The collective yawn heard a couple of weeks ago after the ICD-10 delay to 2014 was announced was probably a bunch of health plan IT types wondering what all the fuss was about.
In conversations with payers and in reviewing their ICD-10 websites it's evident that the major players—Aetna, Cigna, Humana, Kaiser, UnitedHealth, and WellPoint—have been prepping for ICD-10 implementation and were comfortable that they could meet the original 2013 deadline.
That has not necessarily been the case for hospitals and physicians, which anxiously awaited confirmation of the delay first proposed in April. The American Hospital Association supported a one-year delay based on the time and effort already invested by hospitals in meeting the original 2013 deadline. The American Medical Association had lobbied for a two-year delay until 2015 citing, among other concerns, the need for a cost/benefit analysis of the move to ICD-10.
Meanwhile, America's Health Insurance Plans was copasetic either way. The prevailing sentiment in the industry is that health insurers were already prepared to meet the original Oct. 1, 2013 deadline and the one-year delay is just icing on the cake in terms of testing, although there are concerns that the delay will increase costs and cause the project to lose momentum.
How did payers leave providers alone with their angst and anxiety about ICD-10 and move to a mellower place?
In all fairness, providers face the challenge of a more fragmented market. There are a lot more providers than health plans. It will be a lot tougher for providers, particularly the small ones, to get to a place where they are all compliant at the same time.
But health insurers also experienced their own "oh, wow" moment according to Ray Desrochers, executive vice president at HealthEdge, a software company that specializes in the payer market.
"Originally payers were thinking that they just needed to remediate their core system and call it a day," he explains, "then they realized the complexities of going from 17,000 ICD-9 codes to 155,000 ICD-10 codes. That was the health insurance industry's collective 'oh, wow' moment."
For their part, providers were already fretting about the looming deadline.
To their credit, Desrochers says "payers never took their foot off the gas like some provider organizations." He says payers just rolled along assuming that the ICD-10 deadline would be sorted out one way or the other.
Even with the delay, Aetna will maintain its current momentum in its ICD-10 work, according to Stacie Watson, who heads the insurer's ICD-10 program management office. That work includes remediation of impacted systems and vendor tools, as well as affected business processes and policies.
Aetna "will be fully ready to process ICD-10 claims by Oct. 1, 2014, with a strong commitment to begin testing in 2013 with those entities that are also ready," Watson said in an e-mail exchange with HealthLeadersMedia.
Desrochers says the ICD-10 delay provides health insurers with the opportunity to take transformational steps to get ready for the new business models, which will include value-based purchasing and accountable care organizations.
ICD-10 will provide more precision and information related to diagnoses and procedures that will help providers and insurers "make better determinations around what works and what doesn't," he says.
"What we're seeing in the industry is the attitude that if they have to remediate anyway then they might as well use the opportunity not just to change out, rebuild or modify their existing system for ICD-10, but to get ready for everything that's coming." He says payers would like providers to take similar steps.
Still, there are concerns that the delay will actually increase the cost of ICD-10 implementation for many insurers and that some momentum—at least among providers—will be lost.
In addressing the potential ICD-10 delay in June before a House committee, Humana's program manager for ICD-10, Sidney Hebert, explained that Humana began planning for ICD-10 in 2009 and would spend 58% of its projected ICD-10 implementation budget before the end of this year. He noted that the one-year delay in implementation would translate into an "11% to 15% increase in total expenditures" for Humana.
There is concern among payers that as the delay has played out, some providers may have slowed their ICD-10 progress and will need to restart those initiatives.
Health insurers want providers to get their ICD-10 mojo back on track. Watson says Aetna is strongly encouraging providers and vendors to continue to work toward compliance and to use the one-year extension to address any business or system challenges they may experience.
Watson understands the provider struggles. In e-mails she noted that one of the things that makes ICD-10 so complicated is the "pervasive nature of the changes. It's more than just updating one system or one form. For many providers, there are multiple systems, applications, forms, and processes that require remediation."
Software vendors, ostensibly in a position to help, can add another layer of complication because "there are interdependencies that need to be taken into account," she explained.
The deadline delay provides an opportunity for both internal and external testing "to ensure the remediation not only works technically, but that the outcomes of all processes are what would be expected," Watson wrote.
While there has been some aversion to the ICD-10 transition and the costs associated with the move, Desrochers says the confirmed delay in the ICD-10 process "is locked and loaded now. It won't change again. People just need to get on board."
Banner Health, the Phoenix-based health system that operates 23 hospitals in Arizona, and Blue Cross Blue Shield of Arizona have formed a 50-50 joint venture to offer a new Medicare Advantage plan.
Blue Cross Blue Shield of Arizona Advantage will initially be marketed throughout greater Phoenix—Maricopa County and portions of Pinal County where an estimated 500,000 Medicare-eligible people reside. The Medicare Advantage plan will be open for business by October 15, when the national open enrollment period for Medicare begins.
The new plan will replace Banner Health's existing 22,000-member Medicare Advantage plan and continue to offer similar benefits. It will be the Blues plan's first foray into the Medicare Advantage arena, although BCBSAZ does provide Medicare Supplement and Medicare Part D plans for more than 23,000 members.
Banner Health and BCBSAZ have been seeking ways to increase their presence in Arizona's highly competitive Medicare market, where Cigna, Health Net, Humana, and UnitedHealth already offer well-established products.
The joint venture capitalizes on the name recognition of Banner Health and Blue Cross Blue Shield of Arizona in the state. The addition of the Medicare Advantage product positions the Blues plan to develop more lifetime members who maintain their healthcare coverage with the company.
Although Banner Health will maintain a governance position, the joint venture places much of the day-to-day operations of the health plan into the experienced hands of BCBSAZ to take advantage of quality improvement and care coordination programs already in place for Blues members. Banner Health's hospitals and physicians will provide the exclusive network for the BCBSAZ Advantage.
Plans to expand the market for BCBSAZ Advantage beyond Maricopa and Pinal counties are "undetermined," Chuck Lehn, vice president of managed care for Banner Health, tells HealthLeaders Media. "We would like to first focus on high quality service for our existing and new members."
Lehn said the two also have another project in the works. The Arizona Blues recently announced plans to launch BlueAlliance, a Banner Health Network–aligned commercial health plan that will offer lower premiums by limiting the network to Banner's 2,500 healthcare providers in the Maricopa County area.
Banner Health also partners with other health plans, although the joint venture is the only relationship that involves ownership. It has teamed with Aetna in an accountable care organization that offers a shared-risk product, Aetna Whole Health, which covers coordinated care only at Banner Health's Arizona facilities. The incentive for employees is reduced cost of care. The ACO will base compensation and rewards on reduced hospital readmissions, expanded access to primary care physicians, and increased use of preventive screenings. The effort builds on the health system's extensive investment in electronic medical records and health IT.
BCBSAZ is also interested in "opportunities to work collaboratively with other hospital systems in the state," Sandy Gibson, executive vice president of internal operations for BCBSAZ, says.
Two days after WellPoint CEO Angela Braly's resignation, a coalition of investment firms is asking the WellPoint board of directors to come clean about the company's political spending and lobbying activities.
>>>
In an Aug. 30 letter addressed to Jackie M. Ward, WellPoint's lead independent director, the group of five investment firms representing more than $450 billion in plan assets asks the board to "promptly disclose political expenditures, including so-called ‘special assessments' or other payments to trade associations, for the past year and planned political expenditures for the next 12 months."
The four-page letter is signed by representatives from Co-Operative Asset Management, CtW Investment Group, Marco Consulting Group, Mercy Investments Services, and The Nathan Cummings Foundation.
"Corporate political activity pursued for good strategic reasons and in an appropriate manner, and supported by clear disclosure can be positive and value-enhancing for shareholders," the letter states.
"Unfortunately, we are concerned that WellPoint's activities around healthcare reform, particularly in light of the proposed acquisition of Amerigroup, embody the other extreme: political spending that lacks adequate disclosure and potentially places shareholder value and corporate reputation at risk."
Interest in the political and lobbying efforts of health insurers has increased since the passage of the Patient Protection and Affordable Care Act in 2010 and the efforts by the US Chamber of Commerce and others to have the law repealed. The investment firms contend that WellPoint has not fully answered questions about its involvement in the transfer of $100 million to the Chamber, which reportedly used the money to fund its opposition efforts.
WellPoint officials did not respond to questions from HealthLeaders Media. In the past the company has stated that its contributions fully meet all state and federal reporting rules and regulations.
The annual report of WellPac, WellPoint's political action committee, details its extensive contributions to trade associations, including America's Health Insurance Plans, as well to candidates for state and federal offices.
Michael Pryce-Jones, senior analyst at CtW Investment Group, an umbrella group representing union pension funds, says the WellPac report does not include information about special assessments, which he defines as "one-time payments to trade organizations."
He contends that WellPoint's past and future political funding activity is especially relevant in light of its planned $4.9 billion acquisition of Amerigroup. "With the Amerigroup acquisition heavily premised on Medicaid expansion under the Affordable Care Act shareholders need to know whether WellPoint is part of any new industry efforts to undermine the ACA," he explains.
The group has not been able to rally shareholder support for its position. A resolution asking WellPoint to provide additional disclosure was soundly defeated during the company's annual meeting in May.
Almost twice as many people were affected by healthcare data breaches in 2011 as in 2010, according to a report released on Wednesday. The total number of breaches dropped by 32% to 145 but the number of people affected by those breaches doubled to 10.8 million.
The drop in occurrences reflects increased security controls and investigation procedures put in place to uncover data breaches, explains Tyler Quinn, a CPA who co-authored the report for Kaufman, Rossin, and Co., a Miami-based accounting and business consulting firm.
The increase in the number of people affected by breaches signals that individual incidents are hitting wider targets. The latest tally includes the loss of a single back-up tape containing five million records.
The findings are based on a review of breaches reported to have occurred in 2011according to the Department of Health and Human Services' website. The self reporting of breaches is a requirement for businesses under the Health Information Technology for Economic and Clinical Health Act (HITECH).
The data shows that California had the highest number of breaches in 2011 with 15, followed by Texas (11), Illinois (8), Florida (7), and New Jersey (7).
The causes are numerous and range in severity. Theft is by far the most common, accounting for more than half of all breaches:
Theft — 52%
Unauthorized access —22%
Loss 11%
Hacking —6%
Improper disposal —5%
Unknown —3%
Other —1%
Breaches that involved the loss of healthcare data affected the most individuals—6.1 million. Theft affected 2.4 million, unknown cause affected 1.9 million, and loss affected 1.2 million. Unauthorized access, hacking, improper disposal and other combined affected about 464,000 individuals.
The association between laptop computers and healthcare data breaches seems obvious, but access to other portable electronic devices such as thumb drives, backup tapes, CDs, DVDs, and X-Ray films accounted for 28% of the breaches and affected 8.2 million people.
This category of information assets is expected to continue to pose a risk due to the mobility and small size of the devices, which makes them more likely to be lost or stolen, the report says.
As protection, healthcare organizations should evaluate if encryption is applied and consider transferring data via a cloud provider.
Paper and laptops account for 27% and 22% of the beaches, respectively, but combined accounted for only 5% of the individuals affected by breaches. The study says this is a result of organizations taking steps to remove or encrypt protected health information.
Unauthorized access and improper disposal are most likely to trigger paper breaches. Healthcare organizations should evaluate their paper management procedures. Theft is the biggest threat to laptops. Encryption tools should be deployed to protect personal health information.
Angela Braly, the president and CEO of giant WellPoint since 2007, has joined the ranks of the unemployed.
She resigned Tuesday after at least a month of intense media and shareholder scrutiny of her management of the huge health benefits company.
In a three-paragraph press statement released after the stock market closed Tuesday, the WellPoint board expressed confidence in the "wisdom of potentially transformative actions taken under Angela's leadership" while stating that "now is the right time for a leadership change."
For now John Cannon, WellPoint's executive vice president and general counsel, will run the company. He is not a candidate for the permanent position.
I've been thinking about Angela Braly's potential exit since WellPoint's second quarter earnings call on July 25. That's when Braly announced a reduction in the company's 2012 outlook based on lower enrollment and higher medical cost trends. WellPoint's second quarter 2012 profits dropped about 8% from the comparable period in 2011.
Analysts on the call hammered away at the insurer's pricing strategy and claims payouts. Braly's efforts to attribute the decline to market challenges seemed particularly lame. Yes, the job market is weak, which affects membership, and there's increased competition for a piece of the shrinking commercial market, but under similar market conditions, its chief competitor, UnitedHealth, beat analyst projections in the second quarter 2012 and reported a 5.5% profit increase.
Industry profits were less than sterling overall. Four of the five major health insurers posted a drop in second quarter profits. While Aetna and Cigna did better than expected, Humana and WellPoint did worse, but only WellPoint garnered a negative forecast from analyst.
Within days the investment community was suggesting that WellPoint didn't have a market problem as much as it had a management problem. Actually, there has been a drumbeat of opposition to Braly for several years. The second quarter results just seemed to energize that effort.
The WellPoint board issued statements of support for Braly, but investment fund and hedge fund managers, including New York-based Royal Capital Management began making public their opposition to Braly's management.
When investors that own millions of shares of a company begin to disparage leadership, it usually leads to action. It's been barely a month since the disappointing second quarter earnings were released, and now Braly is gone.
She joined WellPoint in 2005 as part of its acquisition of the Missouri Blues plan where she served as CEO. Within two years she was tapped to succeed Larry Glasscock when he retired as WellPoint's CEO.
Braly's tenure was been marked by acquisitions that reflect the changing landscape of the healthcare industry following passage of the Patient Protection and Affordable Care Act.
Last year WellPoint acquired CareMore, which operates healthcare clinics that specialize in delivering care coordination and intensive treatment to the chronically ill. WellPoint is rolling out that model to additional markets. Analysts generally view the long-term prospects of this acquisition as positive.
The insurer's $4.9 billion acquisition of Amerigroup, announced in July, will add 19 states and 4.5 million members to WellPoint's Medicaid footprint. It will also enhance WellPoint's ability to serve the dual eligibles market and capitalize on the emerging long-term services market. The Department of Justice has extended its anti-trust review of the deal, but is not expected to delay the closing. Although this is generally viewed as a good, strategic buy, there is some thought that WellPoint overpaid for this asset and that created problems for Braly.
The June acquisition of 1-800 CONTACTS provides WellPoint with direct-to-consumer expertise as well as the opportunity to expand into a growing business segment. The contact lenses provider has more than three million active customers. Analysts have a mixed opinion of this acquisition with some saying the reported $800 million price tag was too high.
Braly certainly had her share of missteps. In 2010 an ill-timed effort by Anthem, a WellPoint subsidiary, to hike premiums by as much as 39% is credited with uniting congressional Democrats to support Pres. Obama's healthcare reform efforts.
Meanwhile, WellPoint has only a 27% favorability rating among hospital and health system contracting executives, according to a recent survey from Revive Health.
Braly herself was also something of a poster child for an industry often portrayed as out of touch with the realities of the needs of its members. Consumer WatchDog, a consumer advocacy group, called her "the health insurance world's Marie Antoinette" for what it considers insensitive remarks about members who struggle to pay their health insurance premiums.
According to the SEC Form 8-K filed bright and early Wednesday morning on WellPoint's investor page, Braly will remain on the WellPoint payroll through the end of 2012. No other details regarding her exit package have been released.
Press reports have placed her annual salary at just over $1 million; her annual compensation package, which includes various stock options and performance bonuses, has been estimated at more than $13 million.
The big question now is who will replace Braly at the helm of WellPoint? According to the press release that announced Braly's departure, the company will hire a search firm to review internal and external candidates.
Various analysts and investor groups have tossed out the names of a number of potential candidates. James Carlson, the CEO of Amerigroup, seems to be on many lists. Carlson was already expected to move into WellPoint's inner sanctum of leadership once the acquisition of Amerigroup is complete.
This is the first significant management change among the major health plans since healthcare reform became law. Expect all eyes to remain on this hiring process.
The final rule for Meaningful Use Stage 2 released last week by the Department of Health and Human Services "looks a lot better than some people feared," says Jeffrey Smith, assistant director of advocacy for College of Healthcare Information Management Executives (CHIME), which represents 1,400 healthcare CIOs at hospitals and clinics.
The rule, which delays the onset of MU Stage 2 until 2014, specifies the criteria that eligible professionals, hospitals, and critical access hospitals (CAH) must meet to qualify for Medicare and/or Medicaid electronic health record (EHR) incentive payments. It also specifies the Medicare payment adjustments that will be made for failing to demonstrate meaningful use of certified EHR technology.
Although stakeholders are still parsing through the 672-page rule, it is already garnering support among groups associated with the IT side of the healthcare business. The reaction is more subdued, however, among provider groups.
While Premier Health Alliance sees opportunities with the release of the final rule; the American Hospital Association views it as "an obstacle" Among the sticking points: the reporting of clinical quality measures (CQMs).
The final rule for CQMs provides for a menu-based reporting system. Eligible professionals will submit nine CQMs from at least three of the National Quality Strategy (NQS) domains. Eligible hospitals and CAHs will submit 16 CQMs from at least three of the NQS domains.
AHA contends that the change complicates the reporting of CQMs compared to the MU Stage 1 requirements. Chantal Worzala, director of policy for the AHA, told HealthLeaders Media that for Stage 1, all hospitals reported on the same 15 quality measures and EHR vendors needed to be able to produce all of the hospital CQMs.
For Stage 2 she says there is a much broader pool of CQMs and EHR vendors can select the CQMs they want to produce. "It raises a very large question in our minds about whether or not this choice that CMS finalized, is a real choice. We do need to use certified EHR technology to report the measures, but if our vendor has not been certified against a particular measure, we can’t choose it. That’s a pretty complicated scenario," explains Worzala.
"If your vendor can choose which measures they care to be certified against, it’s not clear that you have a choice on which measures to report."
CHIME is more enthusiastic about the CQM changes.
Smith says that for CHIME members the CQMs for MU Stage 1 "were very problematic" with hospitals and physicians unable to able to report on CQMs important to them because CQMs "were dictated in the beginning based on what the vendor system could do."
The final rule for Stage 2 provides more flexibility in terms of CQM selection and reduces the reporting burden. "It is definitely a step in the right direction," he says.
There is concern among some stakeholders regarding the view-transmit-download provision, which requires that 5% of the unique patients seen by an eligible professional must actually electronically download or transmit their healthcare information.
"The basic concern is that providers will be on the hook for delivering something over which they have very little control," explains Smith. He says CHIME wanted providers to have the capability for view-transmit-download without the requirement that it be used by a certain number of patients.
The concerns extend to cost, the availability of software, and privacy rules, explains Susan Turney, MD, president and CEO of the Medical Group Management Association and the American College of Medical Practice Executives.
The pressure to meet fast-approaching deadlines in 2013 and 2014 presents a challenge to vendors. And because vendor capacity is low and demand is high, costs may rise.
Turney notes that incorporating portal functionality could be a challenge because it will not be available from all EHR vendors. Eligible professionals might need to contract with an outside vendor for portal functionality and absorb the additional cost of the portal and the necessary software.
"We are also concerned about the potential for data breaches," she explains. "While comprehensive portals are becoming more common with large healthcare institutions, smaller group practices typically do not have the infrastructure to maintain and support this type of portal. It will require practice workflow to be significantly modified."
Smith says that while he understands the government’s motivation in making the 5% rule, it is still a difficult goal to meet. "The government is pushing hard on patient engagement. They figure if providers have skin in the game to get their patient online to actually download their health records then they (providers) will be more proactive and push their patients to use the system."
Premier Health Alliance takes particular pride in its successful efforts to broaden and clarify certain provider definitions, says Randy Thomas, vice president of portfolio strategy and design for Premier. "We have focused on getting definitions clarified so providers can get their share of incentives."
For example, the expanded definition for eligible professional allows physicians who are employed by hospitals, but have invested their own funds in EHR, to now qualify for EHR incentive payments.
Smith anticipates that there will be further tweaks or clarifications for MU Stage 2. But he expects the process to be less intense that for Stage 1. "I think they have a better developed game plan this time. The structure of this final rule seems more mature in terms of points of clarification. I don’t think anything big will change unless there’s a huge uproar that is supported with data."
The Department of Health and Human Services is making it official. It will delay for one year the implementation of ICD-10 code sets that classify medical diagnoses and procedures.
The final rule, announced Friday delays ICD-10 implementation to Oct. 1, 2014 from Oct. 1, 2013.
"We believe the change in the compliance date for ICD-10 gives covered healthcare providers and other covered entities more time to prepare and fully test their systems to ensure a smooth and coordinated transition by all covered entities," HHS said.
Providers have anxiously awaited confirmation of the delay, which HHS proposed in April. The American Hospital Association supported a one-year delay based on the time and effort already invested by hospitals in meeting the original 2013 deadline.
The American Medical Association had lobbied for a two-year delay until 2015 citing, among other concerns, the need for a cost/benefit analysis of the move to ICD-10.
In confirming the implementation delay, HHS noted the results of a recent survey that indicated that up to 25% of healthcare providers "believe they will not be ready for an Oct. 1, 2013 compliance date." HHS said concerns about provider readiness were confirmed in another readiness survey in which about 50% of the 2,140 provider respondents "did not know when they would complete their impact assessment of the ICD-10 transition."
According to the rule, compliance with ICD-10 "by all covered entities is essential to a smooth transition to the updated medical data code sets, as the failure of any one industry segment to achieve compliance would negatively affect all other industry segments and result in returned claims and provider payment delays."
Reaction to the delay is mixed. Rich Umbdenstock, president and CEO of the AHA, says the delay "will be especially beneficial to smaller hospitals as they modify their information systems and helpful to larger facilities to conduct additional testing with health plans."
Count the College of Healthcare Information Management Executives (CHIME) also in the pleased column. Richard A. Correll, the CHIME president and CEO, notes that a longer delay "would seriously disrupt ongoing efforts to convert to ICD-10...and significantly increase the costs of converting to ICD-10." The group asked HHS "to develop a clear path forward, with benchmarks, so that healthcare industry stakeholders can make the conversion in 2014."
Physicians, however, are generally not happy.
Susan Turney, MD, president and CEO of the Medical Group Management Association and the American College of Medical Practice Executives, cites concerns about the lack of due diligence in ensuring that the implementation of ICD-10 "will not create debilitating cash flow disruptions for physician practices."
She also notes a lack of confidence that critical trading partners, including Medicare and state Medicaid plans, will be ready in time to conduct testing well in advance of the October 2014 compliance date. "We urge CMS to significantly escalate its implementation efforts by pilot testing ICD-10, ensuring health plan, clearinghouse and vendor readiness, and developing comprehensive educational resources," she said.
The AMA statement expressed similar concerns. "The AMA recommended that CMS delay the move to ICD-10 by a minimum of two years," said Steven J. Stack, MD, board chair. "The move toward ICD-10 comes at a time when physicians are dealing with the implementation of multiple Medicare incentive and penalty programs. Implementing ICD-10 alone requires physicians and their office staff to contend with 68,000 codes—a five-fold increase from the current 13,000 codes. Physicians are also already trying to engage in new delivery and payment models. The implementation of ICD-10 will create more challenges for physicians when our Medicare system is broken and cannot provide adequate funding to cover the cost of these additional administrative burdens."
The ICD-10 delay is confirmed in a 208-page rule that also establishes a unique health plan identifier (HPID) for all insurers. The rule is one of a series of changes required by the Patient Protection and Affordable Care Act to cut red tape in the healthcare system. According to the press release announcing the HPID rule, the change will simplify the claims process by standardizing the identifier format.
"These new standards are a part of our efforts to help providers and health plans spend less time filling out paperwork and more time seeing their patients," HHS Secretary Kathleen Sebelius said in a press statement.
HPID's anticipated 10-year return on investment for the entire healthcare industry is expected to be between $1.3 billion and $6 billion," HHS said.
A select group of primary care practices will receive financial incentives to support enhanced, coordinated services on behalf of Medicare fee-for-service beneficiaries, the Centers for Medicare & Medicaid Services announced Wednesday.
Some 500 primary care practices in eight states have been chosen by CMS to participate in a four-year pilot called the Comprehensive Primary Care Initiative (CPCI).
The 2,100 individual providers will receive payment from both government and commercial payers to deliver care to more than 300,000 Medicare fee-for-service beneficiaries.
CMS will pay a management fee that will average $15 to $20 per beneficiary per month. Other government and commercial payers will offer enhanced payments to the primary care practices. After two years providers will have a chance to share in any savings they generate.
The additional monies may be used to help physicians cover the costs of extended treatment hours, electronic health records, coordinating care with other healthcare providers, engaging patients in managing their own care, as well as providing individualized care for patients living with multiple chronic diseases.
Practices were selected through a competitive application process based on their use of health information technology, ability to demonstrate recognition of advanced primary care delivery by accreditation bodies, service to patients covered by participating payers, participation in practice transformation and improvement activities, and diversity of geography, practice size and ownership structure.
The selection process began late in 2011 when CMS recruited a pool of commercial and state payers to the CPCI program.
Some 40 public and private payers in Arkansas, Colorado, Kentucky, New Jersey, New York, Ohio, Oklahoma, and Oregon joined the program. The seven pilot locations were designated based on the percentage of the total population covered by the participating payers.
The number of beneficiaries in each pilot ranges from 40,500 in the Capital District-Hudson Valley Region of New York to 51,000 in Arkansas. Participating payers include Anthem Blue Cross Blue Shield of Colorado, Cigna, Humana, and UnitedHealthcare.
"Primary care practices play a vital role in our health care system and we are looking at ways to better support them in their efforts to coordinate care for their patients," Marilyn Tavenner, the acting CMS administrator, said in a press release.
Despite all the talk about long-range goals to achieve affordable and accountable care, hospitals set very short-term goals when it comes to their contracting priorities with health plans. Hospitals are more concerned with increasing their reimbursement rates and limiting claims denials than they are with developing bundled payments or ACOs, according to survey results.
The annual survey was commissioned by ReviveHealth, a Nashville-based public relations firm that focuses on healthcare, but is performed by Monigle Associates, a Denver-based branding research firm. The survey captured responses from more than 400 hospital and health system CEOs, CFOs, and payer relations executives who negotiate managed care contracts with national health insurance companies such as Aetna and Cigna.
Insurers don't like the survey because it generates a few attention-getting favorability ratings about the health insurer (WellPoint) that hospitals and health systems love to hate. That's the story that has gained the most media attention. It's too bad, because a deeper dive uncovers some real meat regarding the often contentious relationship between hospitals and health insurers.
Hospitals were asked about their health plan contracting priorities over the next 12 months and asked to rank 10 issues in the order of importance for their organization's success. I asked Brandon Edwards, president of ReviveHealth, to provide some insight into the results.
1. Higher contracting rates with their largest payer
Hospitals view getting a better payment rate from their largest customer as their best opportunity for revenue growth. Bundled payments and ACOs are important, but Edwards says hospital execs tell him that without better rates it doesn't matter what else they do. According to the survey, independent Blue Cross Blue Shield plans and WellPoint/Anthem account for the largest share of hospital net revenue.
2. Higher contracting rates with their second and third largest payers
If hospitals can't move the needle with their largest payer then they'll move onto others. UnitedHealth and Aetna are ranked second and third in terms of hospital net revenue, and according to the survey, hospitals may be prepared to put more pressure on those payers.
3. Better protection against denials
Edwards notes that denials protection is growing in importance among hospitals, which are concerned about actual reimbursement yields in relation to denials. A hospital could negotiate a 6% rate, but in the face of clinical and administrative denials the yield might be only be 3% or 4%.
"Hospitals are saying that they know they can't get 9% anymore, but if they negotiate 6% then that's what they need to get. Hospitals recognize that trend isn't going to be their friend anymore so they have to do better on yield. They are looking for ways to protect themselves."
4. Better claims processing and payments
Payers are the bank, says Edwards. They hold the money and control the process. Claims processing, protection against denials, and better contract language are variations on the same themes of timeliness and accuracy.
"It's not whether a hospital will get paid, it's how long it has to wait for the correct payment," Edwards says.
Hospital claims are usually expensive and complicated because they have a lot of moving parts. Insurers complain that hospital claims are often incomplete and filled with errors. Hospitals contend the claims rules are often unclear and open to interpretation.
5. Better rates for physicians
Whoever gets the docs wins, says Edwards. It's about the ability to steer membership to hospitals and out-patient facilities. If the hospital pays the doc then it gets the referral pattern.
6. Shifting market away from one payer
What would it take to accomplish this? Edwards says some narrow network deals may enable hospitals to drive business from one payer to another, but they aren't very common.
7. Better contract language with the largest payer
Hospitals are looking to improve the language that affects the timeliness and accuracy of payments, as well as the coverage of high cost drugs, carve outs, and medical devices. Edwards says he knows of hospitals that have refocused their negotiations with insurers from reimbursement rates to coverage issues. For example, they work to make sure they are reimbursed not just for a knee replacement procedure, but also for the knee implant itself.
8. Better reimbursement for carve outs
Carve outs can include services provided in trauma and neonatal intensive care units, as well as transplant and implant procedures. Edwards says this is important, but ranks as a lower priority because not as many hospital provide these services or uses carve outs. "Now they try to cover these items in their overall rates," he explains.
9. Better Medicare Advantage rates
Aging baby boomers are increasing demand for Medicare Advantage and payers such as Cigna are acquiring MA plans in an effort to grab a significant share of the market. Although reimbursement rates are an ongoing battle, Edwards says this priority is less important to hospitals than it was last year. "Did they rate it low because they just don't think there's anything they can do about the rates?"
10. Bundled payments for medical home, ACO
Making this a lower priority item doesn't mean they aren't doing it explains Edwards. "It means they care about it less and it moves the needle less than the other factors. Other priorities can be done quickly but the return on bundled payments and ACOs could take years."
After you've blazed a trail and made near-universal healthcare coverage a state law, what do you do for an encore?
If you're Massachusetts, you mandate cost containment.
In July the Massachusetts legislature passed a landmark bill, S 2400, touted as the first effort by a state to rein in healthcare costs. The bill, now law, links increases in healthcare spending to the state's gross state product and is expected to help reduce healthcare spending by $200 billion over 15 years.
The law holds providers and payers responsible for healthcare spending increases with outliers facing fines as high as $500,000 if they fail to meet performance targets.
Sen. Richard T. Moore (D-Uxbridge) chairs the Senate Committee on Healthcare Financing and was the primary author of S 2400. He was also the primary author of the original healthcare reform law signed by then Governor Mitt Romney in 2006, as well as the major updates enacted in 2008 and 2010.
Sen. Moore recently spoke with HealthLeaders Media about how the state's efforts to contain healthcare costs and the role providers and payers will play in the effort.
Q. What provision of S 2400 provides the biggest opportunity to reduce healthcare costs? A. There are a couple of things. We set a statewide goal to bring healthcare costs in line with inflation, but it's up to the providers who deliver that care to figure out how they are going to meet the requirement.
We don't direct them to follow a specific course. But if they aren't meeting the goals, they will be asked to develop a specific plan to meet the goals. The law is designed as an opportunity to let the market respond to the need to get costs under control and to squeeze out clinically unnecessary or duplicative services.
We promote transparency by asking providers to identify expected out-of-pocket costs for the patient. That effort, combined with quality measures developed under a plan we passed in 2010, will help patients become better educated health consumers.
We're also pushing for programs like Medicaid and the state employee's health plan to shift from fee for service to global payment and coordination of care. We want to move away from FFS as much as we can.
We modeled our malpractice reforms on a plan Michigan has used for more than a decade. It provides for more of a mediation process between patient and provider. Most malpractice cases are settled so they never go to court and there's usually a confidentially agreement as part of the settlement. We want to learn what happened and be able to do a root cause analysis to see what can be done to minimize the chance of that situation occurring again with other patients.
We have a provision to monitor whether the reforms will reduce defensive medicine, which increase health costs. We want to make sure providers aren't ordering procedures just to cover their butts.
Q. Is there one provision of the law that you view as particularly important? A. Well, like any good research paper, we always need to have more studies. We'll have a commission look at the variation of price. We want to know why there are price differences for a particular procedure. We've seen cases where the same physician will have different charges for the same procedure. We need a better understanding of pricing.
We know some of it is market share, but there are other reasons. We're looking for a way to compare apples to apples instead of just looking at prices and saying they are different. There are probably valid reasons for the price differences but we want to understand the value to the patient and health system that justifies those differences.
Another study group will look at the issue of diagnosis. Studies suggest that 15% to 44% of diagnosis are generally are wrong. If that's true then people are getting treatment that doesn't do them any good because the diagnosis is incorrect. What can we do about that?
Q. Health plans are removed from the actual delivery of care, so what can they do to affect the cost of care? A. Look at Blue Cross Blue Shield of Massachusetts, which is half of the insurance market in the state. It provides quality contracts that set standards for providers. The providers only receive higher payments if they improve the quality of care without increasing the cost of care.
We created a standard for the medical loss ratio (MLR) that's higher than the federal standard in the Affordable Care Act .It's 90% now and will be reduced to 88%. Most insurers have reduced their administrative costs to meet the MLR although some have paid rebates. They have substantial incentive to be part of the solution.
Q. Are you concerned that health plans could adopt gatekeeper models and require a lot of pre-authorizations for care? A. We've done several things to try and minimize that potential. In our 2008 amendments to the reform law we went to uniform billing and coding. With this latest bill, we provide penalties so some stragglers will complete those tasks.
Now we require standardized preauthorization procedures. Plus, we have an established internal and external appeals process so a plan can't deny a procedure just to save money. They have to follow best practices.
Q. Why legislation? Why not let market forces work this out? A. Well, the cost of healthcare is still increasing everywhere. Health reform here didn't add to the cost but it didn't save enough either. The average rate of inflation in the state is 3.6%; average healthcare costs are increasing by 7.2%.
That's not sustainable as we look over the next 10 to 15 years. The marketplace is continuing to increase the costs so the marketplace has to be incentivized to be part of the solution.
Not every payer or provider has worked successfully to get costs under control. We've set up the framework to do that without being overly regulatory. Everybody doesn't have to use the same plan but everyone has to get to the same goal.
Q. How did you get providers and payers to go along with this? A. We have a very capable group of providers and payers. We've been working at this for a long time. We haven't denied coverage for pre-existing conditions and or capped coverage for years. Our insurance companies and providers have done pretty well even with those requirements.
Another thing is that our efforts have been bipartisan. We've passed healthcare reform under a Republican (Mitt Romney) and Democratic (Deval Patrick) governor.
Also, we've done it incrementally. My view of healthcare reform is that it's a dynamic process that has to be adjusted if something isn't working or has unintended consequences. I think the providers and payers know we listen to them.