Category Archives: Cost Management

NEW COVENANT HEALTH CFO AIMS TO LEAD ORGANIZATION’S FINANCIAL TURNAROUND

Posted on by • Posted in Balance Sheet, Chief Financial Officer (CFO), Cost Management, Health System, Hospital, Hospital Industry, Labor Spend Management, Operating Expenses, Operating Income, Operating Margin, Operating Performance, Operating Revenue, Outsourcing, Productivity, Rev Cycle Management, Stewardship, Turnaround, Turnaround Plan, Value, Value Creation • Leave a comment

https://www.healthleadersmedia.com/finance/new-covenant-health-cfo-aims-lead-organizations-financial-turnaround

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The Tewksbury, Massachusetts–based health system strives to post its first positive balance sheet in more than five years.

Stephen Forney, MBA, CPA, FACHE, excels in fixing “broken” organizations and he has built a track record of achieving financial turnarounds at seven healthcare facilities, he tells HealthLeaders in a recent interview.

Forney has over three decades of experience as a healthcare executive, with a primary focus on problem-solving. He began his career fixing problems in areas such as information technology and supply chain, an approach and skill he has carried over into financial operations in the C-suite.

“In finance, it wound up being the same thing. Pretty much every organization I’ve gone to has been broken in some way, shape, or form,” Forney says. “I’ve developed a specialty doing turnarounds and this will be my eighth.”

Forney speaks about his new CFO role at the Tewksbury, Massachusetts–based Catholic nonprofit health system Covenant Health, which he joined in mid-September, and how driving revenue and reducing expenses must go hand-in-hand to achieve financial balance.

This transcript has been lightly edited for brevity and clarity.

HealthLeaders: Covenant is coming off its fifth straight year of operating losses. What is contributing to those losses and how do you plan to address those financial challenges?

Forney: The thing is, most turnarounds—to a greater or lesser extent—look a lot alike. With organizations that have [financial] issues, there are obviously always unique aspects to every situation, but virtually every healthcare organization that’s not doing well is because of the same relatively small handful of issues.

[For example,] revenue cycle is probably No. 1. Productivity has not been well attended to; expenses haven’t had a lot of discipline around them in a broad sense. That’s not to say that all decisions are bad, but in a systematic fashion, things haven’t been looked at. Frequently, driving volume and growing the business needs a better focus. 

In the case of Covenant … there has been a plan developed to address all those areas and we are addressing them already, even though we will be posting another operating loss in fiscal [year] 2019. But the trajectory is good and some of the things that we’re now looking at are what I would consider to be phase two–type initiatives. How do we accelerate and move them to the next level?

On October 1, we outsourced our revenue cycle. I’m pleased that we were able to get that accomplished. Obviously, it’s early but, at least anecdotally, initial trends look good.

HL: Where do you fall on the dynamic between focusing on expense control measures or revenue generation?

Forney: I always feel like you need to do both. Expense management and working towards expense strategies is easier, quicker, and more straightforward.

[Revenue growth strategies] take time, take effort, and tend to [have] a much higher degree of uncertainty around the volume projection. Those are necessary and they’re things that we need to invest in because, at some point, you can’t cut any more from your organization, you’ve got to grow the top line. To me, it’s sort of like step one is stabilize your revenue cycle and stabilize your expenses. Then while you’re doing that, work on growth that’s going to take place 12 to 18 months down the road.

HL: Are you optimistic about the federal government’s efforts to move the industry toward value-based care?

Forney: Going back about a decade, I thought the ACE program, which was [the federal government’s] bundled payment program, was a solid step in the right direction. It gave organizations a chance to collaborate in compliant fashion with physicians to bend the cost curve and have beneficiaries participate in the bending of the cost curve as well. I was with one of the pilot health systems that [participated], and it was a remarkable success.

Everybody got to win; CMS, patients, physicians, and systems won by creating value. Yes, I think that the government has a good role to play in [value-based care] because they have such a large group of patients that they’re willing to experiment like that. [The federal government] can come up with potentially novel ways to get people to buy into this.

HL: What is it like to be at the helm of a Catholic nonprofit system and how does it affect your leadership style?

Forney: From a philosophical standpoint, the principle of creating shareholder wealth and good stewardship are not significantly different. You’ve got an end goal in mind, which is, you’re taking care of the patients and a community. In one case, whatever excess is left goes to a private equity fund or shareholders. In the other case, [the excess] stays in your balance sheet and gets reinvested in the community.

HL: Given your three decades of healthcare experience, do you have advice for your fellow provider CFOs, especially some of the younger ones?

Forney: Focus on being that strategic right-hand person to the CEO. In my experience, that has been one of the things that marks a successful CFO from one that isn’t as successful.

CEOs are going to get ideas from everywhere. They’re outward and inward facing. They deal with the doctors and the community, and they’re going to get all sorts of great ideas.

The CFO needs to be that person [who is] grounded and says, ‘Well, what about this?’ That doesn’t mean saying no. The whole idea is how do you make it [sound] like a yes. To me, the CFO role just grounds all the discussions, from working with physicians to working with the community. 

CFOs over the last couple of decades have been operationally oriented. Now they need to start becoming clinically oriented.

There’s a real benefit in being able to sit down and talk with a physician and understand [what] they’re doing. … It winds up becoming a way to help ground the clinicians in the hospital operations because now you’re having a dialogue with them instead of them just saying, ‘You don’t understand. You’re not a clinician.’ That would be something that I would have a young CFO try to stay focused on, even though it’s dramatically outside the comfort zone for people that typically go into accounting.

 

Elevator Pitch for Fixing U.S. Healthcare

Posted on by • Posted in 2020 Election Issues, Cost Management, Cost Reduction, Cost-Benefit Analysis, Health Policy, Imperfect Markets, Single Payer Health System, Single Payer Healthcare System • Leave a comment

Fixing U.S. Healthcare – Annual Review & Summary

2019.12.10 Clipboard_flat_3D

 

Fixing U.S. Healthcare blog’s two-year anniversary is a good time to take stock of what has changed in our approach to fixing U.S. healthcare.  And a good time to review highlights of the last year.

Elevator Pitch for Fixing U.S. Healthcare

Let’s start with an “elevator pitch” summary:

The U.S. healthcare system has outgrown itself, now comprising almost 20% of the gross domestic product and still rising. It delivers ever more treatments that have diminishing “marginal benefit.” It does so at a cost far beyond the treatments’ true value to either individuals or to society, in all too many cases. And at prices double those in other developed countries. Now these costs are biting into the average family’s wallets. In 1994, the Oregon Health Plan took control of healthcare and managed its costs for 8 years by combining cost-benefit analysis with well-cultivated public engagement.  This would be a good starting place for fixing U.S. healthcare. But 25 years later, this approach alone would not be sufficient.  Powerful interests have now rigged the healthcare system for profits, not health. I conclude that only a grassroots movement to harness the full political, social, legal, economic and ethical weight of the federal government can encircle these entrenched interests and rein them in. There are several models for U.S. healthcare reform that could fall squarely within American tradition and pragmatism.

 

Changes in this Blog’s Approach

Let’s look at how this blog’s messages have evolved this year.

  • Original message: Relentless increases in U.S. healthcare spending puts a drag on economic growth and household spending.

Updated message:  Relentless increases in U.S. spending on healthcare do indeed reduce individual households’ disposable income, especially as households pay ever more of the share of healthcare costs. Healthcare costs also do eat into corporate profits, and blunt international competitiveness. However, healthcare spending is not necessarily a drag on the economy. Rather, it is now a major component of our national economy, accounting for 18.3% of total gross domestic product. This is because the U.S. has evolved into a post-industrial services-oriented economy. There is nothing inherently problematic about healthcare services in this kind of economy. The problem, however, is that excessive healthcare spending is diverting human and financial resources away from other priorities, such as education, research, infrastructure, housing. Furthermore, the marginal benefit of more healthcare spending is dwindling, while the unrealized value of deferred investment in these other priorities is growing – mounting opportunity costs.

 

  • Original message: Relentless increases in U.S. healthcare spending will seriously weaken the nation over time.

Updated message:  Economist Larry Summers dismisses the idea of an impending fiscal calamity. He explains that the “real” interest rate (nominal minus inflation) has been at historic low levels for the last two decades, resulting in no increase on the actual proportionate amount paid to service the debt.  Nevertheless, he cautions federal budgeters not to deepen the debt any further, but rather pay as we go for any new programs. Thus, the reasons to fix U.S. healthcare are not to avoid national disaster, but rather to improve worker productivity, rebalance fiscal priorities, and promote societal cohesion and business climate.

 

  • Original message: Excessive healthcare spending is principally driven by low-marginal-benefit services and inefficient, overly complex administration.

Updated message:  Excessive healthcare spending is indeed driven by administrative complexity (estimated at $265.6 billion annually) and to a lesser degree by low-marginal-benefit treatments (estimated at $75.7 billion to $101.2 billion) (2012-2019 data). Other elements of non-costworthy, wasted spending are:

  • Failures of Care Delivery: $102.4 billion to $165.7 billion
  • Failures of Care Coordination: $27.2 billion to $78.2 billion
  • Fraud and abuse: $58.5 billion to $83.9 billion

But the other big driver of over-spending is pricing failure in imperfect markets, amounting to $230.7 billion to $240.5 billion.

 

  • Original message: Excessive healthcare spending was caused by health professionals who, in good faith, overvalued healthcare services and lost their perspective on their value relative to other societal priorities.

Updated message:  Given the prominence of market and pricing failures, this blog concludes that healthcare business interests, and their professional and political allies, have knowingly and willfully coopted healthcare for the purpose of profits. These interests have superseded the health of the public, often undermine patient-centered care, and, at times, result in actual harm.

 

  • Original message: Healthcare can be fixed by a common-sense, practical approach informed by cost-benefit analysis.

Updated message:  Since the system is rigged by powerful, well-financed interests, it can be fixed only by the full faith and clout of the federal government responding to an informed grassroots movement. The most likely format for healthcare reform would be gradual but deliberate transition to a single-payer system. This would then be followed by systematic remedies to the 6 categories of unjustified “wasteful” spending, including technology assessment using cost-benefit analysis.

 

 

 

HOSPITAL SPLITS THIS PAYROLL EXPENSE 50/50 WITH LOCAL PAYER TO CURB ER OVERUSE

Posted on by • Posted in Cost Management, Cost Reduction, Emergency Care, Health Insurance Industry, Health Plan, Health System, Hospital, Hospital Industry, Social Determinants of Health, Social Worker • Leave a comment

https://www.healthleadersmedia.com/strategy/hospital-curbs-er-overuse-splitting-payroll-expense-5050-local-payer

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New Ulm Medical Center struck a deal with a local payer willing to share the cost of a simple intervention. The arrangement has been paying dividends for seven years.

KEY TAKEAWAYS

The intervention slashed PMPM billing by 61% in three years for a small cohort of plan members.

What makes this program atypical is the way the hospital took a broad problem-solving approach while minimizing its expenses.

Patients who use the emergency department at least three times within four months at Allina Health’s New Ulm Medical Center in New Ulm, Minnesota, have their names added to a high-utilization list.

The keeper of that list is Jennifer Eckstein, a licensed social worker who follows up with each patient directly, looking to solve underlying problems that may be driving their frequent ED use. Whether the patients need a primary care physician, a mental healthcare provider, supportive housing, or another solution, Eckstein does her best to address their social determinants of health and steer them away from the ED for non-emergent care.

The intervention is a straightforward concept. Many other hospitals have similarly hired social workers to help meet the needs of these ED frequent flyers. The program at New Ulm Medical Center, in fact, was inspired in part by an earlier and narrower intervention that focused exclusively on mental health needs of ED patients at Allina’s Owatonna Hospital in Owatonna, Minnesota.

But what makes this program a bit different from others is the way New Ulm Medical Center took a broad problem-solving approach while minimizing its expenses. Rather than shouldering the full cost of employing a full-time ED social worker, the hospital partnered with local insurer South Country Health Alliance. They struck a deal and signed a contract agreeing to split the personnel expense 50/50, beginning in 2012.

Allina’s four hospitals in the Twin Cities metro area have regularly staffed social workers in their EDs, too, but none of them fund those positions through cost-sharing arrangements with health plans, according to a spokesperson for the nonprofit health system.

South Country Health Alliance CEO Leota Lind, who has been with the organization since its founding in 2000, says her organization didn’t need much convincing to sign the contract with New Ulm Medical Center. While unmet mental health needs are often a major factor contributing to ED overuse, they are far from the only factor, so the broader approach taken at New Ulm offered a chance to solve a wider range of the challenges that were leading plan members to an ED when they should be seeing a more cost-effective primary care physician instead, Lind says.

“We really just were looking at ways to influence and reduce emergency department visits,” Lind tells HealthLeaders. “By taking that broader scope, it gave us the opportunity to identify what other issues were contributing to that high utilization of the emergency department.”

FEWER DOLLARS, MORE SENSE

South Country Health Alliance and New Ulm Medical Center each contribute about $40,000 per year to cover Eckstein’s salary and benefits—which, at about $80,000 per year, are in line with what other hospital social workers earn in total compensation in the Midwest, says Carisa Buegler, MHA, director of operations for the hospital.

Both the hospital and payer say their shared investment has been paying off.

Before the social worker was introduced, a small cohort of 28 South Country Health Alliance plan members who received care in New Ulm Medical Center’s ED generated $731 per member per month (PMPM) in hospital bills, according to Buegler. A year after Eckstein began her work, in 2012, those bills fell to $416 PMPM, then they kept falling. By the end of the third year, in 2014, the 28-patient cohort generated $286 PMPM in bills, Buegler says.

That 61% reduction means the hospital billed the payer nearly $150,000 less in 2014—just for those 28 patients—than it had before the social worker was introduced. By the end of the third year, the cohort’s overall ED utilization was cut in half, and its inpatient admissions fell 89%, Buegler says.

That’s only part of the impact Eckstein’s labor has produced, since she doesn’t work exclusively with South Country plan members. Eckstein, who was hired into the position when it was created, says she helps roughly 150–200 patients per year, regardless of who’s paying for their care. Some needs are easier to meet than others, so she’s built a sense of rapport with some returning patients over the years.

“The good thing is they utilize me now instead of the ER, so when they get into a pickle or if they’re having trouble with something, they call me,” she says.

Across all payers, the intervention has likely been saving $500,000 or more, Buegler says.

The intervention is about more than just money, of course. It aims also to improve clinical care and patients’ quality of life.

“I don’t think the driver was necessarily just cost but appropriate care at the right place, at the right time, with the right kind of provider,” says South Country Health Alliance Chief Medical Officer Brad Johnson, MD.

But the financial implications of this intervention are especially interesting considering the fact that New Ulm Medical Center is spending $40,000 per year on a program that delivers cost-savings to payers while reducing the hospital’s revenue. The immediate financial benefit goes to the payer, not the provider.

The hospital has seen a 20% reduction in its overall ED volumes in the past five years, and that’s likely the direction in which most hospitals’ EDs are headed, which is generally good news, Buegler says. The situation presents a challenge, though, since value-based payment arrangements haven’t matured and proliferated to a point where they can compensate adequately for the trend, she says.

Why, then, would the hospital keep investing in this intervention?

“It’s the right thing to do,” Buegler says. “It’s providing the best level of care to our patients who are coming in the emergency department seeking help and then providing another level of service to those individuals to help them improve their social conditions, that will then help them to improve their health. … It’s really looking at the patient as a whole person.”

There’s also a longer-term business case to be made for the hospital’s continued investment, Buegler says.

“From a financial perspective, we’re preparing for more value-based payment contracts,” she says.

Although risk-based contracts have been arriving more slowly than many industry stakeholders had expected, leaders remain confident that more value-based models are on the way, so it makes sense for hospitals like New Ulm Medical Center to invest in the future it anticipates, Buegler says.

PLUGGED INTO SUPPORT NETWORK

Eckstein is the sole social worker stationed in the ED, but she’s not running a one-woman show.

New Ulm Medical Center has a social worker assigned to its clinic, too, and South Country Health Alliance employs a physician as a community care connector in each of the 11 counties it serves—so Eckstein has multiple partners just outside the ED’s walls.

“By having that hospital social worker work in partnership with the community care connector at the county, they’re able to effectively make referrals and access some of those other types of community supports that have also helped address the issues that individuals may be experiencing as barriers to managing their healthcare,” Lind says.

This idea of bridging the gap between traditional medical care and broader social services has been central to South Country Health Alliance’s mission since it was founded, Lind says.

“We recognized way back then that those other aspects, those other social, environmental aspects of an individual’s life, impact their ability to manage and maintain their healthcare,” she adds. “That’s been a part of our program since the beginning.”

Johnson says this care coordination is a vital component of the local safety net.

“In rural Minnesota,” he says, “there’s lots of opportunities for people that are not savvy users of the healthcare system to fall through the cracks.”

“THE GOOD THING IS THEY UTILIZE ME NOW INSTEAD OF THE ER, SO WHEN THEY GET INTO A PICKLE OR IF THEY’RE HAVING TROUBLE WITH SOMETHING, THEY CALL ME.”

 

 

 

 

15 Doctors Fired From Chicago-Area Health System

Posted on by • Posted in Advance Practice Nurse, Cost Management, Cost Reduction, Health System, Hospital, Hospital Industry, Nurses, Physician, Strategy • Leave a comment

https://www.medpagetoday.com/publichealthpolicy/workforce/83576?utm_source=Sailthru&utm_medium=email&utm_campaign=Weekly%20Review%202019-12-01&utm_term=NL_DHE_Weekly_Active

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Physicians “broadsided” by their termination.

At least 15 physicians have been fired from Edward-Elmhurst Health as the suburban Chicago-based health system moves to cut costs, sources told MedPage Today.

The doctors, who worked across its seven “Immediate Care” or urgent care sites, will be replaced by advanced practice nurses, according to an email sent by hospital leadership that was shared with MedPage Today. The physicians were informed late last week that they would be terminated as of April 1, 2020.

A physician who spoke on the condition of anonymity said the doctors were “broadsided” by the news. While they harbored some concerns that a few of the slower urgent care sites might be turned over to non-physician clinicians, they weren’t expecting so many of the sites to be impacted and for such a large number of doctors to be let go.

In their email, hospital system CEO Mary Lou Mastro, MS, RN, and Chief Medical Officers Robert Payton, MD, and Daniel Sullivan, MD, pointed to patient cost concerns as the reason for eliminating the jobs: “Patients have made it very clear that they want less costly care and convenient access for lower-acuity issues (sore throats, rashes, earaches), which are the vast majority of cases we treat in our Immediate Cares.”

“Beginning in the spring of 2020, we will move to a delivery model in which care is provided by Advanced Practice Nurses (APNs) at select Immediate Care locations,” they wrote.

Leadership also stated in the email that they are “working closely with these physicians to assist them with finding alternative positions within Edward-Elmhurst Health or outside our system,” but doctors noted that they face a saturated Chicago healthcare market and they’re likely to have to relocate.

When asked to confirm the layoffs, Keith Hartenberger, a spokesperson for Edward-Elmhurst Health, said in a statement: “We continue to assess our care delivery models in the interest of providing cost-effective care to our patients. We shared with physicians that we have plans to change the model next year at some outpatient sites and are working with anyone affected to find alternative placement.”

The move is becoming a more familiar one as some health systems try to save money by relying more heavily on non-physician clinicians.

Last year, 27 pediatricians at a chain of clinics in the Dallas area lost their jobs and were replaced by nurse practitioners — even though the chain subsequently changed its name to MD Kids Pediatrics.

Rebekah Bernard, MD, wrote in Medical Economics that she spoke with three of the pediatricians who were fired: “They told me that they and their physician colleagues were completely shocked by the sudden firing. ‘We thought we were going to retire from this place,’ one told me.”

Also in 2018, Charlotte, North Carolina-based Atrium Health ended a nearly 40-year contract with a 100-member physician group, signing up instead with Scope Anesthesia, which says it’s dedicated to forming partnerships with certified registered nurse anesthetists. Atrium said it too was looking to reduce patient costs.

“This trend of shuttering hospital departments and firing physicians to save money is dangerous and short-sighted,” Bernard wrote.

Purvi Parikh, MD, of NYU Langone Health in New York City, and a board member of Physicians for Patient Protection, which advocates against other healthcare providers replacing doctors, said that although non-physician clinicians “are vital members of the healthcare team, they are not trained to be substitutes of physicians and as a result diagnoses are missed and improper treatments and tests [are] prescribed.”

Parikh said patients “have the right to choose a facility that is physician-only or one with physician-led care. In Chicago, luckily there are other options among competitors.”

 

Would ‘Medicare for All’ really save money?

Posted on by • Posted in 2020 Election Issues, Cost Management, Cost Reduction, Health Policy, Medicare for All, Population Health, Price Transparency • Leave a comment

https://www.politico.com/news/agenda/2019/11/25/medicare-for-all-save-money-072178?utm_source=The+Fiscal+Times&utm_campaign=ae11965f63-EMAIL_CAMPAIGN_2019_11_26_10_44&utm_medium=email&utm_term=0_714147a9cf-ae11965f63-390702969

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We invited experts to cut through one of the biggest campaign claims about single-payer health care — and what might really work.

Every year, health care eats up a huge and growing chunk of America’s GDP — soon projected to be $1 in every $5 spent in the U.S. ― and “Medicare for All” supporters love to tout its ability to bring that dizzying price tag down.

Would it? Is that even possible in today’s political reality?

For the answer, we looked past the candidates making lavish promises about their policies and turned instead to the experts who’ve been studying this question for years. To encourage a lively back-and-forth, we opened up a shared file and invited six of America’s smartest health-cost thinkers to weigh in freely on a handful of questions, arguing in real time about how and whether a new system might deliver on this one big promise.

The Lineup

DON BERWICK

  • Institute for Healthcare Improvement. Berwick was the Medicare administrator under President Barack Obama and advised Elizabeth Warren on her Medicare for All plan.

KATE BAICKER

  • Dean of the University of Chicago Harris School of Public Policy.

BRIAN BLASE

  • President of Blase Policy Strategies, a visiting fellow at The Heritage Foundation, and previously special assistant to President Donald Trump for economic policy.

LANHEE CHEN

  • Director of domestic policy studies at Stanford University, and fellow at the Hoover Institution.

SHERRY GLIED

  • Dean of New York University’s Robert F. Wagner Graduate School of Public Service.

HANNAH NEPRASH

  • Assistant professor at University of Minnesota School of Public Health.

 

1. The Trillion-Dollar Question

Could Medicare for All really rein in health care spending in America?

Key Takeaway

Don Berwick: A single-payer system may be the only plausible way to get a grip on our health care costs without harming patients. Without it, it’s hard to find a route to the administrative simplification, purchasing power, and investments in better quality of care and prevention that can get at the fundamental drivers of cost increases that don’t add value. Whether it’s realistic or not depends on building public confidence in the benefits of that strategy.

Kate Baicker: The potential simplification has to be balanced against the increase in health care use that we should expect when uninsured people gain access to insurance. Insured people use a lot more health care than uninsured people! That’s a very good thing for their health, but it comes with a cost that taxpayers have to finance. Given that, I’m not sure that we can lower overall health spending without restricting access to care in ways that people might not like, such as through denying coverage, or even shortages caused by cutting back on reimbursement rates.

Hannah Neprash: If I’m sure about anything in this world, it’s that expanding health insurance coverage will increase the total quantity of health care consumed, like Kate said! So that means M4A would need to dramatically reduce the price we pay for care, in order to rein in spending. That’s not out of the question; we know there’s tremendous variation within commercial insurance prices that doesn’t necessarily reflect higher quality. But it could raise concerns about access to care.

Brian Blase: No. Economics 101 says that increasing the demand without doing anything about the supply will put upward pressure on prices. The government can force prices below market-clearing levels, but that would lead to access problems for patients and complaints from politically powerful hospitals and providers. Also, Medicare rates are set through a political process with a bureaucracy subject to intense pressure. Unsurprisingly, Medicare overpays for certain services and procedures, and underpays for others. A single-payer program would likely lead to more wasteful health care expenditures, since it would further reduce market signals about what is valuable and what is not. Innovation and disruption represent the best way to lower costs without harming quality of care, and an even bigger Medicare-style bureaucracy would favor the status quo over more innovative ways of delivering care.

Don Berwick: I have some skepticism about claims Medicare for All will unleash major increases in utilization. That’s not the case in some European countries with health care “free at the point of service,” and I believe that the experience in Massachusetts with nearly universal coverage didn’t match the predictions of major utilization increases — at least not persistent increases.

Kate Baicker: I think we actually have a fair amount of evidence that when patients have to pay less for care, they use more. Again, that’s not a bad thing in and of itself, but I think it’s unrealistic to hope that we can insure more people but spend less on health care overall without substantially cutting back on payments or restricting services, both of which would restrict access to care for the insured.

Sherry Glied: This question really comes down to politics, not economics. As Hannah says, prices are the key here, but we already know Congress has had a very hard time reducing hospital prices or physician prices . Right now, a Democratic majority in the House can’t even agree on a way to address surprise billing, which benefits only a small minority of physicians. Today, health care is the largest employer in over 55 percent of U.S. congressional districts ― a political reach the defense industry must envy. Under a single-payer system, the entire livelihood of all those health care providers would depend on choices made by federal legislators and regulators. That’s an extraordinarily potent political force, with unparalleled access to members of Congress. Think of those annual checkups! Simply invoking the words “single-payer” isn’t going to change that political reality.

Lanhee Chen: I have to agree with Sherry that the history of entitlement spending in the United States supports the notion that the politics will make it almost impossible for single-payer to be fiscally sustainable. The current proposals from the likes of Elizabeth Warren make dramatically unrealistic assumptions about what will happen to provider reimbursement rates — and the history of how Congress has reacted to the provider lobby makes clear that if it passes some kind of single-payer system, reimbursement rates would steadily rise and costs would rise with them. Of course, single-payer advocates could be honest about their intent to ration care to constrain cost — but here again, it’s unlikely politicians would actually make such a concession.

2. The Hospital Challenge

We know that more money is spent in hospitals than any other setting or service, but hospital costs haven’t gotten much attention from the 2020 candidates — in part because beating up on hospitals isn’t good politics. So what can be done there?

Hannah Neprash: The past decade-plus has seen a tremendous amount of merger and acquisition activity in and across hospital markets. As a result, large hospital systems have the bargaining power to command increasingly high prices from commercial insurers. Antitrust enforcement should certainly play a role. I’m also intrigued by what states like Massachusetts are doing, with agencies like the Health Policy Commission that monitors health care spending growth.

Don Berwick: Moving away from fee-for-service payment to population-based payment would be a powerful way to check needless hospital spending. We’d also benefit from stronger antitrust action to mitigate the price effects of hospital market consolidation. Strengthening community resources for home-based and noninstitutional care is also important.

Brian Blase: The key answer is to increase competition. As a reference, see the Trump administration’s 2018 report, Reforming America’s Health Care System Through Choice and Competition. Beyond putting more resources into antitrust enforcement, Congress should also consider restricting anti-competitive contract terms, like “all-or-nothing” contracts that require that every hospital and provider in a system participate in an insurer’s network if the insurer wants to contract with any hospital or provider in that system. The actual practice of medicine matters, too: If states took steps to allow providers to practice to the “top of their license,” delivering the most advanced care they’re qualified to do, it would let hospitals trim costs by using highly qualified but lower-cost alternatives — such as nurse anesthetists instead of specialist MDs on some procedures.

Sherry Glied: I’m sympathetic to Brian’s emphasis on the role of competition, but unfortunately, only a tiny minority of areas in the U.S. have the population base to support four or more large hospitals, which is the number needed for that kind of competition. Some combination of maximum price regulation in markets where there are few choices and expanded public programs to put downward pressure on prices would help. Interestingly, the share of U.S. health care expenditures that goes to hospitals is the same today as it was in 1960 ― before Medicare and Medicaid. I’m dubious that simply changing methods of payment is going to make much of a dent.

Don Berwick: Competition and transparency may help, but I do not have faith that these will be sufficient to control escalating prices. I suspect we will sooner or later have to turn to some form of direct price controls.

Brian Blase: Of course, we already have price controls throughout the health care sector as a result of Medicare fee-for-service’s prominent role. And just a reminder that the onset of Medicare led to an explosion of health care spending in the United States.

3. Would Transparency Work?

One thing everyone across the ideological spectrum seems to agree on is that we need more transparency in health care pricing, so everyone from patients to regulators can see what things actually cost. But what’s the evidence that this actually helps keep costs down? And what more could policymakers realistically achieve, given pushback from industry groups?

Don Berwick: I’m very much in favor of total transparency in pricing. It’s hard to control costs if we don’t know how the money flows. But the evidence suggests that simple-minded notions of informing patients to create price sensitivity don’t work. The effects of transparency are more subtle and indirect.

Kate Baircke: Information alone goes only so far: It has to be coupled with a system that rewards quality of care and health outcomes, rather than just the quantity of care delivered. And it has to be done in a nuanced way. On the patient side, simply increasing deductibles, for example, is likely to restrict patients’ access to high- as well as low-value care — but cost-sharing that is clearly tied to value, like having lower copayments for highly beneficial services, could create pressure for better use of resources and better outcomes. Similarly, on the provider side, having providers share in the benefits of steering patients toward higher-value care is likely to be much more effective in improving value than just cutting back on payment rates.

Brian Blase: I just wrote a paper on this subject, so I apologize for a somewhat long answer. There’s definitely evidence that consumers who have incentives to care about prices benefit from transparent prices — meaning they shopped and saved money. Consumers who used New Hampshire’s health care price website for medical imaging saved an estimated 36 percent per visit. Safeway linked a reference pricing design with a price transparency tool, and its employees saved 27 percent on laboratory tests and 13 percent on imaging tests. (Reference pricing means that consumers are given a set amount of money for a procedure, and then bear any cost above the reference price.) California used reference pricing for orthopedic procedures for their public employees and retirees, and it led to a 9- to 14-percentage-point increase in the use of low-price facilities, and a 17-percent to 21-percent reduction in prices. Perhaps the neatest finding is that people who didn’t shop also benefited, since providers lowered prices for everyone. In California, about 75 percent of these price reductions benefited people who were not participating in the reference pricing model.

So in my paper, I argue that the primary way price transparency will create benefit is by helping employers drive reforms — by easing their ability to use reference price models, better monitoring insurers, and designing their benefits so employees have an incentive to use lower-cost providers.

Hannah Neprash: I think it really depends on what we mean here. Simply providing price information to patients via price transparency tools hasn’t changed behavior much. Reference pricing is promising — because patients switch providers, and higher-priced providers appear to lower their prices in response. Since patients rely so heavily on the recommendation of their physicians, I’d been hopeful about physician-directed price transparency, but existing evidence doesn’t seem to bear this out. This may very well be another area where aligning financial incentives is crucial, so physicians share in the savings if they steer patients toward more efficient providers.

Sherry Glied: Some kinds of price transparency seem to be no-brainers. No one should ever face an unexpected out-of-pocket bill for a scheduled medical service, and everyone should know exactly how much to expect to pay in an emergency. That’s Consumer Protection 101. Things get more complicated from there. If incentives of patients and referring physicians are aligned, there’s some hope of steering patients toward lower-cost providers and encouraging lower prices all-around through structured shopping tools, like reference pricing, but the scope of these programs is very narrow. We actually don’t know — theoretically or empirically — what would happen if all doctors, hospitals and insurers knew what others were paying or charging. And in general, wholesale prices of that type, paid by one business to another, are not transparent in other industries either.

Brian Blase: I think the potential application of reference price models and value-based arrangements is far broader than Sherry does. Only a small amount of health care procedures or services are for emergency care.

Lanhee Chen: The one thing I would add here is that price transparency — however one defines it — should be coupled with better and more thorough information about provider quality. We have long struggled with a way to report quality measures that account for differences in underlying patient health and other factors, but there are a number of private-sector and nonprofit driven efforts that have made good progress on quality reporting in recent years. Whatever efforts there are to drive forward with transparency on the pricing side, we shouldn’t forget that those measures alone may not be enough to help consumers make truly educated decisions.

4. OK, Panel: Now What?

If it were up to you, what’s a politically viable first step you’d take to bring down health care costs right now?

Don Berwick: I’d like to give provider systems the flexibility to invest in care and supports that really help patients, instead of trapping the providers on the fee-for-service hamster wheel of continually increasing activity. So, continue bipartisan efforts to end fee-for-service payment wherever possible. The more we can orient payment toward a population-based system, the faster we can likely make progress. By “population-based” payment, I mean a range of options including capitated payments, global budgets and, generally, paying integrated care systems to take responsibility for the health of groups of enrollees over time.

Kate Baicker: I agree that moving away from fee-for-service and toward value-based payments would be a big step in the right direction. I’d also like to see the Cadillac tax implemented, to limit the regressive subsidy of expensive employer-based plans. This would both make our system both more progressive and more fair, and also promote higher-value health insurance plans.

 

Brian Blase: I agree with Kate that the Cadillac tax should be implemented, although I recommend a reform that would exempt contributions to health savings accounts from the tax thresholds — so we’re replacing a subsidy for third-party payment with a subsidy for personal accounts that employees own and control. More generally, Regina Herzlinger, the dean of the consumer-directed health reform movement has put it this way: “Choice supports competition, competition fuels innovation, and innovation is the only way to make things better and cheaper.” The Trump administration’s report I mentioned earlier has more than 50 recommendations to maximize choice and competition in health care. For politically possible steps in the near term, we should pursue real price transparency at the federal level, and at the state level we should encourage states to allow providers to practice to the top of their license and eliminate anti-competitive restrictions, like certificate-of-need laws.

 

Sherry Glied: Medicaid for all! Give all Americans access to a low-cost health care option, as is done in Australia. That will put downward pressure on prices across the system, because providers will know that if they charge too much, patients will revert to public insurance.

 

Kate Baicker: When it comes to Medicare for All, my colleagues Mark Shepard, Jon Skinner and I have some new analysis suggesting that a “one size fits all” Medicare-type program is increasingly unsustainable as medical technology advances, income disparities rise and taxes increase. A workable alternative would be a more basic universal insurance package that people could then choose to “top up” if they wanted — more like “Medicaid for All” (thanks for the setup, Sherry!). That has the potential to make our health care spending more efficient in a way that can benefit both high- and low-income people.

 

Brian Blase: Without knowing the details, I like Kate’s proposal. I’ve long argued that we should send public subsidies directly to people and let them choose how they want to finance their health care, rather than sending subsidies directly to insurance companies or health care providers.

 

Lanhee Chen: I think there is bipartisan agreement around the need to move away from fee-for-service arrangements, but the devil is in the details. Similarly, bipartisan thinkers and analysts generally agree on the benefits of limiting the tax subsidy for employer-sponsored health insurance — but politically it’s hard to imagine too many politicians coming out to defend the Cadillac tax or supporting other limits.

 

 

Health Care System Accepting New Math: Housing = Health

Posted on by • Posted in Chronic Care Management, Chronic Conditions, Chronic Diseases, Cost Management, Health Insurance Industry, Health Policy, Health System, Homeless, Hospital, Hospital Industry, Housing, Innovation, Social Determinants of Health • Leave a comment

Health Care System Accepting New Math: Housing = Health

Apartment complex with swimming pool on a sunny day

The Residences at Camelback West in Phoenix has 500 rental units ranging from studios to two-bedroom apartments, of which 100 are set aside for homeless UnitedHealth Medicaid members. Photo: Tiempo Development & Management

In the course of a single year, a homeless man named Steve in Phoenix, Arizona, visited the emergency room 81 times. Only 54 years old, Steve is coping with a daunting array of medical conditions: multiple sclerosis, cerebral palsy, heart disease, and diabetes. Because of his health and reliance on emergency rooms, his medical costs averaged about $13,000 per month that year.

Thanks to an innovative housing program run by the nation’s largest health insurer, UnitedHealth Group, Steve no longer sleeps outside — a crucial prerequisite to improved health. He is one of about 60 formerly homeless people covered by Arizona Medicaid who now receive housing and support services in Phoenix, John Tozzi reported for Bloomberg Businessweek. The UnitedHealth housing program, called myConnections, represents the growing recognition across the health care system that improved health cannot be achieved exclusively by traditional clinical models. Getting patients off the streets is often the first — and most important — step to helping them heal, physically and mentally.

“Patients like Steve wind up in the ER because they don’t fit into the ways we deliver health care. . . . [The US system] is not set up to keep vulnerable people housed, clothed, and nourished so they’ll be less likely to get sick in the first place. —John Tozzi, Bloomberg News

“Patients like Steve wind up in the ER because they don’t fit into the ways we deliver health care,” Tozzi explained. “The US system is engineered to route billions of dollars to hospitals, clinics, pharmacies, and labs to diagnose and treat patients once they’re sick. It’s not set up to keep vulnerable people housed, clothed, and nourished so they’ll be less likely to get sick in the first place.”

MyConnections was the brainchild of a partnership between UnitedHealthcare (a division of UnitedHealth) and the Camden Coalition, a New Jersey–based nonprofit dedicated to improving care for people with complex health and social needs. The partnership was established in 2017 at the same time Jeffrey Brenner, MD, founder and executive director of the Camden Coalition, announced he was leaving the nonprofit to lead myConnections. He is now UnitedHealthcare’s senior vice president for integrated health and human services. UnitedHealthcare provides managed care to about six million people nationwide, according to company filings. It does not get reimbursed by Medicaid for housing assistance.

Making the Case for Addressing Social Determinants

Brenner hopes myConnections will show that both a health care and a business case can be made for investing in a Housing First (PDF) model. Tozzi reported that UnitedHealth “aims to reduce expenses not by denying care, but by spending more on social interventions, starting with housing.”

At the Residences at Camelback West, a Phoenix apartment complex of 500 apartments ranging from studios to two-bedroom units, up to 100 apartments are set aside for UnitedHealth Medicaid members enrolled in myConnections. The rest of the units are rented out at market rates. Five health coaches use an on-site office to serve as case managers and counselors for the myConnections residents. The coaches make sure that their clients remember medical appointments, and arrange transportation for them and sometimes accompany them to the doctor.

Since receiving housing and health coaching from Brenner’s team, Steve’s average monthly medical costs have dropped from $12,945 to $2,073. An analysis of the first 41 participants in Phoenix shows that “housing and support services proved cost effective for the 25 most expensive patients, reducing their overall costs dramatically,” Tozzi reported. But total spending for the other 16 increased, highlighting the complexity of this work.

“The return’s only going to work out if we target the right people,” Brenner told Tozzi. The myConnections team selects patients who are enrolled in UnitedHealth, are homeless, and who have annual medical spending greater than $50,000 mostly because of ER visits and inpatient stays. Those high-cost patients are UnitedHealth’s best bet for recovering the cost of its housing investment.

UnitedHealth is starting with 10 subsidized apartments in each new city where it’s introducing the program, including in places where there might be hundreds of homeless Medicaid members on its rolls, Tozzi reported. MyConnections will be in 30 markets by early 2020.

Kaiser Addresses Homelessness in Its Backyard

In its home base of Oakland, California, health system Kaiser Permanente has invested $200 million in an affordable housing project, Hannah Norman reported in the San Francisco Business Times. Its help is not targeted exclusively at Kaiser members, instead aiming to benefit any residents who live in communities it serves.

The initiative was championed by Bernard Tyson, the late chairman and CEO of Kaiser, who died unexpectedly this month. In a New York Times remembrance, Reed Abelson noted that Tyson was committed to addressing social determinants of health in the places where Kaiser operates. “He had the organization examine broad issues like housing shortages, food insecurity, and gun violence and their impact on health and well-being,” Abelson wrote.

Tyson, who was the health system’s first Black chief executive, served as chair of the Bay Area Council, a business association dedicated to economic development in the San Francisco region. His chairmanship culminated in a major report (PDF) that documented the severity of the homelessness crisis and recommended ways to address it, Norman reported.

“We don’t believe as a mega-health system that our only lane is medical care,” Tyson said in April. “It’s a critical lane, but it’s not our only lane.”

Steady Rents in Buildings with Seismic Upgrades

Kaiser announced its $200 million housing initiative, the Thriving Communities Fund, in January. Since then, it partnered with Enterprise Community Partners, a nonprofit organization focused on affordable housing, and the nonprofit East Bay Asian Local Development Corporation to invest a total of $8.7 million ($5.2 million from Kaiser) in Kensington Gardens, a 41-apartment building in East Oakland. “The trio of organizations plans to keep the residents in place and the rent steady at $1,597 per month for a studio and $2,250 for a two-bedroom,” Norman wrote. “Some residents receive federal housing benefits, including Section 8, to help cover the cost.”

The Kensington Gardens purchase is part of the Thriving Communities Fund’s strategy to keep rents steady and to make health and safety upgrades such as seismic upgrades and new roofs.

Kaiser’s Built for Zero initiative committed $3 million over three years to a data-driven, county-level approach to understanding the dynamics of homelessness. Built for Zero tracks the homeless population in a county from month to month to understand “who they are, what they need, and even how many of them are repeatedly visiting emergency rooms,” Norman reported. Fifteen Kaiser communities, including eight in California, are participating in the program.

 

 

 

 

Opinion: ‘Medicare for all’ won’t fix soaring healthcare costs

Posted on by • Posted in 2020 Election Issues, Cost Management, Cost Reduction, Health Insurance Industry, Health Policy, Health System, High Drug Prices, High Premiums, High Prices, Hospital, Hospital Industry, Market Consolidation, Market Power, Market Trends, Medicare for All, Monopoly Behavior, Pharmaceutical Industry • Leave a comment

https://www.latimes.com/opinion/story/2019-11-15/medicare-for-all-health-care-costs?fbclid=IwAR0uMTlEMcPuefoVjeuSvyIa69AIRk8v4N0d4ux6f1HMg1k4wMbM_SRElh8

Medical bill

The idea of “Medicare for all” advanced another step with the recent release of Sen. Elizabeth Warren’s more detailed health proposal. It is expansive and bold, and has brought some excitement to the progressive core of the Democratic Party. While policy mavens can delight in the details, the enormity of the proposal is a sign that this debate has clearly gone off the rails.

There is no question that healthcare cost is a pocketbook challenge for all of us. Employer and employee premiums for private health insurance for a household now average $20,576, before deductibles and copayments, and before payroll and state and local taxes to pay for healthcare for the elderly and the poor.

National health expenditures increased 179% between 2000 and 2019 to $3.8 trillion, and 50% of this increase was directly due to increases in unit prices and service intensity by hospital systems and physicians. In the U.S., healthcare is 28% more expensive than the next highest cost system, Switzerland, and 78% more expensive than in Germany. For a primary care doctor in the U.S., submitting invoices to insurers and collecting payments costs almost $100,000 per year.

What we should be debating — instead of the politics around Medicare for all — is how this market evolved in such a malignant direction, and whether anything can be done to change these trends.

Hospital consolidation has been shown to drive up healthcare costs, and yet 90% of U.S. hospital markets are highly consolidated. Physician employment by hospitals and health systems has increased from 26% to 44% of the market from 2012 to 2018, increasing the pricing leverage of consolidated systems even further.

These changes directly result in higher prices for commercial health insurance as hospitals use their exaggerated hospital “charges,” often many multiples of their costs or of the market price, to drive up their reimbursement rates for in-network care and especially for out-of-network care, where there is no price negotiation. Further, even at most not-for-profit healthcare systems, hospital leaders are compensated based on the profits they generate, not premiums they reduce, as is the case with leaders of for-profit hospital systems.

The pharmaceutical market has also come under scrutiny for the enormous prices of newly approved medications, and for price increases of existing medicines such as insulin. Behind the scenes are layers of businesses that further exploit this market. For example, one pharmaceutical benefit manager (a company hired by a health plan or employer to oversee prescription drug benefits) reported profits of $1.8 billion in 2013 that rose to $4.5 billion in 2017 despite a 4% reduction in revenue reported over this period.

It’s easy to see that consumers need relief from this market. One might imagine that politicians from both political parties would band together in a search for actionable solutions. Yet the debate has migrated from a discussion of why costs are spiraling out of control to a simple and unrealistic answer — Medicare for all. Here are some ideas on how to frame a meaningful discussion about costs.

Reducing administrative costs has been a stated policy goal of the federal government since the passage of the Health Insurance Portability and Accountability Act (HIPAA) in 1996, yet these costs continue to increase. To reduce these costs, we have to simplify the complexity of the billing process for hospitals and physicians across the multiple different health plans in the market, and we need to transform the expensive set of public data reporting mandates into a model in which we are assured these data are used by providers internally to improve the quality of care they provide.

We need to rebalance negotiating power between hospitals and physicians and insurers. Hospitals and other providers have been allowed to set their list prices without any relationship to the cost of care they provide. These inflated prices are then imposed on out-of-network patients, most egregiously in the practice of surprise medical billing in which patients encounter deliberately out-of-network air ambulances and independent anesthesiologists. In billing disputes, state law should offer these patients a default of a market price closer to Medicare payments than to hospital charges.

Finally, it’s time to stop the practices that are driving up prescription drug costs for all of us. Secret payments between pharmaceutical manufacturers and pharmaceutical benefit managers and distributors totaled over $100 billion in 2016. This business model needlessly inflates drug prices for the benefit of intermediaries in the market. We need laws requiring price transparency at the pharmacy for brand and generic drugs, and price competition for medications at the retail level.

The problem with focusing on Medicare for all is that rather than developing practical approaches, the debate is heading down a path likely to leave us without any tenable solutions to address healthcare costs — the issue that ignited the public’s interest in the first place.

 

 

 

Healthcare delivery is moving “up and out”

Posted on by • Posted in Centers of Excellence, Cost Management, Cost Reduction, Health Insurance Industry, Health System, Hospital Bankruptcy, Hospital Industry, Service Line Rationalization, Strategy • Leave a comment

https://mailchi.mp/699634d842fa/the-weekly-gist-november-1-2019?e=d1e747d2d8

 

Our graphic this week captures a phenomenon that we’ve observed in our strategy work with regional, “super-regional” and national health systems. We call it the “up and out” phenomenon—healthcare delivery is increasingly being pulled up and out from local, siloed hospitals. The traditional hospital enterprise, operating in what we refer to below as the “fee-for-service zone”, has typically pursued a service approach that delivers all things to all people. Commonly, the combination of reimbursement incentives and health system governance structures has encouraged hospital executives to prioritize facility profitability over system performance.

One important source of value creation for regional systems is service line rationalization—essentially, consolidating key services in one facility rather than performing duplicative services in every hospital. Centralizing open heart surgery, for example, in one “center of excellence” in a region often results in both lower cost and higher quality, thanks to clinical and operational scale economies. But the economies of scale don’t necessarily run out at the regional level—for some high-end specialty services (transplants, for example) it makes sense to consolidate at a super-regional or national level. For a better outcome and lower price, consumers will be increasingly willing to travel to receive the best value care.

Meanwhile, many services currently performed in the hospital can be more efficiently performed in non-hospital settings and should be distributed across the market in ways that are more convenient and accessible for patients. Traditional hospital economics make the “inpatient-to-outpatient shift” problematic, but as price and access become important consumer engagement levers, there’s little use fighting that shift. Indeed, the logical setting for much care delivery is in the patient’s home itself. This puts systems in the position of pushing care delivery to the hyper-local level, a strategy that can be powered by digital medicine delivered at a national level. All of this raises an important question for the regional health system: as hands-on care is increasingly pulled “up” to the national level (centers of excellence) and pushed “out” to the community setting (home-based care), and as national providers of digital health services can deliver services to anywhere, from anywhere, what is the value of the regional system? We’re working with a number of members to better understand and prepare for this new operating model.

 

The Huge Waste in the U.S. Health System

Posted on by • Posted in 2020 Election Issues, Cost Management, Health Policy, Health System, High Drug Prices, High Premiums, High Prices, Patient Outcomes, Patient Satisfaction, Single Payer Healthcare System • Leave a comment

A study finds evidence for how to reduce some of it, but also a large blind spot on how to remove the rest.

Even a divided America can agree on this goal: a health system that is cheaper but doesn’t sacrifice quality. In other words, just get rid of the waste.

A new study, published Monday in JAMA, finds that roughly 20 percent to 25 percent of American health care spending is wasteful. It’s a startling number but not a new finding. What is surprising is how little we know about how to prevent it.

William Shrank, a physician who is chief medical officer of the health insurer Humana and the lead author of the study, said, “One contribution of our study is that we show that we have good evidence on how to eliminate some kinds of waste, but not all of it.”

Following the best available evidence, as reviewed in the study, would eliminate only one-quarter of the waste — reducing health spending by about 5 percent.

Teresa Rogstad of Humana and Natasha Parekh, a physician with the University of Pittsburgh, were co-authors of the study, which combed through 54 studies and reports published since 2012 that estimated the waste or savings from changes in practice and policy.

Because American health spending is so high — almost 18 percent of the economy and over $10,000 per person per year — even small percentages in savings translate into huge dollars.

The estimated waste is at least $760 billion per year. That’s comparable to government spending on Medicare and exceeds national military spending, as well as total primary and secondary education spending.

If we followed the evidence available, we would save about $200 billion per year, about what is spent on the medical care for veterans, the Department of Education and the Department of Energy, combined. That amount could provide health insurance for at least 20 million Americans, or three-quarters of the currently uninsured population.

The largest source of waste, according to the study, is administrative costs, totaling $266 billion a year. This includes time and resources devoted to billing and reporting to insurers and public programs. Despite this high cost, the authors found no studies that evaluate approaches to reducing it.

“That doesn’t mean we have no ideas about how to reduce administrative costs,” said Don Berwick, a physician and senior fellow at the Institute for Healthcare Improvement and author of an editorial on the JAMA study.

Moving to a single-payer system, he suggested, would largely eliminate the vast administrative complexity required by attending to the payment and reporting requirements of various private payers and public programs. But doing so would run up against powerful stakeholders whose incomes derive from the status quo. “What stands in the way of reducing waste — especially administrative waste and out-of-control prices — is much more a lack of political will than a lack of ideas about how to do it.”

While the lead author works for Humana, he also has experience in government and academia, and this is being seen as a major attempt to refine previous studies of health care waste. Reflecting the study’s importance, JAMA published several accompanying editorials. A co-author of one editorial, Ashish Jha of the Harvard Global Health Institute and the Harvard T.H. Chan School of Public Health, said: “It’s perfectly possible to reduce administrative waste in a system with private insurance. In fact, Switzerland, the Netherlands and other countries with private payers have much lower administrative costs than we do. We should focus our energies on administrative simplification, not whether it’s in a single-payer system or not.”

After administrative costs, prices are the next largest area that the JAMA study identified as waste. The authors’ estimate for this is $231 billion to $241 billion per year, on prices that are higher than what would be expected in more competitive health care markets or if we imposed price controls common in many other countries. The study points to high brand drug prices as the major contributor. Although not explicitly raised in the study, consolidated hospital markets also contribute to higher prices.

A variety of approaches could push prices downward, but something might be lost in doing so. “High drug prices do motivate investment and innovation,” said Rachel Sachs, an associate professor of law at Washington University in St. Louis.

That doesn’t mean all innovation is good or worth the price. “It means we should be aware of how we reduce prices, taking into consideration which kinds of products and which populations it might affect,” she said.

Likewise, studies show that when hospitals are paid less, quality can degrade, even leading to higher mortality rates.

Other categories of waste examined by the JAMA study encompass inefficient, low-value and uncoordinated care. Together, these total at least $205 billion.

With more than half of medical treatments lacking solid evidence of effectiveness, it’s not surprising that these areas add up to a large total. They include things like hospital-acquired infections; use of high-cost services when lower-cost ones would suffice; low rates of preventive care; avoidable complications and avoidable hospital admissions and readmissions; and services that provide little to no benefit.

In addition to wasting money, these problems can have direct adverse health effects; lead to unwarranted patient anxiety and stress; and lower patient satisfaction and trust in the health system.

Here the study’s findings are relatively more optimistic. It found evidence on approaches that could eliminate up to half of waste in these categories. The current movement toward value-based payment, promoted by the Affordable Care Act, is intended to address these issues while removing their associated waste. The idea is to pay hospitals and doctors in ways that incentivize efficiency and good outcomes, rather than paying for every service regardless of need or results.

Putting this theory into practice has proved difficult. “Value-based payment hasn’t been as effective as people had hoped,” said Karen Joynt Maddox, a physician and co-director of the Center for Health Economics and Policy at Washington University in St. Louis and a co-author of another editorial of the JAMA study.

So far, only a few value-based payment approaches seem to produce savings, and not a lot. Some of the more promising approaches are those that give hospitals and doctors a single payment “as opposed to paying for individual services,” said Zirui Song, a physician and a health economist with Harvard Medical School.

“Savings tend to come from physicians referring patients to lower-priced facilities or cutting back on potentially lower-value care in areas such as procedures, tests or post-acute service,” he said.

There is evidence of savings from some bundled payment programs. These provide a fixed overall budget for care related to a procedure over a specific period, like 90 days of hip replacement care. Accountable care organizations also seem to drive out a little waste. These give health groups the chance to earn bonuses for accepting financial risk and if they reach some targets on quality of care.

The final area of waste illuminated by the JAMA study is fraud and abuse, accounting for $59 billion to $84 billion a year. As much as politicians love to say they’ll tackle this, it’s a relatively small fraction of overall health care waste, around 10 percent. More could be spent on reducing it, but there’s an obvious drawback if it costs more than a dollar to save a dollar in fraud.

Because health care waste comes from many sources, no single policy will address it. Most important, we have evidence on how to reduce only a small fraction of the waste — we need to do a better job of amassing evidence about what works.

 

 

 

NY Local employers predict 3.6% increase in health benefit costs in 2020

Posted on by • Posted in Chronic Care Management, Chronic Diseases, Consumerism, Cost Management, Health Insurance Coverage Adequacy, Health Insurance Industry, Health System, High Deductible Health Plans, High Drug Prices, High Premiums, High Prices, Highly Specialized Drugs, Hospital, Hospital Industry, Out of Pocket Expenses, Telemedicine • Leave a comment

https://www.crainsnewyork.com/health-pulse/local-employers-predict-36-increase-health-benefit-costs-2020?utm_source=health-pulse-tuesday&utm_medium=email&utm_campaign=20191028&utm_content=hero-readmore

Image result for chronic care management

Employers in the metro area expect their spending on benefits to rise 3.6% next year after accounting for changes designed to hold down costs, according to an analysis by Mercer.

That trend would be lower than the 3.9% increase employers experienced this year, with local organizations spending $16,059 per active employee. That’s more than 20% higher than the average cost per employee nationwide.

The benefits consultant broke out the responses of 170 employers in New York City, its surrounding counties, northern New Jersey and southern Connecticut for Crain’s from its 2019 National Survey of Employer-Sponsored Health Plans.

In the area, the average contribution to premiums for an individual employee is $199 a month in a PPO plan, $169 a month in an HMO and $107 a month in a consumer-directed health plan, which tends to have a higher deductible.

The median deductible for members in a PPO plan was $500 locally.

Nationwide, there was a split, with the average deductible for businesses between 10 and 499 employees increasing nearly 13%, to $2,285, while employers with 500 or more workers raised the average deductible in a PPO plan just $10, or 1%, to $992.

Companies are looking to telemedicine and management programs for their highest-cost members as ways to keep fees down, said Mary Lamattina, a senior consultant at Mercer. She said most clients she works with have at least one beneficiary with $1 million in annual medical expenses.

“Employers are getting away from cost shifting and looking at other ways to tackle affordability,” she said.

Nationwide, employers spent 3% more on health costs this year, driven in part by specialty drug spending. Costs for specialty drugs rose 10.5% this year.

Ninety percent of employers with 500 workers or more said they viewed monitoring or managing high-cost claimants as important or very important. One strategy companies reported using was introducing a tech-enabled chronic care management program for conditions such as diabetes.

About 88% of large employers said they offer telemedicine as an option, but only 9% of eligible employees had taken advantage of the programs.

Lamattina pointed out that utilization was nearly four times higher at organizations that waived a copay for telemedicine use, compared with employers that charged a $40 copay. “

“Utilization can be driven by the cost,” she said. “Convenience is really key to getting people to use the benefit.” —Jonathan LaMantia