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CMS seeks input on Stark Law changes amid value-based care shift

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https://www.healthcaredive.com/news/cms-seeks-input-on-stark-law-changes-amid-value-based-care-shift/526239/

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Dive Brief:

  • The Centers for Medicare & Medicaid Services asked stakeholders Wednesday for input on how to change the Stark Law to allow for better care coordination and new alternative payment models or other novel financial arrangements.
  • The American Hospital Association has been vocal in pushing for changes to the physician self-referral law, calling it outdated. AHA argues the law presents “nearly impenetrable roadblocks in the move toward value-based care.”
  • The agency specifically is requesting input on what new exemptions to the Stark Law are needed to protect accountable care organization models, bundled payment models and other payment models, including how to allow coordination care outside of an alternative payment model. It also asks for help examining definitions for terminology such as risk-sharing, enrollee, gain-sharing and other terms.

Dive Insight:

The Stark Law, enacted in 1989, aims to cut down on financial incentives impacting physician care decisions. It prohibits certain Medicare-payable referrals to entities they have a financial or familial relationship with, and stops such entities from filing Medicare claims for referred services, unless exempted under certain instances.

CMS says that it is issuing the RFI in response to comments it has received that raised concern that the Stark Law is impeding participation in healthcare delivery and payment reform efforts.

“We are particularly interested in your thoughts on issues that include, but are not limited to, the structure of arrangements between parties that participate in alternative payment models or other novel financial arrangements, the need for revisions or additions to exceptions to the physician self-referral law, and terminology related to alternative payment models and the physician self-referral law,” the CMS notice states.

In a statement submitted by AHA to the House Subcommittee on Health of the Committee on Ways and Means, the group urged Congress to step in to change Stark Law to allow hospitals and physicians to more closely work together.

“Congress should create a clear and comprehensive safe harbor under the anti-kickback law for arrangements designed to foster collaboration in the delivery of health care and incentivize and reward efficiencies and improvement in care,” AHA said.  “In addition, the Stark Law should be reformed to focus exclusively on ownership arrangements. Compensation arrangements should be subject to oversight solely under the anti-kickback law.”

CMS Administrator Seema Verma appears to be sympathetic. In a Wednesday blog post, she said the Stark Law may be prohibiting value-based arrangements that HHS has made a priority to shift towards. Previously, Verma said that CMS was going to put together an inter-agency group to examine potential changes to the law.

“I think that Stark was developed a long time ago, and this gets to where we are going modernizing the program,” Verma told AHA President and CEO Rick Pollack during a webcast in January. “The payment systems and how we are operating is different, and we need to bring along some of those regulations and figure out what we can do. And I’m not sure that this is not going to require some congressional intervention as well.”

CMS is asking for comments to be submitted on the RFI by August 24.

 

AT&T, Time Warner, and the Future of Health Care

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https://www.commonwealthfund.org/blog/2018/att-time-warner-and-future-health-care?omnicid=EALERT%25%25jobid%25%25&mid=%25%25emailaddr%25%25

AT&T Time Warner Merger

Policymakers and private actors should not interpret a federal court’s AT&T and Time Warner ruling as an unconditional green light for vertical integration in health care.

The need for change in the U.S. health care system is obvious, but whether vertical integration is the change we need remains to be determined.

The recent federal district court ruling allowing the merger of AT&T and Time Warner — a case of so-called vertical integration — will likely encourage similar unions throughout the U.S. economy, including in health care. Nevertheless, a close look at the court’s decision, and at the wide variety of vertical health care mergers under way, suggests that policymakers and private actors should not interpret the court’s ruling as an unconditional green light for vertical integration in health care, or any other sector.

Vertical integration typically involves the combination of entities operating on different parts of a supply chain in the production of a particular product. Manufacturers of tires, for example, are part of the supply chain that results in a finished automobile. Similarly, ambulatory physician services are sometimes seen as an input on the supply chain of more advanced hospital services. The acquisition of physician practices by hospitals is often characterized as vertical integration.

Some antitrust experts question whether the analogy between manufactured products and health care delivery is accurate. Independent physicians, for example, often work within hospitals and help to produce their “products.” Nevertheless, there are clear differences between mergers across the same types of health care organizations, like hospitals, and those between different types of providers, like physicians and hospitals.

The AT&T/Time Warner case was the first time in 40 years that the government has taken a proposed vertical integration to court, and many commentators have noted that antitrust theory with respect to vertical integration could use some updating. In the meantime, however, Judge Richard Leon’s 172-page opinion seems to have relied on traditional antitrust considerations: would the merger increase or decrease competition, and thereby increase or decrease consumer welfare? His ruling rested heavily on what he viewed as the government’s failure to supply evidence that the merger would have adverse effects. In other words, if the government had produced more convincing data, the ruling could have gone the other way.

Judge Leon’s ruling may be appealed and, if so, may not stand. But if it does, what are its implications for vertical integration in health care? Simply put, the facts matter. And unfortunately, the facts about vertical integration in health care are obscure, and likely to vary enormously according to the details of the merger and from market to market.

Evidence on the effects of horizontal health care mergers has grown considerably in recent years, and generally shows that they increase prices. But studies of vertical health care mergers are much less common. Perhaps the most relevant experience concerns long-standing integrated health systems, such as Kaiser Permanente, Intermountain, Geisinger, and a handful of similar organizations.

Widely regarded as industry leaders in quality and efficiency, these systems seem to demonstrate the benefits of vertical integration: they are able to coordinate services across different types of providers, and, when incentives encourage it, they can easily substitute less expensive services (e.g., ambulatory care) for more expensive ones (e.g., hospital care). However, whether the experiences of these integrated systems are generalizable to the current flock of mergers is unclear. Each of these venerable organizations has a unique history and culture that have shaped its performance over decades.

Studies of vertical integration will have to take into account the type of merger under consideration. The most common type of vertical integration seems to be the acquisition of physician groups — both primary care and specialty — by hospitals. Between 2012 and 2016, the number of hospital-employed U.S. physicians increased from 95,000 to 155,000.

But health care is witnessing a variety of other types of vertical integration. Insurers are buying physician groups, as in the case of UnitedHealth Group’s acquisition of parts of DaVita’s physician network. Drug store chains are buying insurers, as in the case of CVS’s purchase of Aetna. And integrated health systems like Partners HealthCare are proposing to buy insurers like Harvard Pilgrim Health Care.

The effects of these varied mergers will depend on the types of services being combined and the markets affected. From both a societal and legal standpoint, the facts matter.

For example, it turns out that the CVS-Aetna merger includes an important horizontal union between Part D health plans owned independently by CVS and Aetna. Part D health plans provide drug coverage to Medicare beneficiaries. In recent testimony before the California Department of Insurance, economist Richard Scheffler showed that in a number of markets, the merger of these Part D plans would significantly reduce competition, and thereby, could potentially increase the prices of drug coverage for Medicare patients. Fear of consolidation among Part D plans has caused the American Medical Association to oppose CVS’s acquisition of Aetna.

Adding to the uncertainty surrounding these questions is the unique nature of the health market, in which governments are the largest purchasers and consumers often don’t know the prices or value of the products they buy. Traditional competition in local markets sometimes results in radically increasing prices and costs, as providers pile on new technologies and facilities and compete for star physicians in an effort to attract customers. And many parts of health care already have a high degree of consolidation that limits price competition.  The result is a level of dysfunction that has created an almost universal cry for radical disruption of the status quo.

Health care is a conundrum on many levels, and how and whether to regulate vertical integration among its varied components may turn out to be another one. The need for change is obvious. Whether vertical integration is the change we need, and how the courts will treat it, remain to be determined.

 

Should My Health System Launch a Health Insurance Plan?

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Should My Health System Launch a Health Insurance Plan?

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Here are a few things providers whose vision and strategy include launching a health plan should consider

In 1929 the stock market crashed and the US collapsed into the Great Depression. Coincidentally, it was also in 1929 that Baylor Hospital in Dallas Texas devised a plan that would provide access to health care services to patients and give patients the ability to pay for their care so the hospital could remain viable.

In the nine decades since Baylor Hospital helped create what is known today as Blue Cross, hospitals, physicians and other providers of health care services have regularly asked themselves the questions: Should we develop and own a health insurance plan? Should we take financial risk for care we provide? Should we partner with physicians and/or with a health insurer?

Since the passage of the Affordable Care Act (ACA) in 2010, hospital and physician executives have considered these questions with new motivation. Several have jumped in, but only a few health system-sponsored plans launched in the ACA era are nearing profitability. Others have deferred, waiting to see what develops, wanting to digest lessons from Medicare’s ACO program, direct contracts with employers, and ACO arrangements with commercial payers. The latter has been difficult to achieve even for risk-motivated providers, as many dominant commercial plans are reticent to enable providers to manage risk—and in the long run, create a direct competitor. This has provided new motivation for health systems and large physician groups to evaluate a provider-owned plan.

Today’s mantra is “we are moving from volume to value!” Though the words are fresh, the concepts and concerns are much the same, as are the risks and rewards. Having served in executive roles in provider owned health plans for nearly 40 years, 19 years at Kaiser Permanente, and 21 years at Sentara Health Care, I have observed multiple cycles of providers rushing into the health plan business followed by the rapid exit of providers who fail in managing risk. Here are a few “Be’s…” providers whose vision and strategy include launching a health plan should consider:

Be cautious, but not cowardly

Be courageous, but not careless

Be cognizant, but not cocky

 

These “Be’s…” need some explanation.

Commentary:

A five-year business plan that anticipates start-up costs, operating losses and regulatorily required “risk-based capital” will give executives an “eyes-wide-open” going-in perspective. A Board-approved business plan that is both conservative and credible will plan on operating losses for several years.

When the first members are enrolled in the new health insurance plan, the operating losses will begin. Yes, every start-up health plan will experience losses for a period of time. Detailed preparation and thoughtful execution will not eliminate losses in the early years, but they will hasten the march to profitability.

Commentary:

Getting the right people, and the right number of people on this bus is imperative. Expert people are available, but they are probably not current members of your team. Inexperienced talent and under staffing this strategic initiative will result in disaster.

The total value of your health insurance plan includes much more than bottom line performance. Provider sponsored plans can lead the market in customer satisfaction, quality of care metrics and “total cost of care.” Table stakes for operating a health plan include enrollment, billing, claims processing and financial systems. These systems can be purchased or partnered. However, to maximize value, wise investment in population health IT should be implemented as soon as possible. State of the art population health tools will enable providers to close gaps in care and improve both health outcomes and financial performance. Later on, investing in consumer-centric digital health applications will optimize the customer experience and offer value a provider sponsored plan can bring to the market in a unique manner.

Growing the membership as fast as possible is vital. Without substantial membership, providers will have little reason to focus on changing the model of care. Rapid membership growth can occur in a variety of ways, but the best way is to win contracts for large populations. Securing a Medicaid contract, enrolling the provider’s employees and winning two or three large group commercial accounts, and Medicare Advantage/CMS ACO depending on the players in the MA space in a given market are all good strategies for rapid growth. The sequencing of membership type is less important than the rate of growth.

Commentary:

Given the losses suffered by providers who took risk in 1990’s, and the spotty performance of provider sponsored health plans in today’s CMS ACOs and commercial offerings, you are probably thinking, why do I think we can do better?  Being aware of other’s failures and successes will embolden Boards and CEOs to accept the risk because they recognize the rewards.

A few lessons to be learned from Kaiser include:

  • The imperative of physician leadership and commitment
  • The efficiency of integrated services
  • The clarity of the connection between quality of care and the cost of care

Lessons to be learned from provider sponsored health plans, both those that have succeeded and those that have failed, include:

  • The tolerance and patience for early losses
  • The balance between integration and separation of the health plan and the providers
  • The clarity of purpose and mission. Having a health plan to fill hospital beds is not a sustainable mission

Additional Considerations:

Beyond financial results, most provider sponsored health plans tout other benefits that speak to both the mission of the organization and the financial performance of the enterprise in total. Such benefits include, but are not limited to:

  1. Improved performance in quality, service and total cost of care
  2. Enhanced understanding of the consumer/customer
  3. Control of the premium dollar

Of these added benefits, perhaps the benefit derived from the control of the premium dollar is least intuitive and most important. Here is a simple way to think about this issue:

If XYZ Health Insurer brings in $100 of premium, they will pay a hospital about $40 for inpatient and outpatient services. If the hospital is well run, it will make 4% or $1.20 on the $40 of revenue.

However, if the hospital owns the health insurance plan, and the insurance plan is making a 2% margin on the premium of $100 ($2.00), then the enterprise will earn $3.20, 2% on the premium and 4% on the “inter-company” transfer between the owned health insurance company and the hospital. (NOTE: this is a simple example. The actual arrangements between the hospital, its owned health insurance plan, and the contract with the non-owned health insurance companies will determine the actual results, but the principle is demonstrated with the simple example.)

To be sure, the challenges in owning and operating a health insurance plan are both daunting and different from operating a hospital system. However, the rewards can be worth the effort.

One provider sponsor health insurance plan generated enough net income over a five-year period that the “dividend” to the sponsoring health care system was deployed by the system to build not just one new hospital, but three!

Nearly 90 years after Baylor created the first Blue Cross health insurance company, it merged with Scott & White Clinic, which owns a health insurance plan. Baylor Scott & White is well-positioned to thrive as a fully integrated delivery system. If your system is asking “Should we launch a health plan?” please reach out. I’d be happy to share more of the lessons I’ve learned in my decades as CEO of provider sponsored health plans and discuss your system’s opportunity.

 

 

Perceptions of Affordability Among Individual Market Enrollees in California in 2017

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Perceptions of Affordability Among Individual Market Enrollees in California in 2017

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In 2017 researchers at The Mongan Institute, Massachusetts General Hospital, and Harvard Medical School sought to answer the following questions: How affordable do Californians in the individual health insurance market perceive their insurance to be? How affordable do they perceive their out-of-pocket costs for medical care to be? How frequently do they report delaying or avoiding medical care because of costs? How frequently do they report cutting back on other necessities (like food, rent, other basics) or borrowing money to pay for care?

Researchers surveyed adult (age 18+) individual market enrollees in 2017 who selected qualified health plans through Covered California or outside of the Covered California marketplace (N = 2,912). The survey was conducted in English and Spanish, and respondents could complete the survey by telephone, web, or paper. The survey was fielded between May and October 2017 with a response rate of 42%.

Key Findings

1. On average, 40% of enrollees reported having some difficulty paying their monthly insurance premiums. Sicker enrollees and African American enrollees were more likely to report having difficulty.

2. On average, 31% of enrollees reported difficulty paying out-of-pocket costs when using health care. Similar to premium affordability, sicker enrollees and African American enrollees were more likely to report having difficulty.

3. Almost one in four enrollees (24%) who reported needing care delayed/avoided care due to costs.

4. Close to one in three (32%) enrollees reported some sort of financial stress due to health care costs: They reported cutting necessities, borrowing money, or both. This was more common among lower-income enrollees, African American enrollees, and sicker enrollees.

 

KHN’s ‘What The Health?’ California Here We Come

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https://khn.org/news/podcast-khns-what-the-health-california-here-we-come/?utm_campaign=KFF-2018-The-Latest&utm_source=hs_email&utm_medium=email&utm_content=63802439&_hsenc=p2ANqtz-8uQV0eVmG6wiZv36zFavvka4x7M8g4pB9yDnPy-P8deurp_gxKZvOLOC81MBUTzeYS82F1UH-wLxvRh2GzcFnuXmwbtg&_hsmi=63802439

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Health care is a big political issue, but no place more than in California. In San Francisco last week, voters overwhelmingly approved a ballot measure upholding a ban on flavored tobacco products — over the vehement objections of the tobacco industry.

And the state’s activist attorney general, Xavier Becerra, is leading a group of Democratic officials from more than a dozen states defending the Affordable Care Act in a case filed in Texas. That is important given that the Trump administration’s Justice Department decided not to defend the law in full from charges that changes made by Congress in last year’s tax law invalidates the health law.

This week’s panelists for KHN’s “What the Health?” are: Julie Rovner of Kaiser Health News, Anna Maria Barry-Jester of FiveThirtyEight.com, Carrie Feibel of KQED San Francisco and Joanne Kenen of Politico.

Among the takeaways from this week’s podcast:

  • Republicans and Democrats had been gearing up for a midterm election debate on who is responsible for higher health insurance costs. But that shifted last week to an argument over whether consumers with preexisting conditions should be guaranteed coverage following the Justice Department’s brief saying changes to the ACA invalidated those protections.
  • In California, there is widespread support among Democrats for a single-payer health system. But the term is somewhat amorphous. For some officials, it is a catch-all phrase that seems to suggest strong efforts with current programs to get the uninsured rate down to zero, while still keeping much of the current insurance system in place.
  • Becerra has filed a suit against Sutter Health, a giant in the hospital industry in Northern California, alleging that consolidation has resulted in anti-competitive pricing practices.
  • San Francisco’s adoption of a referendum to ban flavored tobacco products could lead other local governments to follow suit. The measure included not only products with flavors allegedly geared to young people, but also menthol cigarettes, which make up about 30 percent of the market.