Twenty-three facilities in seven states that are affiliated with the for-profit HCA Inc., six affiliated with Lifepoint, and four with Trinity Health were charged with submitting false claims to Medicare for a procedure to treat spinal fractures.
Fifty-five hospitals in 21 states have agreed to pay more than $34 million to settle allegations that they submitted false claims to Medicare for kyphoplasty procedures, the U.S. Department of Justice announced Tuesday.
Kyphoplasty is a minimally-invasive procedure used to treat certain spinal fractures that often are due to osteoporosis. It can be performed on an outpatient basis, but the hospitals involved in the settlement admitted patients and billed it as more costly inpatient care, according the DOJ. The DOJ stated that "the claims resolved by these settlements are allegations only, and there has been no determination of liability."
"Hospitals that participate in the Medicare program must bill for their services accurately and honestly," Stuart F. Delery, acting assistant attorney general for the civil division of the DOJ, said in a press statement. He added that the DOJ "is committed to ensuring that Medicare funds are expended appropriately, based on the medical needs of patients rather than the desire of medical providers to maximize profits."
The settling hospitals include 23 facilities in seven states that are affiliated with the for-profit HCA Inc. The Nashville-based healthcare company will pay $7.14 million in settlement monies.
In an e-mail exchange, an HCA spokesperson stated, "we are pleased to see new clarification of industry care standards, which help physicians make decisions regarding kyphoplasty patients, and we are confident as a result that this issue has been resolved."
HCA, which operates 162 hospitals in 22 states, is no stranger to fraud settlements. Between 2000 and 2003, HCA paid $1.7 billion to the federal government to settle an extensive false claims investigation that included Medicare and other federal health programs.
In addition to the 23 HCA hospitals, other multi-location facilities in the kyphoplasty settlement include:
Six hospitals affiliated with the Brentwood, TN-based Lifepoint Hospitals Inc., which will pay $2.5 million.
Five hospitals affiliated with the Livonia, MI-based Trinity Health, which will pay $2.4 million.
Four hospitals affiliated with the Clearwater, FL-based Morton Plant Mease BayCare Health System, which will pay $3.9 million.
The settlements bring to a close an investigation that has led to more than 100 hospitals paying $75 million to resolve allegations that they mischarged Medicare for kyphoplasty procedures.
The investigation stemmed from a 2008 qui tam (whistleblower) lawsuit filed in federal district court in Buffalo by two former employees of Kyphon Inc., which sold the equipment and materials used to perform kyphoplasty. The two contended that hospital and Kyphon violated the federal False Claims Act.
The whistleblowers alleged that the company persuaded the hospitals to perform the procedure on an inpatient basis to capture larger Medicare payments, Matthew Smith, an attorney with Phillips & Cohen LLP, the Washington, D.C. law firm that represented the whistleblowers, explained in a telephone interview.
Kyphon sold to hospitals kyphoplasty kits valued at about $3,400. Although Medicare outpatient reimbursement grew overtime, Smith says inpatient reimbursement averaged between $6,000 and $12,000, depending on co-morbidities listed and whether the hospital performed a bone biopsy.
He added that "inpatient care generally isn't medically necessary for routine, scheduled kyphoplasty procedures."
Medtronic Inc., which acquired Kyphon in 2007, settled the 2008 qui tam suit for $75 million. Tuesday's settlement brings the total amount recovered from kyphoplasty-related cases to more than $149 million.
The final rule on exemptions from the individual shared responsibility payment penalty mandated by the Patient Protection and Affordable Care Act identifies nine categories. Less than 2% of Americans are expected to qualify for exemption, the Congressional Budget Office estimates.
The Department of Health & Human Services released on Wednesday its final rule [PDF] detailing who is eligible for receive exemptions from the individual shared responsibility payment penalty required as part of the Patient Protection and Affordable Care Act's individual mandate.
The penalty is a flash point among some interest groups and members of Congress who object to Americans being subjected to the play or pay provision of PPACA. Several bills are expected to be introduced in Congress to remove the penalty entirely.
In a fact sheet released with the rule, HHS contends that the rule "will ease implementation and help to ensure that the shared responsibility payment obligation applies only to the limited group of taxpayers who have ready access to affordable coverage but choose to spend a substantial period of time uninsured."
Less than 2% of Americans are expected to owe a shared responsibility payment, the Congressional Budget Office estimates.
The 139-page regulation, which was released without fanfare, is largely a reflection of the proposed rule released in February. It confirms that individuals who cannot afford health insurance will not be subject to the penalty payment. It also clarifies an exemption from the penalty for people who live in states that have opted not to expand their Medicaid coverage.
The rule details nine categories of exemptions, including:
People who lack access to available plans on the state health exchanges
People who have experienced hardships in their efforts to obtain health insurance
Members of certain religious groups
Members of healthcare sharing ministries
Incarcerated individuals
Undocumented immigrants
Low income individuals who can't afford coverage
Individuals with coverage gaps of up to three months
The final rule broadens the exemptions for American Indians to include individuals who are eligible to received medical care through the federal Indian Health Service. The Associated Press recently reported that PPACA exempted only American Indians and Alaska Natives who are members of the more than 500 tribes recognized by the U.S. Bureau of Indian Affairs. This final rule will also include the more than 100 tribes that are recognized by states only.
Applications must be filed to support exemption requests. In general the exemptions will be in force only for the calendar year when the application is submitted.
Typically, the state health exchange will be in charge of granting certificates of exemption in the hardship and religious categories. The Internal Revenue Service, however, will exclusively handle the exemptions for illegal immigrants, individuals with household income below the tax filing threshold, individuals who cannot afford coverage, and individuals who experience a short coverage gap through the tax filing process.
The rule provides a choice to individuals for the exemptions in these categories: members of a healthcare sharing ministry, incarcerated individuals, and members of recognized Indian tribes. These exemptions could be provided either through a health insurance exchange or through the IRS.
A U.S. House subcommittee's review of proposals to improve the Medicare program focuses on three suggestions, but simultaneously restructuring the benefit design, maintaining the average value of benefits, and producing Medicare savings will not be simple.
The debate over how to modernize and improve the fee-for-service Medicare program continued Wednesday on Capitol Hill as the House Energy & Commerce Subcommittee on Health met with a panel of health policy researchers to review a number of proposals.
Medicare reform has been a front burner issue for several House and Senate committees as Congress grapples with making the tough decisions necessary to preserve the future of the almost 50-year-old program, which faces insolvency in 2026.
In a series of opening statements, representatives from both sides of the aisle presented a laundry list of concerns, including Medicare's complex benefit design, the impact of program changes on the vulnerable population of Medicare beneficiaries, and the effectiveness of cost-sharing in encouraging beneficiaries to seek high-value care.
The witnesses were Patricia Neuman, ScD, director of the Program on Medicare Policy and senior vice president of the Henry J. Kaiser Family Foundation; Katherine Baicker, PhD, a professor of health economics at the Harvard School of Public Health; and Thomas P. Miller, JD, a resident fellow in health policy studies for the American Enterprise Institute.
Wednesday's discussion was framed around several of the specific recommendations presented to the subcommittee in April by the Medicare Payment Advisory Committee, (MedPAC) but focused on these three proposals:
1.Combine Medicare Parts A and B under a unified cost-sharing structure.
Medicare has always maintained separate deductibles for Parts A and B. Initially, Medicare was modeled after private insurance, although a single deductible for all medical services is now commonplace among private plans.
But "a single combined deductible for both types of services might lessen the effects of the current structure on beneficiary incentives," says MedPac's April report to the subcommittee.
Inpatient care (Part A) carries a high deductible and because that care is not discretionary, it is less likely to be influenced by cost sharing. However, physician and outpatient care (Part B) are more discretionary and more likely to be influenced by cost sharing.
Thomas Miller of American Enterprise Institute said removing the separate deductibles for Parts A and B, and even Part D, "provides a potential policy reform tool that could achieve the twin goals of saving taxpayer dollars while improving the most essential risk protection benefits available to elderly beneficiaries." He suggested that savings could be used to provide better stop-loss protection against large catastrophic risks.
2. Institute a cap on out-of-pocket spending to protect beneficiaries from the threat ofmedical bankruptcy.
In his opening statement Rep. Joe Pitts (R-PA), subcommittee chair, expressed concerned about the uncertainty of out-of-pocket costs. He noted that Medicare typically requires a 20% copayment, but without knowing the total cost for a doctor's visit, hospitalization, or procedure, seniors can't translate that 20% into dollars and cents until after the service is delivered.
While most beneficiaries in FFS Medicare have supplemental insurance to help with unpredictable health expenses, Patricia Neuman of the Program on Medicare Policy said that even with Medicare and supplemental coverage, beneficiaries still have high out-of-pocket costs.
"They spend three times as much of their household budgets on health expenses as do non-Medicare households. Among beneficiaries with incomes below $20,000, half of them spend 20% of their income on healthcare and health insurance premiums."
3. Incentivize high-value care.
While there was general agreement that the current FFS system does very little to engage patients to seek the most effective healthcare, witnesses noted that a body of research indicates that any increase in cost sharing will change how Medicare beneficiaries use services. The goal is to develop incentives that increase the use of essential health services while reducing the use of less effective services.
In her testimony, Katherine Baicker of the Harvard School of Public Health noted that Medicare reforms are typically evaluated on how they impact the bottom line or whether the burden is borne by providers by beneficiaries.
"These metrics are not enough. Reforms must also be evaluated on how they affect the risk of potentially high expenditures to which beneficiaries are exposed–striking a better balance between financial protections on the one hand and preserving incentives to consume care wisely on the other."
Baicker warned that cost-sharing that ignores the differences in health benefits produced by different types of care, could reduce the use of highly effective care as much as it reduces use of low-value care.
A better approach, she suggested, is value-based cost sharing where services of high value would come with little or no cost sharing. Cost sharing "should be ratcheted up depending on how the value of care diminishes. Care that delivers very little benefit for seniors should come with a substantial copayment."
Although the committee hearing ended without taking action on the recommendations, there was general agreement that a consensus is beginning to build around these proposals.
Still, Patricia Neuman cautioned that the committee has "set a high bar" if it hopes to restructure the Medicare benefit design to provide catastrophic protection, streamline benefits, nudge beneficiaries toward higher-value services, strengthen financial protections for low-income beneficiaries, maintain the average value of benefits, and produce Medicare savings. "Achieving all of these goals simultaneously is a challenge."
Almost all the growth in Medicare in recent years has been accrued to Medicare Advantage. Now health systems and hospitals are considering collaborating with an insurer or developing their own Medicare Advantage plans.
"If [insurers] want to get on the dance floor, now is the time to do it," stated Paul Mango, a director at McKinsey & Co.
Speaking at a packed session at the annual conference of America's Health Insurance Plans, in Las Vegas earlier this month, Mango outlined how competing market dynamics are transforming the healthcare industry and how those influences may affect health plans.
His acknowledgement that hospitals and health systems, are looking at becoming insurers—most likely in the Medicare Advantage market—resonated well with the AHIP crowd.
Mango pointed to several factors, including simple economics, that are sparking provider interest in taking on an insurer role in the Medicare Advantage market.
With an emphasis now on care coordination and the continuum of care, the healthcare delivery system is shifting from hospitals to physician offices and outpatient facilities. Hospital executives understand that the return on investment on future bed towers will not be positive.
As Mango explained, the commercial book of business, which historically has generated about 150% of margin, is shrinking. That means hospitals must raise their prices each year just to stay even. Meanwhile, the Medicaid and Medicare books of business are growing, even as reimbursements are falling.
Mango noted that almost all the growth in Medicare in recent years has been accrued to Medicare Advantage. "In our minds, it's here to stay. We think it will be a refuge for any senior over the long term."
Medicare Advantage will become more important as reduced reimbursements push doctors out of fee-for-service Medicare. In addition, Medicare FFS could also be challenged by decisions from the Independent Payment Advisory Board or IPAB. The Affordable Care Act gives IPAB the power to step in and manage Medicare expenditures when costs, such as physician reimbursements, get out of line.
Under these circumstances providers have several options. They may:
Lower their per-case operating expenses and continue to play on the fee-for-service field,
Participate in the risk arrangements developed by the Centers for Medicare & Medicaid Services,
Partner with an insurer on a Medicare Advantage plan, or
Develop their own provider-led Medicare Advantage plans
In terms of maximizing market share and margin, Mango said hospitals are most interested in collaborating with an insurer or developing their own Medicare Advantage plans. Collaborating with an insurer has a bit of an edge because although the margins are lower, organizationally, the process is a lot less complex. Mango offered several strategies:
A different kind of competition
Be prepared to "co-pete," a hybrid of collaborating and competing with providers simultaneously. Mango noted that "in their heart of hearts, providers know they don't know how to manage risk and they are really concerned about that. They need help. Offer them a viable alternative."
Consider partnering on a private label basis
Mango said Aetna Accountable Care Solutions, which is offered to hospitals and integrated delivery systems, is almost a private label health plan. The Aetna product is based on aligning incentives such as shared savings so all parties are looking for opportunities to add value to the relationship and provide better patient care.
Take another look
Providers who are unhappy with the contracts they have with other insurers may be willing to partner to improve their margins and market share.
Insurers do need to act quickly, though. Mango noted that hospital and health systems are looking now for partners they can have for several years who can help them achieve sufficient scale to take risk, as well as help to meet the new demands of healthcare service delivery, including the continuum of care.
Health insurance company medical loss ratios improved in 2011-2012 to drive a $3.4 billion reduction in healthcare premium costs. But MLR's influence is expected to wane.
Health insurance company medical loss ratios improved sufficiently from 2011 to 2012 to drive a $3.4 billion reduction in healthcare premium costs, according to an announcement last Thursday by Centers for Medicare & Medicaid Services.
The medical loss ratio (MLR) provision of the Patient Protection and Affordable Care Act holds insurers to administrative costs that do not exceed 15% to 20% of premium revenue and requires that the remaining 80% to 85% of premiums be dedicated to direct medical costs. Any excess must be rebated to consumers. CMS officials contend that the rebate threat is moving insurers to reduce premiums.
At a media briefing, Gary Cohen, CMS deputy administrator and director of Center for Consumer Information and Insurance Oversight, described the MLR as "a critical part of the Affordable Care Act" that helps consumers "keep their costs down."
But healthcare industry stakeholders disagree.
America's Health Insurance Plans, the health insurance industry's lobbying organization and no fan of the MLR, contends that the MLR does nothing to address the main drivers of healthcare costs and thus reduce premiums. Those drivers include the added cost of providing benefits to consumers, such as rising medical prices, changes in the covered population, and new benefits required by the healthcare reform law.
Both CMS and AHIP make good points, says Timothy Jost, a professor at Washington and Lee University School of Law who has studied the MLR process. "I think CMS is correct in its analysis that the main effect of the MLR has been to drive down premiums. Insurers respond that the main driver of healthcare premiums is increasing healthcare costs, and that's obviously true."
But while healthcare costs continue to increase, they are doing so at a much slower pace. A just released report from PricewaterhouseCoopers Health Research Institute's notes that for the fourthconsecutive year, the pace of medical cost increases will slow. In 2014, healthcare costs are projected to increase by 6.5%, a full percentage point lower than the 2013 projected rate.
Jost, who is also a consumer representative on the National Association of Insurance Commissioners, says that despite the slowdown in healthcare costs and a corresponding drop in healthcare utilization, insurers did not respond by cutting premiums, and as a result there were often high profits for insurers on the for-profit side and large reserves for the not-for-profit insurers.
He notes that when the MLR was first implemented in 2011, insurers who didn't meet the MLR requirements found themselves owing 12.8 million members more than $1 billion in rebates.
That was something of a wake-up call for the health insurance industry.
"They realized that the downturn in healthcare cost growth was not just a blip and they needed to align premiums more closely with those costs," Jost told HealthLeaders Media. The MLR provides "strong encouragement to take that step" by requiring rebates to be paid by insurers with for MLR excesses. Thus insurers have been paying more attention to administration components such as marketing costs and broker fees.
For 2012 the rebates were about 50% lower, $504 million, while the number of consumers in line to receive a rebate fell by 34% to 8.5 million.
Last year was the first time CMS identified a corresponding premium savings. Among the components of the $3.4 billion premium reduction, the large group market accounted for 43% or $1.5 billion, while the individual and small group markets each accounted for 28%, or $980 million and $970 million, respectively.
Jost notes that the large group market typically has a better understanding of costs and is "probably much more accurate in projecting premiums," which is reflected in its significant contribution to the premium reduction.
By contrast, the small group market is challenged in identifying risks, probably charges a risk premium, and is more likely to "overestimate costs, charge higher premiums, and then pay a rebate," says Jost.
Indeed, the small group market, which is often identified as the market that will suffer the most negative impact from PPACA in terms of premium increases and regulatory burden, accounts for 40% of the total 2012 rebate, or $203.3 million.
The MLR is a "transitional program," Jost says, as the MLR moves to three-year averaging in 2014 and rebates are paid only after accounting for state-based reinsurance and risk adjustment programs and the federal risk corridors program. Those programs are expected to protect against adverse selection and stabilize premiums in the individual and small group markets as health insurance exchanges begin operation.
Jost says the MLR has played a role in improving insurer efficiencies and forcing insurance companies to acknowledge that healthcare costs aren't increasing now at the same rate as they did earlier in the decade. But going forward, the MLR will be a smaller factor "because of the other reform programs coming into effect to try to stabilize the market."
He adds that stricter rate review and increased competition among insurers in the insurance exchanges will play roles in holding premium costs down.
CMS's Cohen also views the MLR influence as somewhat fleeting, especially as additional parts of the PPACA go into effect and other market forces, such as competition, influence premium rates. "Over time, we expect that there will be competitive markets everywhere and premium rates will reflect that," he says.
A Senate bill would make Medicare claims and payment data available to the public in a searchable database that would be free to use.
On the heels of a Senate Finance Committee hearing that explored a wide range of healthcare pricing and transparency issues, three committee members introduced on Tuesday a bill to make Medicare claims data available to the public.
The Medicare Data Access for Transparency and Accountability Act (Medicare DATA Act) would require the Department of Health and Human Services to issue regulations making Medicare claims and payment data available to the public in a searchable database that would be free to use.
The bill requires that each provider be identified by a "unique identifier that is available to the public...such as the National Provider Identifier." It also clarifies that Medicare payments to physicians and suppliers do not fall under a Freedom of Information exemption.
In introducing the bill in the Senate, Sen. Chuck Grassley (R-IA) noted that with only a few exceptions almost all federal spending is available on the Internet through www.openspending.com. "That means virtually every other government program... is more transparent than the Medicare program."
He also sees the effort as countering waste and fraud in the $549 billion Medicare program. "If doctors know that each claim they make will be publicly available, it might deter some wasteful practicesand overbilling."
In his comments to the Senate, Sen. Ron Wyden (D-OR), a bill co-sponsor, said the database will help patients in making medical decisions and help taxpayers understand what their tax dollars pay for in the Medicare program. "Why isn't this information already available?" he asked.
The third co-sponsor is Sen. Michael Bennet (D-CO).
This is the second effort to gain legislative support for the release of Medicare billing and spending data. Sen. Grassley's first effort in 2011 languished in committee, but the emphasis on price transparency and the demand for meaningful data may help it win sufficient support this time around.
Over the past several weeks the Centers for Medicare & Medicaid Services has broken with precedent and released volumes of pricing data. In May it provided the chargemaster data for the 100 most common Medicare inpatient diagnostic related groups or DRGs. Last week at Datapalooza IV, the fourth annual national conference on health data transparency, CMS released several data bases, including estimates for average charges for 30 types of hospital outpatient procedures.
Researchers, data aggregators, and lawmakers, are clearly eager for more.
At Tuesday's Senate Finance Committee meeting, there was a general acknowledgement that CMS has control of a treasure trove of healthcare pricing and quality information. "All data on price, utilization, and quality of healthcare should be made available to the public unless there is a compelling reason not to do so," stated Giovanni Colella, MD, CEO of Castlight Health, which provides healthcare cost and quality information to employers. Colella was one of four witnesses asked to speak at the hearing.
"What's the responsible argument, if there is one, why CMS should not release all this data?" asked Sen. Max Baucus (D-MT), chair of the Senate Finance Committee. "I have never heard one."
"There is no compelling argument," responded Sen. Wyden. "This is a treasure trove of valuable information that needs to be released in a way that's sensitive to protecting personal issues. Once we get this information it will give us lots of clarity with respect to practice patterns across the country. For the first time we'll actually know what Medicare reimburses for specific services."
Historically, some large and influential provider groups have objected to the release of certain data. Until recently, a decades-old court injunction supported the American Medical Association's stand that the release of individual physician records is a privacy violation. In May a federal judge vacated the injunction at the behest of several news organizations. The AMA is reportedly considering its options.
Efforts to reach the AMA to comment on the Medicare DATA Act were unsuccessful.
Payers are working hard to position themselves for success with health insurance exchanges. Competition for customers is fierce. Everyone wants a piece of the healthcare delivery business. And big data may help secure it.
Like a palooka that makes it to the heavyweight finals against improbable odds, the Patient Protection and Affordable Care Act narrowly became law, and ever since has fought off persistent attempts to bring it down.
Its biggest victory was almost a year ago in the Supreme Court (where it won by decision). Now it faces another bruiser: implementing health insurance exchanges next year.
So Las Vegas, a city where longshots are embraced, was a fitting backdrop for the annual conference of America's Health Insurance Plans (AHIP) last week. The focus of the gathering of health plan executives was the implementation of the PPACA and how it will affect the health insurance industry.
I am happy to report that since the Supreme Court's decision stakeholders and vendors have cast aside their doubts and worries (at least outwardly) and have been working to position themselves to thrive as healthcare reform is implemented.
AHIP 2013 featured several days of workshops, networking breakfasts, and appearances by the healthcare industry's equivalent of rock stars. Among them were George Halvorson, the outgoing CEO of Kaiser Foundation Health Plan, Toby Cosgrove, MD, the CEO of Cleveland Clinic, and Susan Dentzer, the former editor of Health Affairs and now senior policy advisor at the Robert Wood Johnson Foundation.
Some 30 sessions provided insight into the transformation of healthcare delivery, the new healthcare consumer, and the importance of big data.
These are the big ideas presented at AHIP 2013 that I came away with:
1.Wellness takes more than marketing.
If you still think of wellness as simply blood drives and cholesterol checks, then you are a few years behind the times. Wellness is emerging as a big business with a steady stream of vendors ready and able to help employers keep their troops in tip top working shape.
Employers are cautiously interested as they struggle to find tangible ways to correlate wellness programs to bottom-line benefits, but failure remains a very real option. While there is a growing body of research linking wellness to reduced healthcare costs, improved productivity, and higher morale, a recent RAND report finds that wellness programs don't pay off.
2.Everyone wants a piece of the healthcare delivery business (Part 1).
Competitors are everywhere. Target, Wal-Mart, and other retailers are looking for opportunities to cherry-pick healthcare delivery. Think you have the flu? Need a DVD to watch or book to read while you recuperate? Stop by one of 54 Target stores that include healthcare clinics. Big-box retailers have huge advantages when it comes to healthcare delivery: They are everywhere and they have been studying their customers' data, oops I mean guests, for years.
3.Everyone wants a piece of the healthcare delivery business (Part 2).
Each week, more than one million Weight Watcher members attend one of the company's weekly weigh-in meetings. Last year consumers spent $5 billion on Weight Watchers branded products and services. That's market power and CEO David P. Kirchhoff wants to bring that power to healthcare.
"We are effectively a provider network," Kirchhoff remarked during a session on the new entrants into healthcare who are driving change in the system. "We are actively looking for ways to work into the healthcare system." He sees Weight Watchers as part of the healthcare industry trend to partner to deliver care. Physicians and payers partner with community-based delivery systems (including Weight Watchers).
4.Big data is a big deal.
Each year at AHIP there is a buzz word or phrase. Last year it was "consumer engagement" and almost every vendor seemed to have a product to help healthcare providers and payers get closer to their customers. This year it was "big data."
The buzz on big data is that mountains of patient information from all types of medical databases have been aggregated and combined with big data algorithms to help create patient profiles and develop integrated and care options.
Vendors say big data will finally put healthcare industry on equal footing with the retail and banking industries, which have been gathering and aggregating their customer information for years.
5. It's all about the consumer.
At least seven sessions at the conference addressed the healthcare consumer. Developing trust, building long-term relationships, identifying the needs of the consumer, and nurturing the consumer all sound kind of New Age, but health plans are spending a boatload of money to better understand their members.
Health plans are taking a cradle–to-grave approach adding products that will build brand loyalty throughout a member's life.
If the PPACA is going to prevail over health insurance exchanges, it's going to need the payer side to be in its corner.
A Senate committee session in which expert witnesses discussed healthcare costs, hospital prices, and data transparency ended with a plea from the chair, Sen. Max Baucus, for "specific recommendations" from "anyone."
The Senate Finance Committee spent more than two hours Wednesday discussing the relationship between healthcare costs and transparency with a panel of witnesses that included Steven Brill, the author of a March 2013 Time magazine cover story titled "Bitter Pill: Why Medical Bills Are Killing Us."
Brill proved to be a provocative witness and directed much of the discussion. Throughout his testimony and during the question and answer period, he often took direct aim at the chargemaster, or what some call the "sticker price" for the 100 most common Medicare inpatient diagnostic related groups or DRGs.
"No one can explain anything about … the chargemaster, which all hospitals have but which vary wildly, hospital by hospital, and have absolutely nothing to do with quality. Nor can anyone explain why the chargemaster's sky-high list prices are charged mostly to those least able to pay, the uninsured or the underinsured."
"And no one can explain why the discounts that insurance companies pay to hospitals and other providers off of the chargemaster vary so wildly, which, of course, affect that co-payments and deductibles paid by patients lucky enough to have insurance."
He cast the chargemaster as a metaphor for the entire healthcare system. "It's irrational; it's completely unaccountable; and the prices are just way too high."
The other three witnesses pressed on and commented on a broad range of pricing and healthcare transparency issues. They were:
How much hospitals charge for the same procedures (source: The New York Times)
Suzanne F. Delbanco, PhD, executive director of Catalyst for Payment Reform, a non-profit company that works on behalf of large employers and public healthcare purchasers.
Giovanni Colella, MD, CEO of Castlight Health, which provides healthcare cost and quality information to employers.
Paul Ginsburg, PhD, president of the Center for Studying Health System Change and research director at the National Institute for Healthcare Reform.
While there was general agreement that price and quality transparency will help consumers more wisely spend their healthcare dollars, there was considerable handwringing over the role transparency can play in resolving the high cost of healthcare.
"I am concerned that policy makers have focused too much concern on the amount of information available rather than the reliability and usefulness of that information," stated Sen. Orrin Hatch (R-UT), ranking member of the committee.
The discussion between the panelists and Senate committee members was framed around several broad issues. As is typical of these hearings there were a lot of questions and dearth of specific recommendations:
Can we return the principles of the free market to healthcare pricing?
"I'm not sure we ever started from that place," said Brill. "We certainly have slid far away from it." He pointed to Medicare as a countervailing payer power to the most concentrated healthcare provider. "It does an awfully good job. It's run mostly by the private sector, contracted out, and demonstrates that if you have one really big buyer in the marketplace it can serve to address the accumulated power of the providers."
Should the chargemaster be replaced?
Delbanco stated that the recent public release of chargemaster data was a great education for all about "how much variation there is [among hospitals] in the charges much less what people end up paying. What we need to work toward, and this will take a lot of work and time, is understanding exactly what the underlying costs are of delivering care and what cost it takes to deliver high quality care."
She noted that most hospitals and health systems "really don't know what it takes in terms of cost to deliver a unit of care." Without that knowledge, she said, it would be impossible to arrive at a "rational system to decide how much a procedure should cost."
What about consolidation's effect on pricing?
Sen. John Thune (R-SD) expressed concern that the coordination and integration of healthcare is providing an incentive in the market for consolidation and translates to higher costs. "What areas of anti-trust need to be re-evaluated if this trend continues to help put downward pressure on prices?"
Ginsburg maintained that there are a lot of forces pushing for consolidation, including reforms in provider payments. He said steps need to be taken to make markets more competitive despite consolidation, including revisiting the Federal Trade Commission's safe harbor policy to require a demonstration of patient benefit in a merger or acquisition.
Will CMS release more data?
Delbanco would like the Centers for Medicaid and Medicare Services to release more data and allow it to be used by qualified entities to analyze for quality and payment patterns. Dr. Colello noted that CMS is sitting on so much data and making it accessible will help improve the quality of care. He added that employers should have access to claims data.
Earlier this month, in addition to costs for certain inpatient procedures, CMS made public estimates for average charges for 30 types of hospital outpatient procedures.
Should Medicare have the ability to negotiate drug prices?
"It's completely logical," stated Dr. Colella. "If you're the biggest payer, you have market power and you should be able to negotiate to reduce drug costs."
Sen. Max Baucus (D-MT), committee chair, closed the hearing with a request for specific recommendations from both the witnesses and "anyone watching this hearing. It's an abomination that we pay about 60% more for healthcare in this country than the next most expensive country. Something's not quite right there. Market forces have a tough time in this area."
Lower-cost healthcare options such as retail clinics and a decline in hospital readmissions are holding the projected increase in medical costs to 6.5%, a full percentage point lower than the 2013 projected rate, says PwC's Medical Cost Trend report.
As work to implement the Patient Protection and Affordable Care Act continues, a new report projects that for the fourthconsecutive year, the pace of medical cost increases will slow.
Taking into account the spread of less expensive care options such as retail clinics and a decline in hospital readmissions, in 2014 healthcare cost are projected to increase by 6.5%, according to the Medical Cost Trend report from PwC'sHealth Research Institute[PDF]. That is a full percentage point lower than the 2013 projected rate.
The medical cost trend, which is a measurement of the inflation in the cost of medical goods and services from year to year, is of importance to employers and consumers because it influences the cost of health insurance premiums, Rick Judy, principal in PwC's Health Industries practice, said in a telephone interview.
While the economy continues to impact the healthcare industry, a number of new factors are identified as influencing the downward direction of healthcare costs in 2014. Some are related to the PPACA while others are structural changes introduced by the private sector:
Declines in hospital readmissions: New readmission penalties introduced by the PPACA take direct aim at waste in the health system, which is estimated to be as high as 30%. According to PWC Medical Cost Trend report, hospitals are already putting more effort and energy into preventing costly readmissions and it shows—hospital readmissions dropped by nearly 70,000 in 2012. That trend is expected to accelerate through 2014.
Use of non-traditional care sites: Consumers are increasingly drawn to retail clinics housed in big-box retailers such as Target and Wal-Mart. Convenience, lower cost, and the retail focus on consumer engagement all contribute to rising interest. In 2007, 9.7% of consumers had visited a retail clinic; by 2012 that number jumped to almost one quarter.
For a minor illness, such as a cold or the flu, the charge at a retail clinic would be around $76 versus $120 for a physician office visit, according to the PwC report. Judy expects retail clinics to expand into the care of to chronic conditions and chronic disease management. "That's a huge opportunity for the retail side."
High performance networks: Faced with high medical bills, employers are increasingly turning to nationally recognized physicians and hospitals to provide high-quality care at a lower price for certain specialized services. Even factoring in the cost of travel, early data suggests these high-performance networks can produce a 25% reduction in costs, the report notes.
During a session last week at the annual conference for America's Health Insurance Plans, Chris McSwain, vice president of U.S. Benefits for Wal-Mart, noted the company's high-performance relationship with the Cleveland Clinic for cardiac care and Mayo Clinic for transplantation, among others.
"We began by trying to raise the bar on performance. We looked at appropriate care and identified who could deliver the gold standard of care. It was a matter of raising our expectations of what the healthcare system can provide to our associates and their dependents."
High deductible plans: U.S. companies are increasing cost sharing with employees by offering plans with higher co-payments and deductibles. According to a PwC employer survey, 44% of companies are considering high-deductible health plans as the only benefit plan options they will offer.
"That shows us that high-deductible health plans are here to stay and really driving consumers toward building cost into their healthcare decisions," says Judy. He notes that there is still work to be done by both employers and health plans to education employees about these plans. "There's concern that patients may defer care, but most high deductible plans offer first dollar coverage for prevention services."
Judy says two factors are exerting upward pressure on healthcare costs—an increase in specialty drug costs and industry consolidation. Although generic drug use is at an all time high, he says approval of generics is slowing while higher-priced specialty drugs are poised to account for 60% of all government drug approvals by 2014. The report notes that approvals of new biologics "now outpace traditional therapies, and that pattern will continue in 2014 as research efforts target complex cases such as cancer."
Meanwhile mergers and acquisitions activity is approaching the level of merger mania of the 1990s. While industry consolidation can improve efficiencies by eliminating duplication, Judy cautions that it typically leads to higher costs. "They have the ability to control how consumers access the delivery of care."
At the America's Health Insurance Plans annual conference, George C. Halvorson, CEO of Kaiser Foundation Health Plan cited "better technology, better databases, and better science" among the tools that will help improve patient care. He urged attendees to "do the right things."
The healthcare reform train has left the station but health insurers, providers, and even employers are still figuring out the specifics of their roles in transforming the delivery and financing of healthcare services.
That was the central message delivered Thursday during the first day of the 2013 annual conference of America's Health Insurance Plans in Las Vegas. Here are some of the highlights:
The Right Stuff
"We are on the cusp of the golden age of healthcare delivery," said George C. Halvorson, chair and outgoing CEO of Kaiser Foundation Health Plan, addressing his remarks to meeting expectations in a changing health care world.
He went on to explain that the toolkit to improve patient care "is getting better every day. We have better technology, better connectivity, better databases, and better science. We have better opportunities to interact with patients to help them improve their health.
Pointing to apps that will help people monitor their personal health and their activity levels, Halvorson noted that "we are moving into an age of interactive, very personal, and very focused care delivery."
He challenged the industry to "encourage, support, and nurture the agenda. "If we take full advantage of the agenda and do the right things then we should be able to improve the quality of care while bringing down the cost of care."
With his official retirement set for December, Halvorson was honored by AHIP with its inaugural lifetime achievement award. In making the presentation Karen Ignagni, AHIP's president and CEO, noted that throughout his decades long career Halvorson has "never lacked for ideas. He has encouraged us to be bold, set the bar high, and to always do the right thing. He has been on the leading edge of change and has left an indelible foot print. We salute you for your imagination, you vision, and your heart."
Status of Employer Expectations
Purchasers are very concerned about the state of healthcare and their relationship with health plans said David Lansky, PhD, president and CEO of Pacific Business Group on Health, a California-based non-profit business coalition focused on health care.
In their view, the business fundamentals that affect their jobs and the corporate bottom line haven't been well-served by health insurance and some are thinking about leaving the system.
What will it take for employers to continue to offer healthcare benefits? Lansky identified these expectations:
Premium trend. While a zero premium trend is desirable, Lansky noted that some employers within the PBGH have begun talking about a negative premium trend.
Durable reduction in the cost shift. They don't want problems with waste within in the healthcare industry solved on the backs of their employees and their companies in the form of higher costs. They are reluctant to shift any more costs to their employees.
Confidence in health incomes. They want to be confident that payers and providers deliver healthcare services that will improve the performance and quality of life for their employees. They want data to help them evaluate outcomes.
Reliability. Companies want to be able to assure employees that no matter where they go for healthcare services, the care will be predictable and reliable.
Competitive marketplace that rewards innovation. They want to see competition based on the ability to improve health, including a redesigned healthcare delivery system where professionals use their skills in the most affordable and efficient way possible.
Disruptive Innovation
Keep an eye on Weight Watchers, which is assuming a role in the healthcare industry according to David P. Kirchhoff, the CEO of Weight Watchers International. "We began thinking of ourselves as a healthcare company when the ACA passed and we are actively looking for ways to work into the healthcare system."
Kirchhoff noted that the Weight Watchers product is a combination of education, helping people adopt behavior modification techniques, and group support. He sees Weight Watchers as part of the healthcare industry trend to partner to deliver care. Physicians partner with community based delivery systems (including Weight Watchers) and payers. "These three groups, working in coordination, can achieve more than they would have accomplished alone."
The clinical definition of Weight Watchers described by Kirchhoff is "multicomponent intensive behavioral therapy…" "We are a community provider of this therapy."