would increase if you thought they were lying to you. You never really get over it but you learn to accept what has happened and then you have to decide what you are going to do."
Instead of hiring a lawyer, filing a lawsuit, and looking for a massive payout after years of costly litigation, the Malizzos sought another way to honor their daughter's memory. "Our immediate response to them was, 'We don't want what happened to our daughter to happen to someone else. We don't want this tragedy to go in vain. Something has to happen to prevent this from happening again.' " Malizzo says.
About 11 months after Michelle's death and with McDonald's encouragement the Malizzos accepted an invitation to serve on the UIC Medical Center's patient safety committee.
"We meet once a month, an hour to 90 minutes. We talk about hospital errors not only at UIC but also errors at other hospitals or harm that was done to people at other hospitals," Malizzo says. "We check our policies and procedures at UIC and if we see they are deficient, we make the changes to prevent some kind of error from occurring. So we review not only potential errors that happen at UIC but errors at other hospitals as well."
Since Michelle's death, for example, Malizzo says anesthesiologists' professional associations have called for the use of capnograms for sedated and moderately sedatedpatients to monitor carbon dioxide levels. "If the patient should stop breathing an alarm will go off," Malizzo says. "So what that does is give us some satisfaction that obviously my daughter's death didn't go in vain and that some positives are coming out of this so that other people maybe don't have to experience what we have experienced."
The family has also accepted what Malizzo called a "very generous" out-of-court settlement from the hospital that provides for Michelle's husband and two young children, who were ages 1 and 7 at the time of her death.
Malizzo says most hospitals are stuck in the mindset of denying their errors often on the advice of their attorneys. He believes that more hospitals would take a more conciliatory tone if they understood that many injured patients and their families want answers and accountability.
"The positive thing that is coming out of this for hospitals is they are starting to see financially that they are actually saving money by being transparent because you eliminate the middle man attorney," he says. "The hospital makes the mistake. They make people whole again financially and then theymove on and learn from their mistake. At UIC, their insurance premiums dropped $10 million this year because of being transparent, because of sitting down and talking with people and saying, 'It is our fault and what do we need to do to make you whole again?' "
"Maybe if we had gone to court we could have gotten more money but that isn't going to bring my daughter back and we were going to have a five- or six-year fight on our hands and your anger is intensified," he says.
The Malizzos will never get over Michelle's death. "It is something that as a parent you live with every day. When you see your grandkids you automatically think about your daughter and the things you did with her and the grandkids. It never leaves."
But the family endures by learning from tragedy. "It's gotten to the point where I am a patient at UIC. I have a bad heart," he says. "I am on the patient safety board and we see how hard they are trying to eliminate errors."
When last we looked in on the status of federal funding for Medicare-dependent and low-volume rural hospitals, a pre-election Congress was distracted and dithering before the Oct. 1 deadline.
Now, more than two months later, we can report that a post-election lame duck Congress remains distracted and dithering with no budget compromise in sight as the federal government stumbles toward the so-called "fiscal cliff."
"The funding expired on Oct. 1 and we are very concerned about it. We are desperately hoping it will be included in whatever package, if there is a package, that is put together at the end of the year," says Maggie Elehwany, government affairs and policy vice president for the National Rural Health Association.
"We are having lobbying advocacy efforts, grassroots efforts on a daily basis hitting Capitol Hill. We think that these Medicare-dependent hospitals are starting to feel the brunt but obviously it's going to hit harder next year. On top of that we have sequestration hitting on Jan. 2. So, it is a very tough situation."
Even though the enhanced funding for the 212 Medicare-dependent hospitals and about 650 low-volume hospitals expired when the new federal budget year began on Oct. 1, hope remains.
A bipartisan group of 31 Senators sent a letter this month to the Senate Finance Committee Chairman Max Baucus, D-MT, and ranking member Orrin G. Hatch, R-UT, urging them to include "The Rural Hospital Access Act of 2012" (S. 2620) in the pending Medicare physician payment legislation. The bill, S. 2620, is cosponsored by 26 Senators from both parties.
"Rural hospitals deliver healthcare to more than 60 million Americans and are the health and economic backbone for communities across our nation," said the letter.
"These small, hardworking hospitals are often the sole source of comprehensive healthcare in their area, and are typically the largest employer, and economic engine, in the communities they serve. Yet, rural hospitals face a wide array of financial difficulties and operational challenges under the current Medicare Prospective Payment System."
MDH status, enacted by Congress in 1987, requires that hospitals be in a rural area, have no more than 100 beds, and show that Medicare patients represent at least 60% of their inpatient days or discharges.
A study done for NRHA found that in 2009 MDHs operated at a negative 4% margin on average. Without hospital-specific and transitional outpatient payments, the study estimated that those MDH margins would have fallen to negative 12.6%.
A Senate Finance Committee aide, speaking on background, told HealthLeaders Media that "Chairman Baucus is working with members of Congress on the full extenders package that includes the provisions in this letter. They're hopeful Congress will be able to reach an agreement on the package before the end of the year."
Such assurances may be of little use for the administrators at rural hospitals across the country who, unlike Congress, have to provide for a balanced budget. Unfortunately, in this gridlocked environment that may be about as much as we can expect.
So, let's look at some of the reasons for hope that the funding will be restored.
First and foremost, as the number of sponsors makes clear, protecting rural hospitals is a bipartisan effort because every Senator represents scores of rural hospitals. The 31 senators who signed the letter were led by Sens. Charles E. Schumer, D-NY and Chuck Grassley, R-IA. There are few topics in the lame duck Congress that a bipartisan group of more than 30 Senators could agree on.
Second, lawmakers made it clear in their letter that they understand that these Medicare-dependent and low-volume hospitals provide vital access to healthcare in remote areas.
They understand this because the many advocates for rural health, including the NRHA and the American Hospital Association have made it abundantly clear what would happen if these hospitals were allowed to fail.
In addition, lawmakers acknowledge that most of these hospitals are the largest employers in their areas. If they shutter communities lose healthcare access and healthcare jobs and the economic effect of those lost jobs reverberates in the community.
A lot of people are hurt and somebody in elected office will be held accountable. In other words, there are direct and linkable consequences for members of Congress who fail to protect rural hospitals.
Third, for Medicare-dependent hospitals, the amount needed to fund their status is about $100 million over 10 years. By Congressional standards, that's pocket change.
The cost is a bit pricier for low-volume hospitals, about $450 million over 10 years, according to some estimates. Elehwany says that and other issues could make securing funding for low-volume hospitals particularly tricky.
"The low-volume hospitals were expanded under the healthcare reform bill, so they sort of have those thumbprints on them," she says. "It went from applying to just 19 hospitals across the country to about 650 or so. Some folks say we overshot the target and that maybe it applies to too many hospitals now. There are some on Capitol Hill trying to look for a happy compromise between that 19 and 650 figure but we don't know what that is going to be."
With so much at stake, Elehwany is urging local hospital leaders to contact their members of Congress to voice their support for S. 2620.
"We are telling them to touch base with us weekly. We have grassroots calls target lists for the House and Senate every Wednesday at noon," she says. "We are doing state-by-state outreach making sure hospitals know what is happening in this lame duck session and what is at stake."
Elehwany says most hospital administrators are so busy providing care that they don't realize all of the federal provisions and funding sources that are at risk. "For the Medicare-dependent hospital it can mean about a 12.6% average loss to a facility," she says.
"Because they are depending upon Medicare for at least 60% and in some cases 80% of their revenues, they would have to make up at least 20% from their private payer patients. That is not happening, so we think some of these hospitals are going to close if this is lost."
States that don't expand their Medicaid rolls to include residents at 133% of the federal poverty level won't get 100% of the matching federal funds made available under the Patient Protection and Affordable Care Act, the nation's governors were told Monday.
"Congress directed that the enhanced matching rate be used to expand coverage to 133% of FPL. The law does not provide for a phased-in or partial expansion. As such, we will not consider partial expansions for populations eligible for the 100% matching rate in 2014 through 2016," said a 17-page memorandum sent by Health and Human Services Secretary Kathleen Sebelius.
The memorandum, which touched upon what HHS said were 39 frequently asked questions about Medicaid expansion, market reforms, and healthcare exchanges, left the door slightly open for states that design demonstration programs.
"If a state that declines to expand coverage to 133% of FPL would like to propose a demonstration that includes a partial expansion, we would consider such a proposal to the extent that it furthers the purposes of the program, subject to the regular federal matching rate," said the notice, the 26th item buried on page 11 in the memo.
"For the newly eligible adults, states will have flexibility under the statute to provide benefits benchmarked to commercial plans and they can design different benefit packages for different populations. We also intend to propose further changes related to cost sharing."
The memo went on to state that: "in 2017, when the 100% federal funding is slightly reduced, further demonstration opportunities will become available to states under State Innovation Waivers with respect to the Exchanges, and the law contemplates that such demonstrations may be coupled with section 1115 Medicaid demonstrations."
"This demonstration authority offers states significant flexibility while ensuring the same level of coverage, affordability, and comprehensive coverage at no additional costs for the federal government. We will consider section 1115 Medicaid demonstrations, with the enhanced federal matching rates, in the context of these overall system demonstrations."
For one person, 133% FPL is an annual income of $14,856. For a family of four it is $30,657.
On other issues, the memo noted that the Obama administration no longer supports the Medicaid blended matching rate that it initially proposed. By some estimates the federal government had hoped to save about $100 billion over the next decade by using the blended rates to shift costs to states.
But when the U.S. Supreme Court ruled last June that the Medicaid expansion under the PPACA was optional, the Obama administration had to sweeten the pot to attract more states.
"We continue to seek efficiencies and identify opportunities to reduce waste, fraud and abuse in Medicaid, and we want to work with Congress, states, and stakeholders to achieve those goals while expanding access to affordable health care," the memorandum states.
"The Supreme Court decision has made the higher matching rates available in the Affordable Care Act for the new groups covered even more important to incentivize states to expand Medicaid coverage. The Administration is focused on implementing the Affordable Care Act and providing assistance to states in their efforts to expand Medicaid coverage to these new groups."
With respect to the reduction of disproportionate share payments for safety net hospitals that are scheduled to begin in 2014, HHS made it clear that it has heard the concerns raised by providers.
The memo states that "the law directs HHS to develop a methodology to reduce DSH funding over time in a way that is linked to reductions in the number of uninsured or how states target their funds. We have heard from states and healthcare providers about their concerns related to this change and are exploring all options. The Department will propose this methodology for public comment early next year."
Bruce Siegel, MD, president/CEO of the National Association of Public Hospitals and Health Systems, said in prepared remarks that he was "greatly encouraged" by the details in the memorandum, particularly as it relates to DSH payments and the "expansion of Medicaid consistent with the scope of the Affordable Care Act. The agency's guidance follows the letter and spirit of the law and takes an important step toward significantly reducing the ranks of the uninsured."
NAPH estimates that by 2019 between 6 million and 10 million people could remain uninsured than when Congress passed the PPACA. That could increase hospitals' uncompensated care costs by more than $53 billion for the period.
"This swelling demand for safety net services, along with planned cuts to federal funding for the very hospitals that provide it, could take a terrible toll on access to care for the uninsured and underinsured," Siegel said.
"We look to the promise of reform to expand healthcare coverage as broadly as possible and call on lawmakers to preserve the funding we have. We also urge the administration to work with states to ease their transition to an expanded Medicaid program and support innovative approaches to enhancing access to care."
Also Monday, HHS announced that six states have had their health insurance exchange plans conditionally approved, which means they are on track to meet all deadlines for the program, which begin assisting consumers with their enrollment options on Oct. 1, 2013. Those states are: Colorado, Connecticut, Massachusetts, Maryland, Oregon, and Washington.
"We are excited to be reviewing applications from other states making progress in building their Exchange," Sebelius said in an HHS blog post. "We will make many more announcements like this in the weeks and months to come and expect that the majority of states will play an active role operating their Exchanges."
As 2012 winds down, healthcare consolidation continues.
Cincinnati Children's Hospital Medical Center has signed an agreement to provide children at Niswonger Children's Hospital, a Mountain States Health Alliance affiliate in Johnson City, TN access to specialized services.
"This affiliation will not only help us improve the care we can offer at Niswonger Children's Hospital, but it will also allow us to keep more children close to home for their care," Steven Godbold, MSHA vice president and CEO of Niswonger Children's Hospital, said in a media release. "We're excited to be able to tap into the clinical expertise of such a world-renowned organization to benefit children and families right here at home."
Under the agreement, Cincinnati Children's will:
Create and manage an onsite hospitalist program that will collaborate with the faculty at East Tennessee State University's James H. Quillen College of Medicine. The program will focus on quality improvement, standardization of best practices, patient safety, and driving down costs.
Provide electronic interpretation of electroencephalograms (Tele-EEGs) by pediatric neurophysiologists to diagnose epilepsy and other neurological disorders.
"We are looking forward to working with our colleagues at Niswonger Children's to enhance existing health care capabilities and address specific unmet needs for patients and families in the region," said Arnold W. Strauss, MD, director of the Cincinnati Children's Research Foundation.
Niswonger operates 69 licensed beds, including 39 beds for neonatal intensive care. It is the region's only state-designated perinatal center, and serves more than 200,000 children in 29 counties in four states.
HCA Buys Thousand Oaks Surgical Hospital
Thousand Oaks Surgical Hospital has been purchased by Hospital Corporation of America (HCA), owner of Los Robles Hospital and Medical Center. The sale of TOSH by a group of area investor-physicians and Cirrus Health was finalized on Nov. 30. Terms were not disclosed
"Adding the hospitality-inspired patient care and award winning clinical attributes of TOSH to the highly specialized acute care medical setting at Los Robles Hospital brings together complementary healthcare services that increase our ability to care for the unique needs of patients," Greg Angle, president/CEO of Los Robles Hospital & Medical Center said in a media release.
"Combining the strengths of TOSH and Los Robles Hospital & Medical Center allows us to offer our community another healthcare dimension within the context of a full service, acute care hospital. It is a win-win for the community. We're able to offer the community additional care choices through the services of both hospitals," Angle said.
Los Robles Hospital & Medical Center is a licensed 344-bed acute care hospital that serves Ventura County, the Greater Conejo Valley and its surrounding communities. The hospital is fully accredited by The Joint Commission and is the only hospital in Eastern Ventura County designated as a Level II Trauma Center.
Vatican OKs Holy Cross Acquisition by Mt. Sinai
Holy Cross Hospital in Chicago and Sinai Health System announced that they are moving forward with their plans to make Holy Cross a member of the Sinai Health System. As required for the partnership to advance, the Vatican granted the request for the transfer of property based upon the recommendation of Francis Cardinal George, the Archbishop of Chicago.
As a member of the Sinai Health System, Holy Cross will remain a Catholic hospital and will fully comply with the U.S. Conference of Catholic Bishops Ethics and Religious Directives for Catholic Healthcare. The Sisters of Casimir will remain the religious sponsors of the hospital, Sinai and Holy Cross said in a joining statement.
The Illinois Health Facilities and Services Review Board will meet today to discuss the proposed merger. Hospital officials said they believe the state will approve the deal, which should be completed by the end of December.
UMMS Finalizes Deal to Acquire CHI's St. Joseph Medical Center
The University of Maryland Medical System and Catholic Health Initiatives on Dec. 1 finalized an asset purchase agreement for the 263-bed St. Joseph Medical Center in Towson. The hospital will be a subsidiary of UMMS.
"We are looking forward to what the University of Maryland St. Joseph Medical Center can bring to the community and to partnering with the physicians and staff," says Robert A. Chrencik, president/CEO of UMMS, a 12-hospital health system.
SJMC's current employees will become employees of either the new organization or UMMS.
"As healthcare reform continues to evolve, the SJMC board and CHI recognized their obligation to find innovative approaches to meet the changing needs of the communities they serve while remaining true to SJMC's Catholic identity," said Beth O'Brien, CHI senior vice president and group executive officer.
UMMS will not assume any SJMC liabilities arising from events occurring prior to Dec. 1, 2012. These liabilities will remain with SJMC and CHI.
This article appears in the November 2012 issue of HealthLeaders magazine.
In our annual Industry Survey, 21% of CEOs said their organization is cutting back on high-level, high-price technology for at least some service lines. How can leaders effectively make decisions regarding the right mix of clinical technology and products to offer, considering cost, quality, and competition, among other factors?
Gary Muller President and CEO
Marquette (Mich.) General Health System
We, in the past, have not had the capital to invest in clinical technology. The new partnership we have with Duke LifePoint is going to help us. They have a whole process that is really good about business planning and return on investment and improving quality. We would work through the Duke LifePoint process to vet the clinical technology from a quality standpoint, a service standpoint, and return on investment.
We know there are going to be Medicare cuts and cuts with readmissions. If you don't decrease them, you lose. The accountable care organizations carry a big risk. The uncertainty is huge. With our new capital partner, it will help us determine some of that and then we can invest. But for the freestanding hospital, with all this uncertainty, I'd say probably not. You need the scale to give you the comfort and security to make those decisions.
Alison Page CEO
Baldwin (Wis.) Area Medical Center
We are not cutting back on high-level technology. We look at it by the services we offer and what equipment we need to offer that service. We roll them up and we have a magic number that we set for how much we can spend—which in our case is the equivalent of our last year's depreciation. We are a small hospital, less than $50 million in revenues. So it's about $880,000 in capital each year that we are spending now. We look at what we have to do and what we'd like to do to offer more and better services or to upgrade the standards. We put it in the capital budget and see if it will fit.
We are part of a larger imaging co-op that buys the equipment and leases it back to us. Then you transfer those costs to the operating budget versus the capital budget. That saves money in the capital budget. If you have more capital appetite than you have dollars, we look at what we can transfer off the capital budget into the operating budget through some sort of lease arrangement.
Dennis Vonderfecht President and CEO
Mountain States Health Alliance, Johnson City, Tenn.
On capital constraints: We aren't cutting back but we have had to delay some of our purchases of some of the higher-end technology, and it's mainly because of capital constraints. We have had a number of replacement hospitals we have built over the past four years and so a lot of our capital budget has gone toward that.
On delays and reassessments: We have done a lot of analyses on robotics and the return on investment, and it's kind of a mixed bag. We have the da Vinci robot here—the first in the region. We had a good return on it, but there are other areas of robotics where the big question mark is the financial return on the investment. The fact that we have had to delay some of these purchases does give us a little bit more time to see what some other organizations are experiencing, maybe not being on the leading edge but being timely.
On investment in a time of uncertainty: I don't want to say the uncertainty is giving us pause, but it is one of those factors that we are taking into account a little more. Even though this equipment might be nice to have, if we have to, we can wait another year to see how it goes as far as the reimbursement picture on some of them. But we have a capital plan here that we stick to and it has served us well over the years and there is no reason to think that it won't in the future.
Stephen L. Moore, MDSenior Vice President and CMO
Catholic Health Initiatives, Englewood, Colo.
A couple of things are driving the challenges. Whether economically related to the recession or related more to the changing of health benefits by employers, the entire industry is seeing a significant decrease in volume and patient revenue related to volume, which then starts to call into question the ability to fund your capital needs. The second is more reflective of what we are doing at CHI: a complete reorientation of our capital investments (that used to be going toward new hospitals and putting new technology into our hospitals), which is now moving more toward what we call strategic capital. We are investing more in data analytics to prepare ourselves for population health and clinical IT infrastructure foundations including health information exchanges, EHR, and then strategic joint ventures where we are spending money to strengthen our regional presence either with out-and-out mergers and acquisitions or less so with the technology and products to offer.
We have solidified more of our discussions around a capital review committee process in our organization. A current decision was bringing in the TAVR [trans-aortic valve replacement], which you can do with a non-cardiac surgery valve implant at the top of the heart. It makes little sense financially from a Medicare reimbursement perspective, but it is cutting-edge technology that will not only help bring recognition regionally to parts of the organization that are performing this, but also will add a lot of value to the clinical literature as well. That is an example of where we have taken a comprehensive look at a clinical improvement technology that we have decided to go ahead with, even though it may not have had the best financial outcomes.
Reprint HLR1112-1
This article appears in the November 2012 issue of HealthLeaders magazine.
The common-sense assumption that longer waits in crowded emergency departments are bad for patients' health is bolstered by a new study.
The study, Impact of Emergency Department Crowding on Outcomes of Admitted Patients, published online this week in the Annals of Emergency Medicine, found that admission to the hospital from the ED on days with prolonged ambulance diversion or high ED crowding was associated with 5% increased odds of dying in the hospital compared to admissions on days with low ambulance diversion.
The study also linked crowding to longer hospital lengths of stay and increased costs per admission.
Lead author, Benjamin Sun, MD, an emergency physician with the Oregon Health & Science University in Portland, says the findings confirm what he had expected.
"It is something that seems to resonate with common sense, but there isn't a whole lot of evidence to support it, which is why we think this is a significant paper," Sun says.
The difference is the size and sweep of Sun's study.
"There have been studies that have looked at the relationship between crowding and outcomes. They've been limited in that they look at a roughly small number of patients or hospitals," Sun says.
"The way this differs from prior work is No. 1, we looked at a large number of patients in a large geographic area in California. In contrast, other papers have focused on the patients who were trauma or heart attacks. We looked at everybody who got admitted to the hospital."
The team analyzed 995,379 ED visits resulting in admission to 187 hospitals in California during 2007. Daily ambulance diversion was the measure of emergency department crowding.
Findings
Patients who were admitted on days with high emergency department crowding had .8% longer hospital stays and 1% increased costs per admission. Periods of high emergency department crowding were associated with 300 excess inpatient deaths, 6,200 hospital days and $17 million in costs, the study found.
"Our findings are robust," Sun says. "Every way we sliced the data it showed that the system is such that if you came into the hospital on a really busy day and you were admitted you had a higher rate of death than if you were admitted on a day when it wasn't so busy."
Although a trip the emergency room is not something that individual patients can pencil in, Sun says that hospitals should be able to track ebb and flow in their EDs.
"For most hospitals the number of patients who need to be admitted from the ED is a very predictable thing," he says. "What the profession has learned over the past 10 years of research is that ED crowding is driven by the availability of inpatient beds. When you say ‘ED crowding' it is a symptom of a problem somewhere else in the hospital."
"This is something that leaders in hospitals are increasingly aware of," he says. "Folks who run hospitals are trying to figure out how to reduce the boarding of admitted patients in the ED and how to improve the through-put of the patient in the inpatient side."
Solutions to ED Crowding
Sun says the American College of Emergency Physicians has guidelines that could help hospitals alleviate ED crowding and boarding. He detailed three recommendations "that seem to be very effective although the political will to implement these might be challenging."
1.Manage Flow
For starters, he says there needs to be someone in the hospital whose job is to manage inpatient flow.
"One common name that is given is the bed czar," Sun says. "This is either a physician or a nurse manager who is always monitoring the availability of inpatient beds. This is across all services but usually medicine and surgery are the two major services you have to watch out for."
"This may require the bed czar to know how many patients are getting elective procedures because those patients are guaranteed to require a bed after the operation. Have one person or a few people who are given the responsibility of knowing what is going on throughout the hospital so they can facilitate through-put, making sure beds are turned over as quickly as possible, making sure of their known bed needs, that the hospital is prepared for that."
2.Spread Out the Boarders
Another solution is to spread the burden of the overcrowded ED throughout the hospital.
"In a lot of the hospitals I've worked at, when the hospital is crowded you just board a bunch of patients in your hallway. You may have multiple patients in stretchers who in theory are admitted, but because there is no place to put them, they just fill up the hallway in the ED," Sun says.
"What's so special about the ED hallways? Spread these patients out throughout the hospital."
3.Control 'Artificial Variation'
A third suggestion that Sun called "the most effective, but also the most difficult," involves controlling "artificial variation."
"The numbers of patients who are admitted from the ED is like clockwork. It's very predictable. That is natural variation," Sun says.
"Artificial variation is when you have different needs for hospital beds that are based on things that physicians in the hospital can control. For example, let's say the surgeons in your hospital decide to do all their surgeries on Monday, Tuesday and Wednesday. On those days you are going to have a tremendous backup because all the inpatient beds are going to be taken up by post-surgical patients. Then for the rest of the week you then have oversupply of beds because those post-surgical patients are discharged and you have an excess of inpatient beds. Spread out the surgical schedule over an entire week."
Although the affects of healthcare reform on ED crowding were not addressed in the study, Sun was asked to speculate.
"That's a complicated question. Nobody really knows," he says. "It could make boarding worse because now that more people are going to be insured they will use the hospital more so that might contribute to ED crowding. We've seen this happen in Massachusetts where the expansion of insurance to pretty much the entire population at the least has not helped ER crowding and it probably has increased the volume of people who go to the ED."
"On the other hand, it might help in the sense that there are payment reforms going on and there is a big push to try to figure out how to keep patients out of the hospital. Right now it is really unknown. It could affect in both directions and nobody knows until we actually go to it."
Hospital groups and other providers this week intensified their campaigns to protect Medicare and Medicaid from drastic funding cuts that could be considered in the weeks ahead under the so-called fiscal cliff negotiations.
The American Hospital Association on Wednesday unveiled the results of its survey taken Nov. 13-15 which showed that 69% of the 800 registered voters queried—regardless of their party affiliation—oppose funding cuts to Medicare and Medicaid.
Specifically, survey respondents were asked if they would support or oppose a proposal to reduce Medicare and Medicaid funding for hospitals by more than $70 billion over 10 years, as has been proposed in the deficit reduction talks.
Of the 31% of the respondents who pointed to spending and budget issues as one of the two most important issues facing the country, 71% oppose reducing federal spending for healthcare, the survey showed.
"Nearly seven out of 10 voters reject cutting hospital funding for Medicare and Medicaid services and voters believe that if funding were reduced then access to services would decrease," AHA Executive Vice President Rick Pollack said in a conference call with reporters on Wednesday.
"We know that as part of the fiscal cliff discussions, Congress could further cut hospital funding to reduce the deficit. It is our view that these cuts would have serious implications for patients and could jeopardize access to quality care."
"It reinforces all the points we have been making about why people should be very cautious about looking at these kinds of options," Pollack says.
"It exposes a gap between what people on the policy side are looking at versus what the public is willing to accept. This just reinforces all of the messages that we’ve been sending during the lame duck [session] and presumably for the remainder of the year as they continue to grapple with these issues."
On other fronts, a broad coalition of 20 associations representing Medicare recipients, hospitals, nursing homes, and other providers sent a joint letter to President Barack Obama and Congressional leaders urging them to protect provider assessments from the budget axe.
The letter warned that cutting or eliminating Medicaid provider assessments would do little to reduce healthcare costs but would threaten access to quality care for seniors, children, individuals with disabilities and low-income families.
"Cutting provider assessments hurts patients," National Association of Public Hospitals and Health Systems President/CEO Bruce Siegel, MD, said in a media release accompanying the letter. "Congress and the administration must recognize that limiting this crucial funding stream will shift costs onto states—costs that will trickle down to providers and, ultimately, to millions of beneficiaries who rely on Medicaid."
Provider assessments allow states to generate revenue and federal matching funds for Medicaid. The assessments allow for expanded coverage and benefits and increased reimbursement rates. Recent budget proposals have suggested reducing the provider assessment threshold from 6%, or eliminating the program altogether.
Also this week, NAPH launched an advertising campaign that features short videos and related research designed to educate policymakers and the public about Medicaid's value to patients and the economy.
The advertisements stress the value of Medicaid coverage to the health of the more than 60 million people in the program, mostly children, women and the disabled.
The campaign also highlights Medicaid's value to state and local economies by keeping workers healthy and on the job and contributing to job creation and other economic activity in healthcare and related sectors.
"Medicaid is not only good for patients, it's good for communities," Siegel said in a media release announcing the campaign. "The evidence clearly shows the personal health and financial benefits of the program and its efficiency compared with private insurance and Medicare. But beyond its obvious benefits to health, Medicaid injects economic life into communities and states."
Safety net hospitals drive nearly 800,000 jobs nationwide and pump about $120 billion into state economies. Even modest cuts to Medicaid put hundreds of thousands of jobs at risk and would bleed billions of dollars in federal support to states.
Such a loss of funding would force states to turn to taxpayers for additional revenue and likely would result in hospitals ending or scaling back important community services, such as specialty care clinics, NAPH said.
The AHA survey did not ask the respondents how they would pay for the continued funding for Medicare and Medicaid.
Bill McInturff, a partner and co-founder of Public Opinion Strategies, which conducted the survey, told reporters in the teleconference that other surveys he has done recently suggest that the public would support across-the-board income tax increases before they would support cuts to Medicare and Medicaid.
"They really believe there are other options that they would support long before they would get to changes in Medicare and Medicaid, one of which would be raising taxes on people who make more than $250,000," McInturff says.
"It reflects the public’s unwillingness to want to make this change until and unless they believe lots of other things have been done first as regards to where they think these funds should come from. Voters have been very resistant to raising retirement ages and increasing taxes. Most of what has been discussed for the public policy solution does not have significant voter support."
The AHA survey found that opponents of Medicare and Medicaid funding cuts include:
74% of Democrats, 58% of Independents, and 69% of Republicans;
63% of men and 75% of women;
71% of whites and 64% of voters of color;
70% of voters under age 35, 63% of voters age 35-44, 73% of voters age 45-64, and 67% of seniors; and,
More than three-in-five in every region of the country
Even though the poll shows that the public does not want Congress to cut Medicaid and Medicare funding, Pollack says the programs are too big to ignore.
"A lot of that just comes down to the size of the budget," Pollack says. "When you look the whole budget and the fact that Medicare and Medicaid combined represent a big portion of federal spending, it immediately gets into the discussion in a significant way. It’s as simple as that."
The survey also shows that the public holds hospitals in high regard, with two-thirds of respondents saying they held a favorable views, and one-third have "very favorable" views of hospitals.
Only 9% of survey respondents said they had an unfavorable view of hospitals, and 21% largely said they have a mixed or half-and-half opinion. That high regard for hospitals extended across party lines, 66% of Republicans, 62% of Independents, and 70% of Democrats saying they held a favorable impression.
In stark contrast, separate polls have shown that Congress has some of the highest unfavorable ratings in its history. Averaging approval ratings of about 16%, Congress is about as popular in the United States as Fidel Castro, Hugo Chavez, and Paris Hilton.
