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Paying hospitals to keep patients away

By JAY HANCOCK

For Kaiser Health News

Saturdays at Mercy Medical Center used to be perversely lucrative. The dialysis clinic across the street was closed on weekends.

That meant the downtown Baltimore hospital would see patients with failing kidneys who should have gone to the dialysis center. So Mercy admitted them, collecting as much as $30,000 for treatment that typically costs hundreds of dollars per patient per dialysis.

“That’s how the system worked,” said Mercy CEO Thomas Mullen. Instead of finding less expensive alternatives, he said, “our financial people were saying, ‘We need to admit them.’”

Maryland’s ambitious hospital-payment overhaul, put in place in 2014, has changed such crass calculations, which are still business as usual for most of American health care. A modification of a long-standing state regulation that would be hard to replicate elsewhere, the system is nevertheless attracting national attention, analysts say.

As soon as Mercy started being penalized rather than rewarded for such avoidable admissions, it persuaded the dialysis facility to open on weekends, saving government insurance programs and other payers close to $1 million annually.

In the four years since Maryland implemented a statewide system of pushing hospitals to lower admissions, such savings are adding up to hundreds of millions of dollars for the taxpayers, employers and others who ultimately pay the bills, a new report shows.

Maryland essentially pays hospitals to keep people out of the hospital. Analysts often describe the change as the most far-reaching attempt in the nation to control the medical costs driving up insurance premiums and government spending.

Like a giant health maintenance organization, the state caps hospitals’ revenue each year, letting them keep the difference if they reduce inpatient and outpatient treatment while maintaining care quality. Such “global budgets,” which have attracted rare, bipartisan support during a time of rancor over health care, are supposed to make hospitals work harder to keep patients healthy outside their walls.

 

Maryland’s system, which evolved from a decades-old effort to oversee hospitals as if they were public utilities, regulates all hospital payments by every private and government insurer. That makes it radically different from piecemeal attempts to lasso health spending, such as creating accountable care organizations, which seek savings among smaller groups of patients.

From the program’s launch in 2014 through 2016, per capita hospital spending by all insurers grew by less than 2 percent a year in Maryland. That’s below the economic growth rate, according to new results from the state’s hospital regulator and the federal Department of Health and Human Services.

Keeping hospital spending below economic growth — defined four years ago as 3.58 percent annually — is a key goal for the program and something that rarely happened.

Counting The Savings

The state plan saved the Medicare program for seniors and the disabled about half a billion dollars over three years and achieved “substantial reductions in hospitalization and especially improvements in quality of care,” said a Medicare spokesman.

In the three years measured so far, he added, “the state has already exceeded the required performance for the full five years of the model.”

As high costs for hospital care have been growing more slowly nationwide, Maryland hospital costs over that period rose even less.

“It looks like it has very strong results,” said John McDonough, a Harvard health-policy professor who helped craft the federal Affordable Care Act.

What Maryland is doing, he said, “is pretty bold and it’s pretty thoughtfully done and has generated a huge amount of interest around the country.”

Comprehensive results through 2016 are the most recent available from Maryland and HHS, although savings continued last year, Maryland officials said. Independent researchers found mixed results for savings in the earlier years of Maryland’s system.

Maryland’s global budgets saved Medicare $293 million — 1.8 percent of total Medicare spending — in 2014 and 2015, research firm RTI International reported in August.

A separate paper from a team led by Eric Roberts at the University of Pittsburgh found that Maryland’s program in those years couldn’t be clearly credited for reducing hospital use.

The system’s advocates say several years of results are needed to show it’s working.

“These are not fake savings,” said Joseph Antos, an economist at the conservative-leaning American Enterprise Institute who sits on Maryland’s hospital-payment commission. “It didn’t happen instantaneously. It’s taken this number of years to achieve the kinds of savings that you see” for 2016 and beyond.

Even boosters such as Joshua Sharfstein, the former Maryland health secretary who got approval for global budgets from the Obama administration, say the system is far from perfect or finalized.

“There is a range of responses. Some hospitals have been able to do more than others,” said Sharfstein, now an associate dean at the Johns Hopkins Bloomberg School of Public Health, in Baltimore. “Change in health care is notoriously slow.”

Hospitals have lagged in delivering primary, preventive care to people with chronic conditions such as asthma, diabetes and heart failure, especially in low-income neighborhoods.

Maryland’s system does little to control soaring costs of drugs or nursing home care, doctors’ office treatments and other care not connected to hospitals, although policymakers are working on proposals to do both.

Even so, “what Maryland has done is just so far ahead of many of these other models” to try to control costs, said Dan D’Orazio, a management consultant who has worked with hospitals across the country. One Maryland hospital CEO told him: “This has fundamentally changed how we wake up and do business every day,” D’Orazio said.

Seeing A Difference

At Mercy, described by policymakers as more aggressive than many hospitals in watching costs, about a third of the patients now leave the hospital with medications in hand, said Dr. Wilma Rowe, the hospital’s chief medical officer. That bypasses the tendency for patients to skip a follow-up pharmacy visit and risk landing back in the emergency room.

A statewide data network notifies Mercy and other hospitals when one of their patients ends up in an emergency room somewhere else. That helps coordinate care.

Greater Baltimore Medical Center, north of the city, has hired dozens of primary care doctors to track around 1,000 people with diabetes — staying in touch, advising on diets and keeping them on insulin so they avoid the hospital.

Often clinicians visit elderly patients’ homes to prevent what might turn into an ambulance call and admission, said the hospital’s CEO, Dr. John Chessare.

Before global budgets, “I’d look at the waiting room in the [emergency department], and if it wasn’t full I’d get scared,” he said.

Now he worries it might be full of people who could be better treated elsewhere — including Gilchrist, a GBMC affiliate delivering hospice care for those at the end of life.

These days, he said, “we consider it a defect if someone with chronic disease dies in the hospital.”


Fast pace continues of hospitals hiring physicians

 

This is from FierceHealthcare:

“There’s been no slowdown in the trend toward physician employment, as new data shows that hospitals acquired 5,000 independent physician practices in a 12-month period.

“Hospitals bought those practices between July 2015 and July 2016, according to data from the Physicians Advocacy Institute (PAI) and Avalere. Over the same period, the number of physicians employed by hospitals grew by 14,000, representing nearly 11% growth….

“The data show the trend toward hospital acquisition of practices continued nationwide, part of a larger movement toward consolidation in the healthcare system. But 2016 marked a tipping point for physician practices, as physician owners are no longer the majority in the U.S., according to a survey by the American Medical Association. Less than half of practicing physicians own their own practice.”

To read more, please hit this link.

 


Lofty physician pay, administrative costs, pricey drugs, not overtreatment, cited in sky-high U.S. health-care costs

 

This just in from FierceHealthcare, based on a study in JAMA:

“{R}esearchers from the Harvard T.H. Chan School found that the notions that the U.S. spends money on too many doctor visits, hospitalizations, procedures and specialists, and spends too little on social services that could mitigate healthcare needs—may be wrong. Instead, they found that prices of labor and goods, including pharmaceuticals and devices, and administrative costs appear to be the main drivers of the differences in spending.”

“{T}he U.S. spends more on administrative costs, such as planning, regulating and managing health systems and services compared with other countries.  And per capita spending for pharmaceuticals was $1,443 in the U.S., compared with a range of $466 to $939 in other nations. The U.S. also pays higher salaries for doctors. The average salary for a general practice physician in the U.S. was $218,173, while in other countries the salary range was $86,607-$154,126.”

To read the study in JAMA, please hit this link.

To read more, please hit this link.


Hospitals enriching job offers to address nurse shortage

The original Stamford Hospital on a 1911 postcard. Looks like one of the mansions in that long-prosperous community.

Some hospitals are pulling out the stops to address a nurse shortage, reports FierceHealthcare. Many give sign-up bonuses but  some institutions have  also come up with such new blandishments as offering to pay tuitions for nurses and   for their children.

This has become the reality for many of the nation’s hospitals as many experienced RNs retire and too few nurses are in the pipeline to fill those positions as the population ages. The U.S. Bureau of Labor Statistics projects employment of registered nurses will grow 15 percent over the next eight years.

Hospitals are also recruiting  nurses via such programs as Stamford {Conn.} Health’s 12-week orientation program that pairs them with  mentors in medical or surgical units.  Stamford Hospital is the system’s flagship.

And down Route 95,  Greenwich {Conn.} Hospital,  part of the Yale New Haven Health System,  last year tried out a 12-month operating-room nurse-residency program, with the first five nurses graduating in January.

To read more, please hit this link.


HHS chief Azar will push value-based campaign hard

HHS Secretary Alex Azar has outlined four of his  biggest priorities for the department.

Perhaps surprising some providers, Azar told the Federation of American Hospitals on Monday that there would be “no going back to a system that pays for procedures rather than value,” and asserted that the Trump administration doesn’t fear disrupting current arrangements, regardless of the powerful economic interests backing them. Sounds like someone from the Obama administration….

He also suggested a willingness to have “perhaps even an uncomfortable degree” of federal intervention to make the system work better for the stakeholders he sees as least well-served currently: patients and taxpayers, FierceHealthcare reported.

His priorities for accelerating the move toward a value-based healthcare sector, as summarized by Fierce:

“1. Moving ownership and control of electronic health records from providers to patients.”

“2. Providing payers and providers with incentives to be more transparent about healthcare costs.”

“3. Using Medicare and Medicaid to drive industry change.”

He called  previous efforts to drive innovation such as through Affordable Care Organizations “lackluster,” promising “bold measures” to “create a true competitive playing field where value is rewarded handsomely.”

“4. Reducing regulatory burdens.”

“He particularly singled out reporting rules and FDA policies around communications that he said might inhibit collaboration among stakeholders.”

To read more, please hit this link.


Pick the right provider and get money back

 

By JULIE APPLEBY

For Kaiser Health News

Laurie Cook went shopping recently for a mammogram near her home in New Hampshire. Using an online tool provided through her insurer, she plugged in her ZIP code. Up popped facilities in her network, each with an incentive amount she would be paid if she chose it.

Paid? To get a test? It’s part of a strategy to rein in health care spending by steering patients to the most cost-effective providers for non-emergency care.

State public employee insurance programs were among the early adopters of this approach. It is now finding a foothold among policymakers and in the private sector.

Scrolling through her options, Cook, a school nurse who is covered through New Hampshire’s state employee health plan, found that choosing a certain facility scored her a $50 check in the mail.

She then used the website again to shop for a series of lab tests. “For a while there, I was getting a $25 check every few weeks,” said Cook. The checks represented a share of the cost savings that resulted from her selections.

Lawmakers in nearby Maine took the idea further, recently enacting legislation that requires some private insurers to offer pay-to-shop incentives, part of a movement backed by a conservative foundation to get similar measures passed nationally.

Similar proposals are pending in a handful of other statehouses, including Virginia, West Virginia and Ohio.

“If insurance plans were serious about saving money, they would have been doing this stuff years ago,” said Josh Archambault, a senior fellow at the Foundation for Government Accountability, a limited-government advocacy group based in Naples, Fla., that promotes such “right-to-shop” laws. “This starts to peel back the black box in health care and make the conversation about value.”

Still, some economists caution that shop-around initiatives alone cannot force the level of market-based change needed. While such shopping may make a difference for individual employers, they note it represents a tiny drop of the $3.3 trillion spent on health care in the U.S. each year.

“These are not crazy ideas,” said David Asch, professor of medicine, medical ethics and health policy at the Penn Medicine Center for Health Care Innovation in Philadelphia. But it’s hard to get consumers to change behavior — and curbing health care spending is an even bigger task. Shopping incentives, he warned, “might be less effective than you think.”

If they achieve nothing else, though, such efforts could help remove barriers to price transparency, said Francois de Brantes, vice president and director of the Center for Value in Health Care at Altarum, a nonprofit that studies the health economy.

“I think this could be quite the breakthrough,” he said.

Yet de Brantes predicts only modest savings if shopping simply results in narrowing the price variation between high- and low-cost providers: “Ideally, transparency is about stopping folks from continuously charging more.”

Among the programs in use, only a few show consumers the price differences among facilities. Many, like the one Cook used, merely display the financial incentives attached to each facility based on the underlying price.

Advocates say both approaches can work.

“When your plan members have ‘skin in the game,’ they have an incentive to consider the overall cost to the plan,” said Catherine Keane, deputy commissioner of administrative services in New Hampshire. She credits the incentives with leading to millions of dollars in savings each year.

Several states require insurers or medical providers to provide cost estimates upon patients’ requests, although studies have found that information can still be hard to access.

Now, private firms are marketing ways to make this information more available by incorporating it into incentive programs.

For example, Vitals, the New Hampshire-based company that runs the program Cook uses, and Healthcare Bluebook in Nashville offer employers — for a fee — comparative shopping gizmos that harness medical cost information from claims data. This information becomes the basis by which consumers shop around.

Crossing Network Lines

Maine’s law, adopted last year, requires insurers that sell coverage to small businesses to offer financial incentives — such as gift cards, discounts on deductibles or direct payments — to encourage patients, starting in 2019, to shop around.

A second and possibly more controversial provision also kicks in next year, requiring insurers, except HMOs, to allow patients to go out-of-network for care if they can find comparable services for less than the average price insurers pay in network.

Similar provisions are included in a West Virginia bill now under debate.

Touted by proponents as a way to promote health care choice, it nonetheless raises questions about how the out-of-network price would be calculated, what information would be publicly disclosed about how much insurers actually pay different hospitals, doctors or clinics for care and whether patients can find charges lower than in-network negotiated rates.

“Mathematically, that just doesn’t work” because out-of-network charges are likely to be far higher than negotiated in-network rates, said Joe Letnaunchyn, president and CEO of the West Virginia Hospital Association.

Not necessarily, counters the bill’s sponsor, Del. Eric Householder, who said he introduced the measure after speaking with the Foundation for Government Accountability. The Republican from the Martinsburg area said “the biggest thing lacking right now is health care choice because we’re limited to our in-network providers.”

Shopping for health care faces other challenges. For one thing, much of medical care is not “shoppable,” meaning it falls in the category of emergency services. But things such as blood tests, imaging exams, cancer screening tests and some drugs that are administered in doctor’s offices are fair game.

Less than half of the more than $500 billion spent on health care by people with job-based insurance falls into this category, according to a 2016 study by the Health Care Cost Institute, a nonprofit organization that analyzes payment data from four large national insurers. The report also noted there must be variation in price between providers in a region for these programs to make sense.

Increasingly, though, evidence is mounting that large price differences for medical care exist — even among rates negotiated by the same insurer.

The price differences are so substantial it’s actually scary,” said Heyward Donigan, CEO of Vitals.

At the request of Kaiser Health News, Healthcare Bluebook ran some sample numbers for a Northern Virginia ZIP code, finding the cost of a colonoscopy ranged from $670 to $6,240, while a knee arthroscopy ranged from $1,959 to $20,241.

Another challenge is the belief by some consumers that higher prices mean higher quality, which studies don’t bear out.

Even with incentives, the programs face what may be their biggest challenge: simply getting people to use a shopping tool.

Kentucky state spokeswoman Jenny Goins said only 52 percent of eligible employees looked at the shopping site last year — and, of those, slightly more than half chose a less expensive option.

“That’s not as high as we would like,” she said.

Still, state workers in Kentucky have pocketed more than $1.6 million in incentives — and the state said it has saved $11 million — since the program began in mid-2013.

Deductibles, the annual amounts consumers must pay before their insurance kicks in and are usually $1,000 or more, are more effective than smaller shopping incentives, say some policy experts.

In New Hampshire, it took a combination of the two.

The state rolled out the payments for shopping around — and a website to look for best prices — in 2010. But participation didn’t really start to take off until 2014, when state employees began facing an annual deductible, said Deputy Commissioner Keane.

Still, the biggest question is whether these programs ultimately cause providers to lower prices.

Anecdotally, administrators think so.

Kentucky officials report they already are witnessing a market response because providers want patients to have an incentive to choose them.

“We do know providers are calling and asking, ‘How do I get my name on that list’ [of cost-effective providers]?” said Kentucky spokeswoman Goins. “The only way they can do that is to negotiate.”

 


Leave ‘productivity’ out of the physician-patient relationship

Robert Centor, M.D., is leery of applying “productivity” to medicine.  He writes in Med Page Today:

“According to Wikipedia, ‘Productivity describes various measures of the efficiency of production. A productivity measure is expressed as the ratio of output to inputs used in a production process, i.e., output per unit of input. Productivity is a crucial factor in production performance of firms and nations.’

“Please tell me how this relates to being a physician or a patient? We do not produce anything. Rather, we work with individuals to diagnosis, prevent, treat, and hopefully improve both longevity and quality of life.”

“‘Productivity’ implies that we can count patient units. That idea really disrupts the essential ‘why’ question?

“If you are unfamiliar with ‘why,’ I highly recommend Simon Sinek’s book Start With Why. Why did we become physicians? I think the answer for most physicians includes helping individual patients. We strive to do our best for each patient.”

“‘Productivity’ implies that seeing more patients each day is a good thing. But likely most patients and physicians will agree that we need to optimize the time with each patient. How many patients can we comfortably see in one day and deliver high-quality care? High-quality care does not refer to performance measures, but complex multi-dimensional factors that improve the patient experience. For many patients, talking is both therapeutic and diagnostic. We shorten our conversation time at the risk of diagnostic errors, higher healthcare costs, and dissatisfied, confused patients.”

To read all of Dr.  Centor’s essay, please hit this link.

 


Surgical overkill for the elderly

At 87, Maxine Stanich cared more about improving the quality of her life than prolonging it.

She suffered from a long list of health problems, including heart failure and chronic lung disease that could leave her gasping for breath.

When her time came, she wanted to die a natural death, Stanich told her daughter, and signed a “do not resuscitate” directive, or DNR, ordering doctors not to revive her should her heart stop.

Yet a trip to a San Francisco emergency room for shortness of breath in 2008 led Stanich to get a defibrillator implanted in her chest — a medical device to keep her alive by delivering a powerful shock. At the time, Stanich didn’t fully grasp what she had agreed to, even though she signed a document granting permission for the procedure, said her daughter, Susan Giaquinto.

Stanich, at age 87, had signed a “do not resuscitate” directive, ordering doctors to not revive her should her heart stop, but doctors gave her a defibrillator anyway. (Photo courtesy of Susan Giaquinto)

That clarity came only during a subsequent visit to a different hospital, when a surprised ER doctor saw a defibrillator protruding from the DNR patient’s thin chest. To Stanich’s horror, the ER doctor explained that the device would not allow her to slip away painlessly and that the jolt would be “so strong that it will knock her across the room,” said Giaquinto, who accompanied her mother on both hospital trips.

Surgery like this has become all too common among those near the end of life, experts say. Nearly 1 in 3 Medicare patients undergo an operation in the year before they die, even though the evidence shows that many are more likely to be harmed than to benefit from it.

The practice is driven by financial incentives that reward doctors for doing procedures, as well as a medical culture in which patients and doctors are reluctant to talk about how surgical interventions should be prescribed more judiciously, said Dr. Rita Redberg, a cardiologist who treated Stanich when she sought care at the second hospital.

“We have a culture that believes in very aggressive care,” said Redberg, who at the University of California-San Francisco specializes in heart disease in women. “We are often not considering the chance of benefit and chance of harm, and how that changes when you get older. We also fail to have conversations about what patients value most.”

While surgery is typically lifesaving for younger people, operating on frail, older patients rarely helps them live longer or returns the quality of life they once enjoyed, according to a 2016 paper in Annals of Surgery.

The cost of these surgeries — typically paid for by Medicare, the government health insurance program for people over 65 — involve more than money, said Dr. Amber Barnato, a professor at the Dartmouth Institute for Health Policy and Clinical Practice. Older patients who undergo surgery within a year of death spent 50 percent more time in the hospital than others, and nearly twice as many days in intensive care.

And while some robust octogenarians have many years ahead of them, studies show that surgery is also common among those who are far more frail.

Eighteen percent of Medicare patients have surgery in their final month of life and 8 percent in their final week, according to a 2011 study in The Lancet.

More than 12 percent of defibrillators were implanted in people older than 80, according to a 2015 study. Doctors implant about 158,000 of the devices each year, according to the American College of Cardiology. The total cost of the procedure runs about $60,000.

Procedures performed in the elderly range from major operations that require lengthy recoveries to relatively minor surgery performed in a doctor’s office, such as the removal of nonfatal skin cancers, that would likely never cause any problems.

Research led by Dr. Eleni Linos has shown that people with limited life expectancies are treated for nonfatal skin cancers as aggressively as younger patients. Among patients with a nonfatal skin cancer and a limited time to live, 70 percent underwent surgery, according to her 2013 study in JAMA Internal Medicine.

With diminished mental acuity and an old-fashioned respect for the medical profession, some aging patients are vulnerable to unwanted interventions. Stanich agreed to a pacemaker simply because her doctor suggested it, Giaquinto said. Many people of Stanich’s generation “thought doctors were God … They never questioned doctors — ever.”Surgery poses serious risks for older people, who weather anesthesia poorly and whose skin takes longer to heal. Among seniors who undergo urgent or emergency abdominal surgery, 20 percent die within 30 days, studies show.

According to the University of Michigan’s National Poll on Healthy Aging, published Wednesday, more than half of adults ages 50 to 80 said doctors often recommend unnecessary tests, medications or procedures. Yet half of those who’d been told they needed an X-ray or other test — but weren’t sure they needed it — went on to have the procedure anyway.

Dr. Margaret Schwarze, a surgeon and associate professor at the University of Wisconsin School of Medicine and Public Health, said that older patients often don’t feel the financial pain of surgery because insurance pays most of the cost.

When a surgeon offers to “fix” the heart valve in a person with multiple diseases, for example, the patient may assume that surgery will fix all of her medical problems, Schwarze said. “With older patients with lots of chronic illnesses, we’re not really fixing anything.”

Even as a doctor, Redberg said, she struggles to prevent other doctors from performing too many procedures on her 92-year-old mother, Mae, who lives in New York City.

Redberg said doctors recently treated her mother for melanoma — the most serious type of skin cancer. After the cancer was removed from her leg, Redberg’s mother was urged by a doctor to undergo an additional surgery to cut away more tissue and nearby lymph nodes, which can harbor cancerous cells.

“Every time she went in, the dermatologist wanted to refer her to a surgeon,” Redberg said. And “Medicare would have been happy to pay for it.”

But her mother often has problems with wounds healing, she said, and recovery would likely have taken three months. When Redberg pressed a surgeon about the benefits, he said the procedure could reduce the chances of cancer coming back within three to five years.

Redberg said her mother laughed and said, “I’m not interested in doing something that will help me in three to five years. I doubt I’ll be here.”

Dr. Rita Redberg, director of women’s cardiovascular services at the University of California-San Francisco Division of Cardiology, tends to her mother, Mae Redberg, in Mae’s apartment in Manhattan. (Yana Paskova for Kaiser Health News)

 

The momentum of hospital care can make people feel as if they’re on a moving train and can’t jump off.

The rush of medical decisions “doesn’t allow time to deliberate or consider the patients’ overall health or what their goals and values might be,” said Dr. Jacqueline Kruser, an instructor in pulmonary and critical care medicine and medical social sciences at the Northwestern University Feinberg School of Medicine.

Many hospitals and health systems are developing “decision aids,” easy-to-understand written materials and videos to help patients make more informed medical decisions, giving them time to develop more realistic expectations.

After Kaiser Permanente Washington introduced the tools relating to joint replacement, the number of patients choosing to have hip replacement surgery fell 26 percent, while knee replacements declined 38 percent, according to a study in Health Affairs. (Kaiser Permanente is not affiliated with Kaiser Health News, which is an editorially independent program of the Kaiser Family Foundation.)

In a paper published last year in JAMA Surgery and the Journal of Pain and Symptom Management, Schwarze, Kruser and colleagues suggested creating narratives to illustrate surgical risks, rather than relying on statistics.

Instead of telling patients that surgery carries a 20 percent risk of stroke, for example, doctors should lay out the best, worst and most likely outcomes.

In the best-case scenario, a patient might spend weeks in the hospital after surgery, living the rest of her life in a nursing home. In the worst case, the same patient dies after several weeks in intensive care. In the most likely scenario, the patient survives just two to three months after surgery.

Schwarze said, “If someone says they can’t tolerate the best-case scenario — which involves them being in a nursing home — then maybe we shouldn’t be doing this.”

Maxine Stanich was admitted to the hospital after going to the ER because she felt short of breath. She experienced an abnormal heart rhythm in the procedure room during a cardiac test —not an unusual event during a procedure in which a wire is threaded into the heart. Based on that, doctors decided to implant a pacemaker and defibrillator the next day.

Dr. Redberg was consulted when the patient objected to the device that was now embedded in her chest. She was “very alert. She was very clear about what she did and did not want done. She told me she didn’t want to be shocked,” Redberg said.

After Redberg deactivated the defibrillator, which can be reprogrammed remotely, Stanich was discharged, with home hospice service. With nothing more than her medicines, she survived another two years and three months, dying at home just after her 90th birthday in 2010.


Enriched by the poor: Another example of why U.S. health ‘system’ is so expensive

 

By CHAD TERHUNE

Kaiser Health News

CHULA VISTA, Calif. — Norma Diaz and her husband, Joseph Garcia, have dedicated their careers to running a nonprofit health insurer that covers some of California’s neediest residents.

For three decades, they have worked for a Medicaid managed-care plan, Community Health Group, serving nearly 300,000 poor and disabled patients in San Diego County under a state contract funded entirely by taxpayers. They’ve earned above-average ratings for patient care.

And in the process, they’ve made millions of dollars.

Together, Diaz and Garcia made $1.1 million in 2016 and received more than $5 million since 2012, according to the health plan’s tax returns and company data. Diaz’s compensation as CEO exceeded the pay of several peers at bigger plans in 2016.

Garcia, married to Diaz since 1997, is an outside consultant who serves as chief operating officer. Their health plan, with $1.2 billion in annual revenue, had a profit margin of 19 percent in 2016, the highest of any Medicaid insurer in California and more than six times the industry average.

“This is not only a conflict of interest but egregious overpayments,” Frank Glassner, chief executive of Veritas Executive Compensation Consultants in San Francisco, said after hearing of the payments from a reporter and reviewing the tax returns. “It’s the family-and-friends plan.”

The arrangement at this midsize California health plan raises broader questions about government oversight as states award billions of dollars in public money to private plans to cover patients on Medicaid, the federal-state insurance program for the poor.

Evidence is mounting that Medicaid’s rapid expansion under the Affordable Care Act has far outstripped the government’s ability to monitor the taxpayer money it turns over to insurers. In California, for instance, some health plans have reaped outsize profits, so large the state is now trying to claw back billions in overpayments, a recent Kaiser Health News investigation found.

Medicaid enrollment has soared to 74 million Americans, from 58 million before the ACA rollout. About 75 percent of them are assigned to plans like Community Health

Group, which receive a flat monthly fee per person to handle their medical care.

Increasingly, states have embraced managed care in hopes of controlling Medicaid costs. Insurers could see further growth as the Trump administration and Congress seek to cut federal spending on Medicaid and shift more of the fiscal burden onto states.

These managed-care contracts can be highly lucrative for the companies involved and their executives, like Diaz and Garcia. Any money left over after spending on medical care and administration is profit or “surplus,” depending on whether the plan is nonprofit.

Federal auditors have warned for years about lax oversight of Medicaid money, a task that primarily falls to states. A 2017 report found that even as managed care has grown in importance, states have fallen behind in collecting essential data from plans.

In the past year alone, government auditors and consultants criticized Illinois, Kansas and Mississippi for poor supervision of Medicaid insurers. Illinois auditors said the state didn’t properly monitor $7.1 billion paid to Medicaid plans in fiscal year 2016, leaving the program unable to determine what percentage of money went to medical care as opposed to administrative costs or profit.

An examination of Community Health Group in California points to systemic flaws in oversight.

For instance, California officials said they do not examine the companies’ public tax filings. As a social welfare nonprofit, Community Health does not pay taxes, but it is required to file returns with the federal government, known as 990s, which provide basic information about operations and finances.

In a review of Community Health’s recent returns, KHN discovered that the company falsely denied — on the 2015 and 2016 forms — that it was doing business with a family member.

In response, the insurer immediately said that was an error and it was amending the returns to reflect its relationship with Garcia. The company had disclosed the relationship in earlier years.

California’s Medicaid agency, in a statement, said insurers are allowed to set their own conflict-of-interest policies. Asked specifically about Community Health Group, it referred further questions back to the health plan.

Likewise, the state’s chief insurance regulators at the Department of Managed Health Care said in a statement that insurers are not required to submit information on executive compensation and the state does not set standards for that. They do review the pay of outside contractors.

Diaz and Garcia, sitting together at a conference table in the CEO’s office on a recent weekday, said they were proud of their long record of helping disadvantaged people. The couple insists there’s nothing wrong with mixing work and family.

Community Health Group, with $1.2 billion in annual revenue, had a profit margin of 19 percent in 2016, the highest of any Medicaid insurer in California and more than six times the industry average.

Diaz, 56, said her husband reports not to her but to a fellow executive, the associate CEO, and his consultant’s role was approved by the health plan’s board. “I don’t feel for me it’s a conflict of interest because he was here for many years long before we ever got married, so we got used to a working relationship,” she said.

Garcia, 66, served as the company’s on-staff chief operating officer for about 15 years and then switched in 2011 to the role of consultant (acting as COO), which ultimately raised his pay. He said the couple has never tried to hide their personal relationship from the state or anyone else.

“I understand from the outside someone might say ‘Oh my God. That’s a conflict.’ But it’s not. It’s irrelevant that I’m her husband,” he said. “I don’t see how it’s a misuse of public funds. The expense for a chief operating officer would be made no matter what, and my compensation is fair.”

His total compensation reached $487,386 in 2016, according to the insurer. From 2012 to 2016, the health plan paid him a total $2.3 million.

Under his consulting agreement, Garcia is paid $275 an hour and can make as much as $572,000 annually, according to documents obtained by KHN through a public records request. The health plan had requested the information be kept confidential, but the state released it.

In September, regulators at the managed-care department asked Community Health Group how Garcia’s pay was determined. The company submitted a pay range for chief operating officers that it said was drawn from industry surveys.

Community Health said it picked the maximum figure in the range, $442,863, to reflect Garcia’s “many years of experience in health plan operations.” It then increased his pay range by 30 percent because it said Garcia doesn’t receive benefits. The plan called his current salary — which in 2016 fell below the maximum allowed — “both fair and competitive.”

An agency spokesman said the state’s review of the matter is closed.

In early 2012, the insurer hired a new executive as COO, but he left the following year. Garcia stayed on as a consultant during that time at roughly $400,000 annually, then resumed his COO duties. His current consulting agreement runs through 2021.

“We don’t want to lose Joseph. He has a tremendous amount of knowledge,” said Albert Vitela, a retired San Diego police detective who is the plan’s co-founder and chairman.

As for Diaz, she has received $2.8 million in salary, benefits and other compensation over the five years ending in 2016. Her 2016 pay of $604,502 exceeded that of the CEO of the Inland Empire Health Plan in Southern California, which has four times the enrollment.

(Story continues below.)

Last year, federal auditors examined compensation for the 133 top paid executives at managed-care organizations in seven states, focused on health plans that get more than half of their revenue from Medicaid.

For 2015, the top executives earned $314,278, on average — more than double what state Medicaid directors earned, according to the report. Auditors didn’t find major differences in pay between for-profit and nonprofit Medicaid plans.

Executive compensation has risen as Community Health Group recorded hefty profits.

State officials had raised the rates paid to Medicaid plans in anticipation of the Affordable Care Act rollout in 2014, but the costs for newly insured patients weren’t as high as predicted. After the KHN investigation into insurer profits published in November, California’s Medicaid director, Jennifer Kent, vowed to recoup billions of dollars in excessive payments from insurers in coming months.

From 2014 to 2016, Community Health Group recorded profits of $344.2 million, according to state data obtained and analyzed by Kaiser Health News. Diaz said her insurer expects to return more than $100 million to the Medicaid program.

Robert Stern, a government ethics expert and former general counsel of California’s Fair Political Practices Commission, welcomed the scrutiny of Medicaid profits. But he said the business practices at Community Health Group suggest there is much more to be done.

“Taxpayer money should be spent as wisely as possible,” Stern said. “It’s not their money. It’s our money.”


Over-rated patient portals?

 

Todd Johnson, writing for Med City News, takes a skeptical look at the pitfalls, promises and potential of patient portals. Among his observations:

“{H}ere is the problem with most portals today: Patients have little interest in using them because they don’t offer enough value.

“Patients don’t care about ‘Meaningful Use’ and the fact that their provider will lose money if they don’t create an account and actually use the portal. Patient portals are notoriously obsolete and difficult to navigate, and patients often struggle to interpret medical information, such as test results.

“An extensive body of research exists related to patient portal usability and satisfaction among users. Until now, few studies have looked at the impact of portals on hospital outcomes. A new study out of the Mayo Clinic Hospital in Jacksonville, Florida, and published in the Journal of the American Medical Informatics Association in December last year found that 30-day readmissions, inpatient mortality, and 30-day mortality were virtually the same when comparing hospitalized patients who used portals with those who did not. The researchers concluded that patient portals might not ultimately improve hospital outcomes.”

To  read all of Mr. Johnson’s article, please hit this link.


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