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Julie Rovner: Replacing the ACA: Where there’s a will there’s a way

 

By JULIE ROVNER

Kaiser Health News

Now that the GOP effort to repeal and replace the Affordable Care Act is in limbo, is there a way to make it work better?

Democrats and Republicans don’t agree on much when it comes to the controversial federal health law, but some party leaders from each side of the aisle agree it needs repairs.

“No one ever said the Affordable Care Act was perfect,” said Senate Minority Leader Chuck Schumer (D.-N.Y.) on the Senate floor March 27. “We have ideas to improve it. Hopefully our colleagues on the Republican side do as well.”

A day later, Speaker Paul Ryan (R-Wis.) said, “We all want a system in healthcare where everybody can have access to affordable coverage, where we have more choice and competition.” And several GOP senators have moved away from the party’s long-held call for a total repeal and are offering bills that would amend the measure.

Health-policy analysts say that some of the health law’s marketplace problems could be improved with a bipartisan spirit. Here are some of the possibilities:

Stabilize the Insurance Market

Insurance companies have only a matter of weeks before they must tell the federal government and/or individual states whether they plan to offer coverage in 2018 on the health law’s online marketplaces, which serve customers who don’t get job-based or government insurance.

As of now, many companies say the uncertainty of what the market will look like — or the rules under which they will operate — is making that decision difficult. At least one insurer, Humana, has already said it would not offer coverage.

Two key moves that insurers are looking for from the administration are a promise to continue providing certain subsidies for those with lower incomes and enforcing the requirement for most people to either have insurance or pay a tax penalty.

The subsidies — known as “cost-sharing reductions” — are different than the tax-credit subsidies that many marketplace customers get to help pay their premiums. The cost-sharing subsidies help those with incomes between the poverty line ($20,420 for a family of three) and nearly 2½ times that ($50,400 for that same family) pay their deductibles and other out-of-pocket costs. The House  sued the Obama administration in 2014 for providing the subsidies without a formal congressional appropriation for the money, and a federal judge sided with the lawmakers.

The Obama administration appealed the decision, but if the Trump administration were to drop that appeal, the subsidies would disappear. At a House hearing March 29, Health and Human Services Secretary Tom Price, M.D. would not say what the administration plans to do about the lawsuit or the subsidies.

“I’m a party to that lawsuit and I’m not able to comment,” he said. But Ryan, who is also a party to the suit, said March 30 that he believes the administration should continue paying the subsidies until the lawsuit is resolved.

The administration has been similarly quiet about how strictly it will enforce the “individual mandate” that requires most people to have health insurance or pay a fine. On his first day in office, President Donald Trump issued an executive order directing federal agencies to “minimize the unwarranted economic and regulatory burdens” of the health law. But other than the IRS backtracking on a plan to enforce the mandate more strongly, little has happened on that front.

Yet those two provisions together — the cost-sharing subsidies and the individual mandate — could result in 25 to 30 percent increases in premiums if they were to disappear, said Andy Slavitt, who oversaw the health law for the final years of the Obama administration. Assuring that the subsidies will remain and the mandate will be enforced “would send a strong signal to (insurance companies) that they should continue to participate in the market,” he added.

Some GOP health policy analysts — including economist Gail Wilensky, who previously ran the Medicare and Medicaid programs — have proposed replacing the individual mandate with penalties for signing up for insurance late, which is what Medicare does. Republicans did that in their proposed replacement bill, by adding a 30 percent premium surcharge to those with a break in coverage longer than two months. But insurance actuaries and the Congressional Budget Office said that might eventually prompt fewer people to enroll because it would encourage healthy people to remain uncovered.

Entice People to Enroll

Getting young and healthy people to sign up for coverage is not just a benefit for them. If there are not enough healthy people in the insurance pool, then premiums rise for everyone, because risk is being spread across a mostly sicker population. And someday even the healthy people will need medical care.

But it takes more than just the requirement for coverage to get people to enroll. Slavitt said it requires a real effort by both federal and state officials to reach people and help them understand that having health insurance is a good thing, even if they are healthy. “What they should be doing is increasing marketing and the outreach budget,” he said. “You’re trying to reach people who are uninsured and are unsure how it all works, and it does take a lot of hand-holding.”

So far, however, the administration’s only move on that front was to cancel ads encouraging people to sign up at the end of the enrollment period that overlapped with Trump’s first days in office. The HHS Inspector General is now investigating the results of this action. Some analysts have estimated canceling the last-minute push lowered enrollment in the exchanges by as much as a half-million people.

Help Offset Insurer Losses

Democratic lawmakers who wrote the Affordable Care Act knew that the market might be hard for insurers to navigate for the first few years, and they built in several programs to help reimburse those who lost money.

Republicans, however, blocked funding for one of the major programs, which was intended to reimburse insurance plans that enrolled sicker-than-average populations for the first three years of the marketplace operations. Republicans called the money “insurer bailouts.” The loss of that money was a major reason for the collapse of many of the nonprofit insurance co-ops created under the law and some other insurance companies said it contributed to their decisions to leave the marketplaces.

Now, however, there are indications that Republicans might support some efforts to provide more funding for insurers.

On March 13, Price sent a letter to governors encouraging them to apply for waivers of the ACA rules in order to make insurance more affordable and available in their states. Among the state innovations singled out in the letter is a “reinsurance” program in Alaska that helps insurers pay for extremely high-cost patients. That plan, said Price, “significantly” offset what was a projected 40 percent premium increase in the state, and might be an option elsewhere under the waivers, which could allow states to get federal funding for such a program.

And the GOP health bill, the American Health Care Act, included $100 billion for a “Patient and State Stability Fund” that states with limited insurer competition could use to lower costs and help encourage insurers to stay in the market.

“They have a potential fix staring them in the face,” said Larry Levitt of the Kaiser Family Foundation of the GOP proposal for a stability fund. “It was a clever mechanism because the states could use it for any of a variety of purposes.” (Kaiser Health News is an editorially independent project of the Foundation.)

Assist Patients With High Out-Of-Pocket Costs

Democrats and Republicans agree that people who buy their own insurance are paying too much out-of-pocket, in premiums as well as deductibles and cost sharing.

Democrats mostly want to increase federal subsidies to help with affordability — something Republicans are not likely to embrace.

But there are other ways to lower consumer spending.

For example, Sabrina Corlette of Georgetown University’s Center on Health Insurance Reforms, calls for “smarter, not skimpier benefit design.” One way to do that is to set federal rules to push insurers that offer coverage with high deductibles to add more benefits that would be available without paying thousands of dollars first, like a few trips to the doctor or urgent care center or a few prescriptions. She writes that could keep people from dropping coverage because they feel they are not getting any value for their premiums. And if those mostly healthy people feel they are getting benefits they might use, they are more likely to continue to purchase coverage, thus reducing premiums for everyone.

Another potential way to lower insurance costs is to lower health care costs. Even if there are multiple competing insurers in an area, if there’s one dominant hospital system, it can pretty much charge whatever it wants.

“There’s no other price in the U.S. economy that’s growing as fast as a hospital price,” said Bob Kocher, a former Obama administration health official now at the venture capital firm Venrock. And in areas with not much hospital competition, “prices are 30 to 50 percent higher for everything.”

But how to get hospital prices down is almost as hard as regulating insurance. Kocher said one way would be for federal regulators to be more discriminating about approving hospital mergers, which tend to give hospitals more negotiating power over insurers.

More controversial would be to require hospitals that dominate their markets “to just accept Medicare prices” from marketplace insurers, Kocher suggested. While that would tend to bring prices down, it’s not likely to fly with free-market Republicans.


5 takeaways from the AHCA collapse

 

Billy Wynne, writing in Health Affairs, presents five lessons from the failed launch of the American Health Care Act:

They are:

“Nothing is inevitable”

“There’s a difference between making a political statement and enacting real policy. The latter is invariably complex and time-consuming, creating vulnerabilities and pitfalls both known and unknown at the outset. While a cornerstone of tried and true policymaking is to leverage the ‘strategy of inevitability’—more than seven years ago, the ACA campaign itself vigorously deployed just such a strategy—the underlying premise of that strategy is always inherently false.’’

“Stakeholders matter’’

“Virtually every hospital and hospital group, every physician group, nurses, patient groups representing the young, old, disease-stricken, and disabled, and many others fervently opposed AHCA. They added analysis of AHCA’s impact on them, as governors did regarding its impact on their states. At the end of the day, this was simply a bad bill. Stakeholders figured it out and acted when it counted.’’

‘’Ultimately, on the day AHCA was originally supposed to get its final House vote, a Quinnipiac University poll came out showing only 17 percent of the public supported the bill, while 56 percent opposed it, a startling gap rarely seen in any bona fide political polling.’’

“The ACA stole most of  the good conservative ideas’’

‘’While it was lambasted by Republicans as the manifestation of a Marxist dystopia, the truth of the ACA is that it is a very moderate law. …As Health Policy Counsel to then-Finance Committee Chairman Max Baucus in the prelude to President Obama’s election, I know the pains he took to build bipartisan consensus. In 2008, he negotiated with Republican counterparts on reforming the market for small businesses, in what became the SHOP Act component of the ACA (drawing from legislation originally co-led by Republican Olympia Snowe). He convened an all-day, fully bipartisan Prepare to Launch summit to query experts and debate ideas. He released a series of white papers that laid out detailed policies he believed could gain bipartisan support (welcomed by the conservative Heritage Foundation as ‘a starting point for serious discussion’). And all of that was before President Obama was elected.”

‘’The centerpiece of the ACA became tax credits for the purchase of commercial—not government—health insurance, with a tax-driven mandate that everyone take responsibility for buying in. This had been the linchpin of numerous Republican health reform proposals prior to that time. While Medicaid expansion was also included, it took on a greater role only because that is a less costly way to expand coverage, and Democrats were utterly committed to ensuring the bill did not increase the deficit.”

‘’Other key conservative ideas were embedded in the law as well. Numerous new payment reforms were instituted to drive efficiency and lower costs; states were allowed to pool their markets (though notably none have yet); price and value transparency was instituted so consumers could compare their coverage options side-by-side; emphasis was placed on prevention and community health centers; states were free to run their own exchanges and establish their own essential health benefits; dozens of new program integrity and oversight protections were instituted.’’

“Tom Price is now the most important person in healthcare”

“While the Trump Administration has some more thinking to do before it commits to letting our health care system crash and burn, via sabotage or neglect, it certainly has that power. The locus of that power is the Department of Health and Human Services and its Secretary, former Republican Congressman Tom Price, M.D., a former orthopedic surgeon.

‘’As we have already seen, simple maneuvers like pulling publicity for HealthCare.gov and creating an aura of uncertainty can adversely impact insurance enrollment. Payment and delivery system reforms, intended to lower costs and improve quality, have been halted in their tracks. Governors have been informed that they are now freer to impose premiums and increase cost-sharing for Medicaid enrollees.

“As destabilizing as these changes are, they pale in comparison to some of the more nuclear options Secretary Price has at his disposal to wreak havoc on health care. Perhaps the foremost of these, and the one readily accessible at any moment, is the option to refrain from defending the cost-sharing subsidies.”

.

“Bipartisanship is still possible’’

“While not as expedient or gratifying to the inner ideologue inside us all, the long, frustrating work of compromise is the only viable path forward.

‘’There is a lot of lower-hanging fruit and we should give AHCA credit for bringing some of those to people’s attention. Insurers have now made clear what they think will help stabilize markets and perhaps make them more competitive, including funding risk corridor and reinsurance programs. Meanwhile, several start-up health plans are eyeing a wide array of markets where competition is limited and ripe for a lower-cost competitor. Some have faced obstacles at the state-level, undoubtedly due in part to the objections of entrenched interests. Can a Price-led HHS help open up these markets?’’

 


Trump’s CMS pushes back against bundled payments

knee

The CMS has delayed the expansion of a major bundled- payment pilot, Comprehensive Care for Joint Replacement, and implementation of its bundled-payment initiatives for cardiac care to Oct. 1, 2017, from July 1, according to an interim final rule posted to the Federal Register. It also again delayed the effective date of a final rule detailing the  implementation process  for CJR and other bundled-payment programs, to May 20, 2017 from March 21.

The agency is considering delaying  implementation of all bundled-payment initiatives even further, until 2018.

Modern Healthcare speculated that the Trump administration’s “move to delay these initiatives raises questions about the future of government initiatives to usher healthcare out of fee-for-service operations and into a new age of value-based payment.”

The new secretary of health and human services is Tom Price, M.D., who had a very lucrative career as an orthopedic surgeon and has been a major investor in some medical companies. CMS ultimately reports to him and President Trump.

To read more, please hit this link.


CMS nominee wants to overhaul Medicaid

 

Seema Verma, nominated by President Trump to lead the Centers for Medicare & Medicaid Services, told her confirmation hearing at the Senate Finance Committee that she’d consider clawing back parts of a rule set during the Obama administration that overhauled Medicaid managed-care programs.
She also  said he doesn’t want to turn Medicare into a voucher program, an idea backed by Health and Human Services Secretary Tom Price, M.D., and thinks  that rural healthcare providers shouldn’t face risk in alternative-payment models.

Ms. Verma said  that one of her priorities would be re-assessing a rule issued under the Obama administration that ordered states to more vigorously oversee the adequacy of Medicaid plans’ provider networks and encouraged states to establish quality rating systems for health plans. She raised the question of whether these mandates have  overly burdened the states financially.

On Medicaid,  she said that  “the status quo is not acceptable.”

“I’m endorsing the Medicaid system being changed to make it better for the people relying on it … and whether that’s a block grant or per capita cap, there are many ways we can get there.”

On Medicare, Modern Healthcare reported that Sen. Ron Wyden (D.-Ore.), the ranking Democrat on the Finance Committee, “said that she sounded like she wanted to keep Medicare a fee-for-service system.” The CMS under the Obama administration set goals to move Medicare away from fee-for-service, which was viewed as prone to abuse and fraud even as it has been very lucrative for physicians and hospitals and encourages much medically unneeded ordering of tests and procedures to maximize providers’ income.

But Ms. Verma denied Senator Wyden’s assertion and said that she supports Medicare focusing more on quality of care instead of volume.

To read more, please hit this link.

 

 

 


The ‘GOP Doctors Caucus’

By PHIL GALEWITZ

For Kaiser Health News

The confirmation of Tom Price,  M.D., the orthopedic surgeon-turned-Georgia congressman, as secretary of Health and Human Services represents the latest victory in the ascendancy of a little-known but powerful group of conservative physicians in Congress he belongs to — the GOP Doctors Caucus.

During the Obama administration, the caucus regularly sought to overturn the Affordable Care Act, and it’s now expected to play a major role determining the Trump administration’s plans for replacement.

Robert Doherty, a lobbyist for the American College of Physicians, said the GOP Doctors Caucus has gained importance with Republicans’ rise to power. “As political circumstances have changed, they have grown more essential,” he said.

“They will have considerable influence over the considerable discussion on repeal and replace legislation,” Doherty said.

Price’s supporters have touted his medical degree as an important credential for his new position, but Price and the caucus members are hardly representative of America’s physicians in 2017. The “trust us, we’re doctors” refrain of the caucus obscures its heavily conservative agenda, critics say.

“Their views are driven more by political affiliation,” said Mona Mangat, M.D., an allergist-immunologist and chairwoman of Doctors for America, a 16,000-member organization that favors the current health law. “It doesn’t make me feel great. Doctors outside of Congress do not support their views.”

For example, while the American College of Obstetrics and Gynecology has worked to increase access to abortion, the three obstetrician-gynecologists in the 16-member House caucus are anti-abortion and oppose the ACA provision that provides free prescription contraception.

While a third of the U.S. medical profession is now female, 15 of the 16 members of the GOP caucus are male, and only eight of them are physicians. The other eight members are from other health professions, including a registered nurse, a pharmacist and a dentist. The nurse, Diane Black of Tennessee, is the only woman.

On the Senate side, there are three physicians, all of them Republican.

While 52 percent of American physicians today identify as Democrats, just two out of the 14 doctors in Congress are Democrats.

About 55 percent of physicians say they voted for Hillary Clinton and only 26 percent voted for Donald Trump, according to a survey by Medscape in December.

Meanwhile, national surveys show doctors are almost evenly split on support for the health law, mirroring the general public. And a survey published in the New England Journal of Medicine in January found almost half of primary care doctors liked the law, while only 15 percent wanted it repealed.

Rep. Michael Burgess, R-Texas, a caucus member first elected in 2002, is one of the longest serving doctors in Congress. He said the anti-Obamacare Republican physicians do represent the views of the profession.

“Doctors tend to be fairly conservative and are fairly tight with their dollars, and that the vast proportion of doctors in Congress [are] Republican is not an accident,” Burgess said.

Price’s ascendancy is in some ways also a triumph for the American Medical Association, which has long sought to beef up its influence over national health policy. Less than 25 percent of AMA members are practicing physicians, down from 75 percent in the 1950s.

Price is an alumnus of a boot camp the AMA runs in Washington each winter for physicians contemplating a run for office. Price is one of four members of the caucus who went through the candidate school. In December, the AMA immediately endorsed the Price nomination, a move that led thousands of doctors who feared Price would overturn the health law to sign protest petitions.

Even without Price, Congress will have several GOP physicians in leadership spots in both the House and Senate.


Advice to Dr. Price on how to fix or wreck the ACA

wreck

To read the whole article, please hit this link.


Price vows to protect people with pre-existing conditions

 

Republican Congressman Tom Price, M.D., President Trump’s nominee to run the U.S. Department of Health and Human Services, told the Senate Finance Committee  on Jan. 24 that he wants to ensure  that people with pre-existing conditions have access to health insurance, though he did not specify how this would work under the Trump administration’s plan to kill the Affordable Care Act.

Dr.  Price, a Georgia orthopedic surgeon, said “nobody ought to be priced out of the market for having a bad diagnosis.”

“I commit that we will not abandon individuals with preexisting illness or disease.”

One of the ACA’s most popular parts is the ban on insurers using patients’ pre-existing conditions to deny them coverage.


HHS nominee got sweetheart deal from biotech company

 

By JAY HANCOCK and RACHEL BLUTH

For Kaiser Health News

When tiny Australian biotech firm Innate Immunotherapeutics needed to raise money last summer, it didn’t issue stock on the open market. Instead, it offered a sweetheart deal to “sophisticated U.S. investors,” company documents show.

It sold nearly $1 million in discounted shares to two American congressmen sitting on House committees with the potential power to advance the company’s interests, according to company records and congressional filings. They paid 18 cents a share for a stake in a company that was rapidly escalating in value, rising to more than 90 cents as the company promoted an aggressive plan to sell to a major pharmaceutical company. Analysts said the stock price could go to $2.

One of the beneficiaries was Rep. Tom Price, M.D., a Georgia Republican poised to become secretary of the Department of Health and Human Services, which regulates pharmaceuticals. Price told HHS ethics officials last Thursday that if appointed, he will divest himself of the Australian stock as well as stock in about 40 other companies that could pose conflicts. He said he would sell within 90 days of appointment and abstain from any decision-making about companies in which he or his family has had an interest.

He has already seen about a 400 percent paper gain in his investment in Innate Immuno, stock trading records show.

The other and more substantial August investor was Rep. Chris Collins, a Republican from upstate New York, who along with family members owns about 20 percent of the foreign company. A key supporter of the president-elect, Collins sits on a key health subcommittee.

The outlines of the stock deal, first reported by The Wall Street Journal, resurrected concerns about powerful public officials gaining investment opportunities unavailable to the public, including from companies whose profits might be influenced by political decisions.

A review of corporate documents raises a more unusual aspect of the deal. Innate Immuno is a foreign company which, in documents and presentations, is explicit about a business strategy targeting the U.S. market, where the amount that can be charged for a new drug is generally far higher than in other countries.

Innate Immuno has hinged its strategy on winning a preliminary green light for a new multiple sclerosis drug, known as MIS416, from the HHS’s Food and Drug Administration. It says in its private placement offering documents that money raised in the U.S. will help it finance the FDA approval process, which can take years. Innate Immuno CEO Simon Wilkinson could not be reached for comment.

Price’s financial disclosures show that he acquired his first small stake in Innate Immuno in January 2015, investing about $5,000. He made two more small purchases in the company that year, declaring a small loss on the stock in his 2015 financial disclosure.

His largest purchase was on Aug. 31, 2016, valued at $50,000 to $100,000, his disclosures show.

Government ethics experts said  that Price’s stake in Innate Immuno as it tries to develop a blockbuster drug would clash with his public duties, making divestiture mandatory.

While ethics rules for Congress are relatively relaxed, “the minute you go to the executive branch, it’s a lot stricter,” said Richard Painter, a University of Minnesota law professor who was President George W. Bush’s chief ethics lawyer.

“Dr. Price takes his obligation to uphold the public trust very seriously,” said Phil Blando, a spokesman for the Trump transition. He has “complied fully with all applicable laws and ethics rules governing his personal finances.”

 

Rep. Chris Collins, along with family members, owns about 20 percent of Innate Immunotherapeutics. (Courtesy of the Congressional Directory)

Innate Immuno told investors it would seek “investigational new drug” status from the FDA, which could shorten the approval process. The FDA would not confirm this week whether the company has filed an application.

The drug is in a small clinical trial in New Zealand due to end in April. MS drugs are especially expensive for patients, costing $5,000 a month or more.

Positive trial results could set the stage for Innate Immuno’s stock to reach $2, said Australian stock analysts. In that scenario, Price’s investment of between $50,000 and $100,000 would be worth between $555,000 and $1.1 million. House financial disclosures require reporting of ranges of value but not specific amounts.

“You could easily picture a drug that is in the billions of dollars in revenues, but that’s assuming the [trial] data is there,” said David Blake, an analyst at Bioshares, a newsletter covering Australian life sciences stocks. “It’s really got to deliver.”

A physician who chairs the House Budget Committee, Price also sits on the House Ways and Means Committee and the Congressional Health Care Caucus. He has a history of contacting the FDA on behalf of industry campaign donors.

His ownership of Innate Immuno while serving in the House creates its own appearance of a conflict of interest, ethics authorities said.

“There is an appearance problem … to have members of Congress buying and selling stocks that are affected by the work of the committees they sit on,” Painter said. “It could be perfectly legal, but it looks terrible and shows lack of judgment.”

Price’s Innate Immuno stake is one of more than 40 companies he identifies as potential conflicts with the HHS job, including stock in Pfizer, Eli Lilly and Bristol Myers Squibb.

Collins, who sits on Innate Immuno’s board, has been a major shareholder in the company since 2011 and has gradually increased his family’s holdings to about 20 percent, corporate documents show. His investment in the private placement last summer was worth $720,000, according to regulatory documents.

“Congressman Collins has followed all ethical guidelines related to his personal finances during his time in the House and will continue to do so,” said spokesman Michael McAdams.

All told, including Price, Collins and other U.S. investors, the sale raised $1.8 million. In addition to funding the FDA approval process, the company said it would use the money to finance the clinical trial and develop potential manufacturing for the drug.

All U.S. investors in the August deal received a 12 percent discount to the stock’s market price at the time, which is not unusual in private placements, said Stuart Glazebrook, a biotech analyst for Gordon Capital Research, a securities research company in Melbourne, Australia.

For small companies, private issues can be more efficient than selling new public shares, he said. Selling at less than the market price raises odds of attracting investors, he said.

“It’s an incentive,” he said. “It’s like Amazon offering 20 percent off today only if you commit today.”

Ethics rules for FDA officials are especially strict, said Joshua Sharfstein, a former agency deputy commissioner.

“For the agency’s leaders, even holding onto a single share of stock in a regulated company is prohibited,” he said.

A decade ago FDA Commissioner Lester Crawford resigned and pleaded guilty to two criminal misdemeanors after being charged with concealing stock ownership in food and drug companies the agency regulated.

Innate Immuno executives have talked openly about selling the company to one of a number of pharmaceutical company suitors if its clinical trial is successful. Many small pharmaceutical companies with hot drugs go that route, reaping shareholders millions in quick profits.

The larger company would have the deep pockets to invest in more clinical trials that might be needed to obtain regulatory approval, analysts said.

Christina Jewett contributed reporting.


Trump’s HHS pick dislikes Medicare bundles program

hip

By RACHEL BLUTH

Kaiser Health News

A recent change in how Medicare pays for joint replacements is saving millions of dollars annually — and could save billions — without impacting patient care, a new study has found. But the man whom Donald Trump has picked to be the secretary of  the Department of Health and Human Services has vocally opposed the new mandatory payment program and is likely to revoke it.

Under the new program, Medicare effectively agrees to pay hospitals a set fee — a bundled payment — for all care related to hip- or knee-replacement surgery, from the time of the surgery until 90 days after. Traditionally hospitals collect payments for many components of care and rehabilitation individually.

Tom Price, M.D., the president elect’s HHS nominee, a congressman from Georgia and a very affluent orthopedic surgeon, has actively opposed the idea of mandating bundled payments for these orthopedic operations, calling it “experimenting with Americans’ health,” in a letter to the Medicare agency just last September. In addition, the agency which designed and implemented the experiment, the Center for Medicare and Medicaid Innovation, was created by the Affordable Care Act to devise new methods for encouraging cost-effective care. It will disappear if the act is repealed, as President-elect Trump has promised to do.

The study appeared Jan. 3 in the Journal of the American Medical Association. Though one of its authors is Ezekiel Emanuel, M.D., a professor at the University of Pennsylvania who helped design the ACA, the research relies on Medicare claims data from 2008 through mid-2015, long before the presidential election.

Starting in April 2016, CMS required around 800 hospitals in 67 cities to use the bundled payment model for joint replacements and 90 days of care after the surgery as part of the Comprehensive Care for Joint Replacement program. The program had previously been road-tested on a smaller number of hospitals on a voluntary basis, which formed the focus of the research.

The study found that hospitals saved an average of 8 percent under the program, and some saved much more. Price has been skeptical that bundled payments did save money, but the researchers estimate that if every hospital used this model, it would save Medicare $2 billion annually.

The bundled payment program works like this: For some specific kinds of medical procedures, including joint replacements or some heart surgeries, the Centers for Medicare & Medicaid Services will add up the costs for the entire episode, from the hospital stay and medical supplies to the rehabilitation afterwards. If the total costs are below a target set by CMS, the hospital gets to keep the savings. If not, the hospital has to pay Medicare the difference. It’s supposed to incentivize more efficient spending and better care coordination between providers, so they can lower costs.

In practice, it seems to be working. Baptist Health System, a network of five hospitals in San Antonio, saved an average of $5,577 on each joint replacement without sacrificing the quality of care, according to the study. Baptist was an early adopter of bundled payments; it began experimenting with them in 2008. Over seven years, the hospital system has cut Medicare’s costs on knee replacements by almost 21 percent.

The savings came without impacting quality. Patients at Baptist Health System were just as likely to be readmitted to the hospital or end up in the emergency room as patients nationally. There was some indication that quality of care may be better, fewer patients under bundled payments had long, extended hospital stays.

In Price’s letter from September, he said that Medicare had exceeded its powers in imposing such bundled payments, which he said took decisions out of the hands of doctors and patients.

That doesn’t seem to be the case, according to Amol Navathe, M.D., an assistant professor of medicine and health policy at the University of Pennsylvania, and one of the authors of the JAMA study. Instead, Navathe and his colleagues suggest that the bundled payments actually fostered greater collaboration between surgeons, administrators and patients because programs could only succeed in saving money if physicians were engaged in creating standardized pathways for care.

For example, the Baptist Health System saved about 30 percent on implant costs, around $2,000 on each artificial joint, by using the least expensive medically equivalent implants as determined by the hospitals’ surgeons.

Usually, physicians are prevented from benefitting when hospitals save money because of anti-kickback laws. Waivers under bundled-payment models mean that surgeons can put in the time to find the best, most cost-effective implants, and share in some of that savings.

“It takes that extra level of effort and coordination, and proactively communicate with [patients],” Navathe said. “Preplanning, setting of expectations and communicating up-front is resource intensive, when they have the incentive to do that they were willing to expend the extra resources to make that happen.”

When bundles included care after a patient’s hospital stay, spending on rehabilitation went down 54 percent. That’s because hospitals took the time to match patients to the right level of care, Navathe said.

Patients who didn’t need to stay in a nursing home or rehab center were set up with home health care or physical therapy.

Price has objected to CMS making bundled payments mandatory, calling it an instance of federal overreach. But bundled payments only work if everyone has to participate, according to Darshak Sanghavi, M.D., the former director of prevention and population health at the Center for Medicare and Medicaid Innovation.

If hospitals can choose whether or not to participate, only the ones that are already delivering care efficiently –and coming in under CMS’s cost target — will use bundles and Medicare will constantly be paying out bonuses. The system needs to be mandatory, Sanghavi said, to pull in less efficient hospitals and give them incentive to change.

“Stopping the programs for ideological reasons I think impedes innovation in a way that is going to consign us to having really, really high costs of care that’s going to continue in the future,” Sanghavi said.

Bundled payments aren’t just for hip and knee replacements. On Dec. 20, CMS announced it would expand mandatory bundled payments to treatments for heart attacks, bypass surgery and cardiac rehab beginning in July 2017. In its waning days, the Obama administration is effectively throwing down the gauntlet to the incoming administration on bundled payments, one of its signature reforms.


CEO of Boise-based St. Luke’s Health System reports progress in drive to end fee-for-service care

David C. Pate, M.D., a physician and lawyer who has been president and CEO of St. Luke’s Health System, based in Boise, Idaho, since 2009, spoke Dec. 14 as part of the Boise Metro Chamber of Commerce’s CEO Speaker Series. These remarks are edited for length and clarity from a transcript prepared by the chamber’s public-relations director, Caroline Merritt.

There’s a lot of discussion about healthcare, a lot of fear about what’s going to be happening with healthcare from a national level. I think there are answers — answers that healthcare providers are best prepared to implement, not Washington.

For the seven years that I’ve been here, we have been working at St. Luke’s, building the capabilities and competencies necessary to manage healthcare in a very different world than has existed.

Six months after I got here, the Affordable Care Act was enacted. We at St. Luke’s did not support the Affordable Care Act. Not because it doesn’t have a lot of really good features. It does. The discussion at the time was that if we add tens of millions of people to the newly insured in what was at the time, and still is, a broken healthcare delivery system, we’re going to end up saving money. We did not believe that. We have seen with the Affordable Care Act the continued growth and cost in healthcare. Something different has to happen.

Now the discussion is, “Let’s repeal and replace the Affordable Care Act.” I think it’s going to miss the mark as well. In both cases, Republicans and Democrats are coming up with the right answers to the wrong question.

Get a service, pay a bill

Most experts in healthcare would agree that the single biggest problem is our reimbursement model. It’s what’s called fee-for-service. You go to the doctor, you get a bill. You get a lab test, you get a bill. You go to the hospital, you get a bill.

It leads to a fragmented healthcare-delivery system. Everything is being paid by this unit-of-service or episode-of-care. Regardless of whether it helped you or not. Regardless of whether it provided value. Regardless of whether there was a less costly alternative.

An ideal reimbursement system ought to align the incentives of the payment with what we say are the important objectives that we want. You go places and you’re always having to repeat the same things because nobody seems to have all the information. You get bills from all the different ones.

It’s estimated that, at minimum, 30 percent of all healthcare spending in the United States goes to low-value or no-value services. So we are spending money on things that don’t help people. With fee-for-service, we pay for a lot of duplication.

One of the consequences is that we have these consistently rising premiums, and they have outpaced the growth in incomes. In Idaho this is particularly serious, because premiums as a percentage of average income [are] about 17 percent, and even the federal government with the Affordable Care Act said affordable is less than 9.5 percent.

High-deductible health plans don’t help

What has been a response is, “Let’s create really high-deductible health plans that make the patients have skin in the game and make them a little bit resistant to buy these services unless they really need them.”

Most of us can remember the day when we thought a high deductible was a thousand dollars for an individual. These high-deductible plans now are in the neighborhood of up to $6,000 for an individual, $12,000 for a family. Nearly half of Idahoans don’t have enough liquid assets to be able to pay the deductible.

So insurance is increasingly become more like a catastrophic health plan, not something that you can really use. People do avoid getting care, but they avoid getting the care they need as well as the care that you’d like to discourage. This isn’t working.

Now imagine a new world that I’ll call pay-for-value. Imagine that I’m getting paid $500 a month for people to provide all of their healthcare, and that’s all I’m getting,

The majority of the population [accounts for] a very small amount of the healthcare spending – 4 percent. In fee-for-service, Saint Al’s {Boise-based St. Alphonsus Health System} and St. Luke’s would go broke. They just don’t use many services.

Today, in fee-for-service, what I want to know when I come to work is: Are all our hospital beds full? Are our emergency departments full? Are women lined up down the hallway to give birth? Because this is how we get paid.

When [a patient is] ready to be discharged, we’re going to wheel [her] out in a wheelchair to the front sidewalk, and her family members are going to pull up, and we’re going to put her in the car and close the door. We’re done. Now, if anything else happens to her, that’s fine, come on back. We’d be glad to have you, and we’ll do it again. Re-admissions aren’t really a problem for us under fee-for-service. It’s just an opportunity to make more money.

New financial incentives for better care

Think about pay-for-value. I’m getting $500 per month. Is there any hospitalization that you can have for under $500 that you can think of? No.

Now don’t misunderstand me. We’re still going to have hospitalizations, even under pay-for-value. But we’re looking at them differently: Could we have prevented this?

Under pay-for-value, complications are very expensive, and now they’re our expense, because we’re just getting that $500. And we’re looking at two things. How can we give the right care 100 percent of the time? And how can we get to zero complications?

If you have a knee or a hip replacement, one of the dangers is that the prosthesis, the artificial part of it, can get infected. We figured that if someone got an infection from their knee or hip surgery, it added about $120,000 to the cost. That’s a lot of $500 premiums to pay for that complication. So what we’ve been doing is trying to figuring out how do we get to zero complications.

With hip and knee infections — I’m going to oversimplify — there are two ways you can get infected. One is: There can be bacteria on the skin that we don’t get off, so in the operation we put the bacteria in it. But today, the bigger problem is there’s particulate material in the air. We’ve got your wound open. That particulate matter can settle in your wound.

So we partnered with Micron and Boise State University to come into our operating rooms and to study about these particulate counts. Who knew there were such things as air engineers, but there are, and Boise State has one. And what we found is that every time the OR door opened, it stirred up the particulate count in the room. Just by us making sure everything is needed is in the room, and putting in new procedures about minimizing traffic through the OR, we have cut what was already a very good infection rate in half. These are the kind of things that you have got to do in this new world.

A very small percentage of the population accounts for a lot of the healthcare spending. [A man] has diabetes and heart failure and chronic kidney disease, and he’s a couch potato and he’s not very active. He is just a mess. People in [his] category, on average, are going to have six to eight doctors. In fee-for-service, they’re not talking to each other.

‘We’re driving this forward’

In pay-for-value, that’s where we can reduce costs and make healthcare more affordable. Instead of concentrating all of my health systems’ resources on all of them, I’m going to focus my resources on this group, because there is so much we can do just by paying those doctors differently. They’re not just getting paid for the office visit. They are now paid to actually coordinate his care. You use other resources like care managers to help coordinate that care.

Starting Jan. 1,  25 percent of our revenue will be in this new model. We expect that sometime in 2018, it actually may be 50 percent. So we’re driving this transformation forward.

Now, the Boise/Meridian hospitals are five-star hospitals designated by CMS [the federal Centers for Medicare and Medicaid Services], the only one like that in the state of Idaho — in fact, in the surrounding six states. And our health system has been named, and that’s all of the hospitals, a top 15 health system for three years in a row. We’re showing that this can be done. We’re doing it.

The other piece is: Drive it at the lowest possible cost. That’s what we’ve got to deliver on.

We’re not counting on Washington to figure out how to fix healthcare.

Q: You’re talking about the transformation, but I’m wondering how that’s going to happen. You partner with SelectHealth, right? To deliver this model? Are you going to be able to work with the other insurance companies to make this happen? Or maybe it’s something bigger, like CMS changing from fee-for-service to pay-for-value. How are you going to get from 50 to 100 percent?

A: This is a great question, because the only way we can do it is if the payment system is transformed as well. It’s not going to work for us to transform the clinical model if the business model doesn’t change with it.

We have a great partnership with SelectHealth. That is certainly accelerating our efforts. One reason we went to SelectHealth was there wasn’t a lot of appetite for this in the market with the insurers at the time many years ago. Now other payers are getting aligned with this same concept.

In defense of my insurance-company colleagues, let me tell you, it’s really hard to change your business model. What we’ve gone through with our board to convince them that we should do this, and for them to understand you’re going to take 25 percent of our revenue and put it at financial risk? It’s a big step. And it’s hard for any business to transform their business when they’re doing well.

I think there’s going to be a competitive advantage to who can figure this out first. What I can do is: With the insurance companies that want to partner with us, we can now get by on a lower premium. So you can actually lower your premium, and we know that is what will shift market share.

As far as the federal government:

The current administration is all in favor of this, and they would applaud what we are doing.

I am concerned with the new pick for secretary of HHS [President-elect  Trump has chosen Rep. Tom Price,  M.D., a Georgia Republican congressman] because I’m not convinced based on what I’ve read about him that he believes in this. He’s a physician that came from the fee-for-service world and did well in that world.

I think the question is: How difficult is the new administration going to make it for us to do this? But I hope not.

This story appears in the December 21, 2016-January 17, 2017, edition of the Idaho Statesman’s Business Insider magazine.  To get to the magazine, hit this link.

 

 


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