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Hospitals Brace For Unpaid Bills If GOP Balks On Children’s Healthcare
Hospitals are bracing for an increase in unpaid medical bills and related uncompensated care after the Republican-led Congress let funding for the Children’s Health Insurance Program lapse.
Congressional committees this week are working on language to renew the CHIP program after federal funding expired Saturday, Sept. 30, leaving coverage of 9 million children in doubt. What was thought to be a done deal with bipartisan agreement a month ago that CHIP would be renewed for five years has lately become bogged down in Congressional gridlock and charges of ineptitude against Republicans and the Trump White House.
U.S. Speaker of the House Rep. Paul Ryan (R-WI) (L) speaks as Senate Majority Leader Sen. Mitch McConnell (R-KY) (3rd L), Sen. Ted Cruz (R-TX) (2nd L) and Sen. Pat Toomey (R-PA) (R) listen during a press event on tax reform September 27, 2017 at the Capitol in Washington, DC. (Photo by Alex Wong/Getty Images)
“States will not have access to additional funds and either will have to scramble to find money to pay for the health care costs for some of the most vulnerable patients or hospitals likely will experience a surge in uncompensated care,” Mizuho Securities USAresearch director Sheryl Skolnick said in a report Wednesday. “The need to reauthorize CHIP was well-known and the failure seems symptomatic of the larger issue of a dysfunctional political process.”
Some states could begin to run out of money to cover children over the next three months, triggering an uptick in medical bills that could lead to layoffs and a freeze on capital spending.
Hospitals generally account for CHIP funds in their Medicaid revenues, which can be 10% and 20% of some facility revenues. For-profit hospital operators like Tenet Healthcare, HCA Holdings and Community Health Systems, though, have less than 10% of their operations funded by Medicaid, Mizuho’s report this week shows.
Since the Affordable Care Act expanded coverage to more than 20 million Americans, hospital charity care and related uncompensated care expenses that include bad debt have dropped significantly.
Uncompensated care costs for the nation’s 4,862 hospitals dropped below 5% to 4.2%, or $35.7 billion in 2015, the American Hospital Association’s most recent tally shows. The 2015 level of uncompensated care costs were the lowest amount since 2007 , the AHA figures show.
But a loss in money from millions of children covered by CHIP would reverse the uncompensated care trend and certainly hit hospitals hard.
The healthcare industry was still hopeful momentum would return in Congress and CHIP funding would be renewed before providers and their patients would be harmed.
“Given CHIP’s immensely positive impact on children’s health, MHPA is very gratified that the House language released on Monday, October 2 extends the CHIP funding for another five years,” Medicaid Health Plans of America said in a letter to Congress. “We also appreciate that the language acknowledges any changes to funding must be made carefully and over time by gradually reducing the temporary 23 percent increase to 11.5 percent in October 2019, before allowing the program to resume the regular CHIP funding in October 2020. MHPA also appreciates that the funding, once extended, will be retroactive thus ensuring states’ current budgets will not be negatively affected.”
MHPA members include Aetna, Centene, Cigna and UnitedHealth Group.
How U.S. Hospitals and Health Systems Can Reverse Their Sliding Financial Performance
Since the beginning of 2016, the financial performance of hospitals and health systems in the United States has significantly worsened. This deterioration is striking because it is occurring at the top of an economic cycle with, as yet, no funding cuts from the Republican Congress.
The root cause is twofold: a mismatch between organizations’ strategies and actual market demand, and a lack of operational discipline. To be financially sustainable, hospitals and health systems must revamp their strategies and insist that their investments in new payment models and physician employees generate solid returns.
For the past decade, the consensus strategy among hospital and health-system leaders has been to achieve scale in regional markets via mergers and acquisitions, to make medical staffs employees, and to assume more financial risk in insurance contracts and sponsored health plans. In the past 18 months, the bill for this strategy has come due, posing serious financial challenges for many leading U.S. health systems.
MD Anderson Cancer Center lost $266 million on operations in FY 2016 and another $170 million in the first months of FY 2017. Prestigious Partners HealthCare in Boston lost $108 million on operations in FY 2016, its second operating loss in four years. The Cleveland Clinic suffered a 71% decline in its operating income in FY 2016.
On the Pacific Coast, Providence Health & Services, the nation’s second largest Catholic health system, suffered a $512 million drop in operating income and a $252 million operating loss in FY 2016. Two large chains — Catholic Health Initiatives and Dignity Health — saw comparably steep declines in operating income and announced merger plans. Regional powers such as California’s Sutter Health, New York’s NorthWell Health, and UnityPoint Health, which operates in Iowa, Illinois, and Wisconsin, reported sharply lower operating earnings in early 2017 despite their dominant positions in their markets.
While some of these financial problems can be traced to troubled IT installations or losses suffered by provider-sponsored health plans, all have a common foundation: Increases in operating expenses outpaced growth in revenues. After a modest surge in inpatient admissions from the Affordable Care Act’s coverage expansion in the fall of 2014, hospitals have settled in to a lengthy period of declining hospital admissions.
At the same time, hospitals have seen their prices growing at a slower rate than inflation. Revenues from private insurance have not fully offset the reductions in Medicare payments stemming from the Affordable Care Act and federal budget sequestration initiated in 2012. Many hospitals and health systems strove to gain market share at the expense of competitors by deeply discounting their rates for new “narrow network” health planstargeted at public and private health exchanges, enrollments from which have far underperformed expectations.
The main cause of the operating losses, however, has been organizations’ lack of discipline in managing the size of their workforces, which account for roughly half of all hospital expenses. Despite declining inpatient demand and modest outpatient growth, hospitals have added 540,000 workers in the past decade.
To achieve sustainable financial performance, health systems must match their strategy to the actual market demand. The following areas deserve special management attention.
The march toward risk. Most health system leaders believe that population-based payment is just around the corner and have invested billions of dollars in infrastructure getting ready for it. But for population-based payment to happen, health plans must be willing to pay hospitals a fixed percentage of their income from premiums rather than pay per admission or per procedure. Yet, according to the American Hospital Association, only 8% of hospitals reported any capitated payment in 2014 (the last year reported by the AHA) down from 12% in 2003.
Contrary to widely held belief, the market demand from health insurers for provider-based risk arrangements has not only been declining nationally but even fell in California where it all began more than two decades ago. This decline parallels the decline in HMO enrollment. Crucially, there is marked regional variation in the interest of insurers in passing premium risk to providers. In a 2016 American Medical Group Association survey, 64% of respondents indicated that either no or very limited commercial risk products were offered in their markets.
The same mismatch has plagued provider-sponsored health-plan offerings. Instead of asking whether there are unmet needs in their markets reachable by provider-sponsored insurance or what unique skills or competencies they can bring to the health benefits market, many health systems have simply assumed that their brands are attractive enough to float new, poorly configured insurance offerings.
Launching complex insurance products in the face of competition from well-entrenched Blue Cross plans with lavish reserves and powerful national firms like UnitedHealth Group, Kaiser, and Aetna is an extremely risky bet. Many hospital-sponsored plans have drowned rapidly in poor risks or failed to achieve their enrollment goals. A recent analysis for the Robert Wood Johnson Foundation shows that only four of the 37 provider-sponsored health plans established since Obamacare was signed into law were profitable in 2015.
The regular Medicare and commercial business. Most hospitals are losing money on conventional fee-for-service Medicare patients because their incurred costs exceed Medicare’s fixed, per-admission, DRG payments. Moreover, there is widespread failure to manage basic revenue-cycle functions for commercial patients related to “revenue integrity” (having an appropriately documented, justifiable medical bill that can be collected), billing, and collection. All these problems contribute to diminished cash flows.
Physician employees. For many health care system, physician “integration” — making physicians employees of the system — seems to have become an end in itself. Yet many hospitals are losing upwards of $200,000 per physician per year with no obvious return on the investment.
Health systems should have a solid reason for making physicians their employees and then should stick to it. If the goal is control over hospital clinical processes and episode-related expenses, then the physician enterprise should be built around clinical process managers (emergency physicians, intensivists, and hospitalists). If the goal is control over geographies or increasing the loyalty of patients to the health care system, the physician enterprise should be built around primary care physicians and advanced-practice nurses, whose distribution is based on the demand in each geography. If the goal is achieving specialty excellence, it should be built around defensible clusters of subspecialty internal medicine and surgical practitioners in key service lines (e.g., cardiology, orthopedics, oncology).
To create value by employing physicians, health systems must actually manage their physicians’ practices. This means standardizing compensation and support staffing, centralizing revenue-cycle functions and the negotiations of health plan rates, and reducing needless variation in prescribing and diagnostic-testing patterns. Health system all too often neglect these key elements.
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If health systems are to improve their financial performance, they must achieve both strategic and operational discipline. If they don’t, their current travails almost certainly will deepen.
New York City Health+Hospitals to sue state over $380 million in withheld DSH payments
System is already cutting hiring, using attrition to conserve cash and will end the week with only 13 days cash on hand.
NYC H+H plans to sue New York state over the $380 million in disproportionate share hospital payments they claim should have been delivered to them by Sept. 30, NYC H+H interim CEO Stan Brezenoff said on Friday.
City spokeswoman Freddie Goldstein said the suit would be filed sometime next week, though she couldn’t specify whether it would be filed in state or federal court. She also couldn’t specify exactly what state entities would be named as respondents or whether it would include the federal government.
More details will be forthcoming in the coming days, but regarding the purpose of the lawsuit, she said the payments in question were allocated by the federal government for the purpose of reimbursing the city for services already rendered in fiscal 2017. She said the state has no role other than to be a vessel for this funding.
“They can’t change the purpose of the funding once it’s been allocated by the feds.”
Dean Fuleihan, director of the NYC Office of Management and Budget said pursuant to state law it’s clear the $380 million has to go H+H. While he recognizes that there are reconciliations after every fiscal year, he said the $380 million in DSH payments has nothing to do with that.
“That can not turn into we are not giving you the $380 million that you expected, that we knew you expected, that we never objected to and that had to be paid in the prior federal fiscal year.”
The state has argued that the impending massive federal cuts to the DSH program are the reason for not releasing the funds, and that the state will be conducting detailed financial analysis of each hospital that receives funds from the program to assess their situation and need. Gov. Andrew Cuomo said the $1.1 billion cut that will unfold over the next 18 months will mean the state can’t fund any public hospital 100 percent, and they have not made any DSH payments since Oct. 1, when the law went into effect. The cuts are a caveat of the Affordable Care Act.
Fuleihan also conceded that there is no actual statute stipulating the Sept. 30 deadline. Rather, the past pattern of payment dictated it, and the payments are for expenses incurred in fiscal 2017, which ended Sept.30. He said the state’s decision to withhold the funds is a first.
And there was no federal cut to DSH funding in fiscal 2017, so the money should come.
“Is there anyone in the state of New York that does not recognize that NYC H+H is the major provider of care to Medicaid recipients and the uninsured. One-third of our patients are uninsured and we don’t get any of the FY17 DSH money? The voluntaries got their money. We’re not getting anything,” said Brezenoff.
About a third of the system’s patients are uninsured and large number of them are not eligible for insurance.
Brezenoff has already told staff that they will using attrition and drastic cuts to hiring to try and conserve cash. He said by the end of Friday they’ll have only $255 million, equal to 13 days of cash on hand.
“You can see just how precarious our situation is…We have begun painful process of adjusting our operations in ways that will almost certainly impact services to patients and put additional strain on our hard working employees.”
He said they will now be looking closely at each position that becomes open and deciding whether or not to fill it, and that those decisions could ultimately impact clinical staff and patient care.
“It is definitely conceivable that some physician positions will not be filled,” Brezenoff said.
They are also slowing down payments to vendors, which could impact future pricing and maintaining of supplies.
“The longer this goes on, it will require more and more difficult things to conserve cash. That’s the mode NYC H+H is in.”
Between last fiscal year and this one, NYC H+H is looking at a more than $700 million gap, including the currently withheld DSH funds as well as a possible $330 million cut for fiscal 2018 if Congress does not repeal the cuts.
Brezenoff said they have no plans to ask the city for more funds, as the traditional amount that comes from the city to NYC H+H is between $1 billion and $1.3 billion. The city is currently slated to contribute $1.8 billion, with commitment for $2 billion in their financial plan. NYC is facing their own $3.5 billion budget gap for fiscal 2019.
Steep Premiums Challenge People Who Buy Health Insurance Without Subsidies
Paul Melquist of St. Paul, Minn., has a message for the people who wrote the Affordable Care Act: “Quit wrecking my health care.”
Teri Goodrich of Raleigh, N.C., agrees. “We’re getting slammed. We didn’t budget for this,” she says.
Millions of people have gained health insurance because of the federal health law. Millions more have seen their existing coverage improved.
But one slice of the population, which includes Melquist and Goodrich, is unquestionably worse off. They are healthy people who buy their own coverage but earn too much to qualify for help paying their premiums. And the premium hikes that are being announced as enrollment looms for next year — in some states, increases topping 50 percent — will make their situations more miserable.
Exactly how big is this group? According to Mark Farrah Associates, a health care analysis firm, as of 2017, there were 17.6 million people in the individual market, 5.4 million of whom bought policies outside the health exchanges, where premium help is not available. Combine that with the percentage of people who bought insurance on the exchanges but earned too much (more than four times the federal poverty level, or about $48,000 for an individual) to get premium subsidies, and the estimate is 7.5 million, or 43 percent of the total individual market purchasers, according to insurance industry consultant Robert Laszewski.
Who are these people?
“They’re early retirees,” says Laszewski. “They’re people working part time who have substantial outside income. They’re people who are self-employed of any age, people who are small employers.”
Melquist is one of those early retirees. He and his wife are both 59. He worked in the defense industry and retired at the end of 2016.
He always planned to retire at age 55 but ended up working longer, in part because he knew health insurance costs were rising. When he did retire and sought to purchase coverage for himself and his wife, he says, “I was shocked to find out how bad it actually was.”
For a bronze-level plan with a health savings account, Melquist says, “we pay $15,000 a year [in premiums] and the first $6,550 [for health care expenses] for each of us comes out of our pocket. So basically you could be looking at $30,000 out of pocket before anything gets covered.”
Insurance is important, Melquist says, particularly if a catastrophic health issue were to hit either of him or his wife. In the meantime, he can still pay the bills. But he’s frustrated. “I’m not eating dog food, but I’m also not able to do stuff for my grandchildren,” he says, like help with college costs. “It’s not that my life is falling apart, but the [Affordable Care Act] has ruined a lot of things I’d like to have done.”
The good news, if there is any, for Melquist is that premiums in Minnesota are going up by only small amounts for 2018, and in some cases going down, because of a reinsurance program passed by the state legislature that will help cover the costs for some of the state’s sickest patients in the individual market. That move will help keep premiums from spiking even more.
But that won’t be the case in Raleigh, where Goodrich and her husband, John Kistle, work as private consultants in the energy industry.
Goodrich, 59, and Kistle, 57, bought insurance through the ACA exchange in their state for three years. When premiums reached $1,600 per month with deductibles of $7,500 each, however, “it was just unbelievable. We decided just not to get insurance,” Goodrich says.
Eventually, they bought short-term plans that cover only catastrophic illness or injury. That insurance is not considered adequate under the ACA, so the couple could be liable for a tax penalty as well.
Goodrich, who volunteers to help people with their taxes in her spare time, says she has run the numbers and thinks that insurance is so expensive where she lives that the couple will be exempt from the penalty. That is because the cheapest insurance would cost the couple more than 8.16 percent of their income. Under the health law’s provisions, the penalty doesn’t apply above that level because insurance is considered unaffordable.
“We try to be good citizens and do the right thing,” she says. “Next year, we’re trying to figure out how to make less than $64,000 so we can get subsidies.” That amount is equal to 400 percent of the federal poverty line for two people, the cutoff for premium assistance because Congress assumed those who earned more could afford to buy affordable coverage.
Sabrina Corlette, a research professor at Georgetown University who specializes in health insurance, agreed that this is a population “that faced big hikes” in premiums when the health law took effect.
But, she says, in many cases, people in the individual market were previously paying artificially low premiums. Some of those old policies had substandard coverage. For others, however, the higher prices are the result of one of the fundamental changes enacted by the health law. “These are folks who were benefiting from a system that was affordable solely because insurers were able to keep sick people out,” Corlette says, adding that they are now being asked “to pay more of the true cost of health care.”
This is a population that is also more likely to vote Republican, says Laszewski, “which is one of the grand ironies now.”
Republicans in Congress and President Trump haven’t been able to “repeal and replace” the health law. But some of their efforts are undermining it — primarily the administration’s threat to stop paying billions of dollars to insurers in subsidies to help some lower-income people pay their out-of-pocket costs. The uncertainty surrounding those subsidies has led insurers to boost premiums next year by an estimated 20 percent. Those who get premium help from the government won’t have to pay more. But those who are paying the full freight will.
Also driving up premiums for next year, says Corlette, are the administration’s threats not to enforce the individual requirement for insurance and its decision to cancel most advertising and outreach for the year’s open-enrollment period that begins Nov. 1. Both of those provisions bring more healthy people into the insurance pool to help spread costs.
“One could argue that the 2014 premium increases were painful, but it was about getting us to a system that was more fundamentally fair and just,” Corlette says. “Now, it’s completely unnecessary price increases for unsubsidized folks that could so easily be avoided by a rational political system.”
Can the U.S. Repair Its Health Care While Keeping Its Innovation Edge?
The United States health care system has many problems, but it also promotes more innovation than its counterparts in other nations. That’s why discussions of remaking American health care often raise concerns about threats to innovation.
But this fear is frequently misapplied and misunderstood.
First, let’s acknowledge that the United States is home to an outsize share of global innovation within the health care sector and more broadly. It has more clinical trials than any other country. It has the most Nobel laureatesin physiology or medicine. It has won more patents. At least one publicationranks it No. 1 in overall scientific innovation.
Strong promotion of innovation in health care is one reason the United States got as far as it did in our recent bracket tournament on the best health system in the world. Though the United States lost to France, 3-2, in the semifinals, it picked up its two votes in part because of its influence on innovation, which can save lives in the United States and throughout the world.
Now we shouldn’t delude ourselves into thinking Americans are inherently more innovative than people in other countries. In fact, many American innovators are immigrants who may or may not be citizens. Many technological and procedural breakthroughs in medicine have occurred in other countries.
Rather, the nation’s innovation advantage arises from a first-class research university system, along with robust intellectual property laws and significant public and private investment in research and development.
Perhaps most important, this country offers a large market in which patients, organizations and government spend a lot on health and companies are able to profit greatly from health care innovation.
The United States health care market, through which over one-sixth of the economy flows, offers investors substantial opportunities. Rational investors will invest in an area if it is more profitable than the next best opportunity.
“The relationship between profits and innovation is clearest in the biopharmaceutical and medical device sectors,” said Craig Garthwaite, a health economist with Northwestern University’s Kellogg School of Management, and one of the judges in our tournament. “In these sectors, firms are able to patent innovations, and we have a good sense of how additional research funds lead to new products.”
High brand-name drug prices, along with generous drug coverage for much of the population, fuel an expectation that large biopharmaceutical research and development investments will pay off. Were American drug prices to fall, or coverage of prescription drugs to retrench, the drug market would shrink and some of those investments would not be made. That’s a potential innovation loss.
This is not mere theory, economists have shown. Daron Acemoglu and Joshua Linn found that as the potential market for a type of drug grows, so do the number of new drugs entering that market. Amy Finkelstein showedthat policies that made the market for vaccines more favorable in the late 1980s encouraged 2.5 times more new vaccine clinical trials per year for each affected disease. And Meg Blume-Kohout and Neeraj Sood found that Medicare’s introduction of a drug benefit in 2006 was associated with increases in preclinical testing and clinical trials for drug classes most likely affected by the policy.
Health care innovation can have direct benefits for health, well-being and longevity. A study led by a Harvard economist, David Cutler, showed that life expectancy grew by almost seven years in the second half of the 20th century at a cost of only about $20,000 per year of life gained. The vast majority of gains were because of innovations in the care for high-risk, premature infants and for cardiovascular disease. These technologies are expensive, but other innovation can be cost-reducing. For instance, in the mid-1970s, new dialysis equipment halved treatment time, saving labor costs.
Even with those undeniable improvements, there are questions about the nature of American innovation. Work by Mr. Garthwaite, along with David Dranove and Manuel Hermosilla, showed that although Medicare’s drug benefit spurred drug innovation, there was little evidence that it led to “breakthrough” treatments.
And although high prices do serve as incentive for innovation, other work by Mr. Garthwaite and colleagues suggests that under certain circumstances drug makers can charge more than the value of the innovation.
The high cost of health care, an enormous burden on American consumers, isn’t necessarily a unique feature of our mix of private health insurance and public programs. In principle, we could spend just as much, or more, under any other configuration of health care coverage, including a single-payer program. We spend a great deal right now through the Medicare program — often held out as a model for universal single-payer.
Despite the fact that traditional Medicare is an entirely public insurance program, there’s an enormous market for innovative types of care for older Americans. That’s because we are willing to spend a lot for it, not because of what kind of entity is doing the spending (government vs. private insurers).
In fact, some question whether the innovation incentive offered by the health care market is too strong. Spending less and skipping the marginal innovation is a rational choice. Spending differently to encourage different forms of innovation is another approach.
“We have a health care system with all sorts of perverse incentives, many of which do little good for patients,” said Dr. Ashish Jha, director of the Harvard Global Health Institute and the other expert panelist who favored the U.S. over France, along with Mr. Garthwaite. “If we could orient the system toward measuring and incentivizing meaningfully better health outcomes, we would have more innovations that are worth paying for.”
Naturally, the innovation rewarded by the American health care system doesn’t stay in the U.S. It’s enjoyed worldwide, even though other countries pay a lot less for it. So it’s also reasonable to debate whether it’s fair for the United States to be the world’s subsidizer of health care innovation. This is a different debate than whether and how the country’s health care system should be redesigned. We can stifle or stimulate innovation regardless of how we obtain insurance and deliver care.
“We have confused the issue of how we pay for care — market-based, Medicare for all, or something else — with how we spur innovation,” Dr. Jha said. “In doing so, we have made it harder to engage in the far more important debate: how we develop new tests and treatments for our neediest patients in ways that improve lives and don’t bankrupt our nation.”
Patients, Health Insurers Challenge Iowa’s Effort To Privatize Medicaid
Iowa is one of 38 states that radically changed the way it runs Medicaid over the past few years. The state moved about 600,000 people on the government-run health program into care that is managed by for-profit insurance companies.
The idea is that the private companies would save the state money, but it has been a rocky transition in Iowa, especially for people like Neal Siegel.
Siegel is one of six disabled Iowans suing the state, alleging that Medicaid managed care, as it is known, deprives thousands of Iowans with disabilities the right to live safely in their homes.
Medicaid serves people with disabilities, low-income people and people in nursing homes. A combination of federal and state funds pays for the program. It covers 74 million people across the country these days, about half of whom are in Medicaid managed care.
Siegel, a former financial consultant, was in a hit-and-run bicycle crash four years ago that left him with a severe brain injury. He uses a wheelchair and can barely speak.
“I would probably put Neal at about 98 percent cognitive of what’s going on around him, but unfortunately not able to articulate it,” says Siegel’s girlfriend, Beth Wargo. “So it’s being trapped inside your own body.”
After the accident, Siegel qualified for Medicaid. He lived in a rehabilitation center for a while, and the lawsuit, filed in U.S. district court in June, says he was the victim of abuse and neglect while living there.
Eventually, he moved home with Wargo, where he is reliant on caregivers to assist him with all activities of daily life.
Then last year, Wargo says, they got a letter in the mail from AmeriHealth Caritas, the company that manages his care. Siegel’s budget for home help had been slashed by 50 percent, Wargo says. Siegel’s face lights up as Wargo talks about the lawsuit, and he manages to say, “Oh yeah,” when she mentions how happy they were that they could be part of it.
Cyndy Miller is the legal director with Disability Rights Iowa, the advocacy group that spearheaded the lawsuit.
“The system is too stressed right now with the way it’s being managed, and it’s not healthy for individuals with chronic or serious disabilities,” says Miller.
According to the lawsuit, the company claimed that spending on Siegel’s case was cut because it had exceeded a limit set in state policy. A spokesman for AmeriHealth Caritas said the company could not comment on ongoing litigation. The state has asked for the lawsuit to be dropped.
In addition to the suit, complaints about Medicaid from hospitals, doctors and patients have spiked in Iowa.
Iowa Department of Human Services Director Jerry Foxhoven defends moving the entire Medicaid population to managed care. He says more taxpayer dollars will be saved under private management.
But he says his agency is willing to make changes, especially for people like Neal, who have serious disabilities.
“Everything’s always on the table. We’re always looking at everything to say how do we best serve the people we’re trying to serve and be the best stewards of taxpayer dollars,” Foxhoven says.
For their part, the three companies with contracts in Iowa say in statements that the first 18 months have been successful. But they also have said to state officials that reimbursement rates were based on deeply flawed cost estimates provided to them before the project began.
They are now negotiating to get millions of dollars more in state funding.
So where is the savings? So far, no state has actually done a comprehensive review of whether private companies actually save Medicaid dollars, says Kelly Whitener, an associate professor with Georgetown University who studies managed care.
“You’d really need to be able to see are you saving money overall or not, and if you are spending less money, are you suppressing services that are needed? Or are you really finding efficiencies and only delivering care that families really need?” says Whitener.
For the moment, those questions don’t have definitive answers.
Meanwhile, Iowa has to balance its books. Republican Gov. Kim Reynolds had to tap more than $260 million of the state’s reserve fund this year, and officials expect next year’s budget will be even tougher to negotiate. Medicaid funding will likely be a large part of the discussion.
U.S. Health Care Reform Can’t Wait for Quality Measures to Be Perfect
https://hbr.org/2017/10/u-s-health-care-reform-cant-wait-for-quality-measures-to-be-perfect
There’s a debate in the United States about whether the current measures of health care quality are adequate to support the movement away from fee-for-service toward value-based payment. Some providers advocate slowing or even halting payment reform efforts because they don’t believe that quality can be adequately measured to determine fair payment. Employers and other purchasers, however, strongly support the currently available quality measures used in payment reform efforts to reward higher-performing providers. So far, the Trump administration has not weighed in.
The four of us, leaders of organizations that represent large employers and other purchasers of health care, reject any delay in payment reform efforts for the following three reasons:
Even imperfect measurement and transparency accelerate quality improvement. One set of measures often questioned is the Agency for Healthcare Research and Quality’s (AHRQ) Patient Safety Indicators (PSIs) used by the Centers for Medicare and Medicaid Services (CMS) and others in value-based payment programs. These indicators measure surgical complications and errors in hospitals, which is critical given that one in four hospital admissions is estimated to result in an adverse event.
PSIs remain among the most evidence-based, well-tested, and validated quality measures available. CMS uses many in its value-based purchasing programs. Use and reporting of PSIs through AHRQ’s Medicare Patient Safety Monitoring System has measurably improved quality. For instance, CMS reported a reduction in inpatient venous thromboembolisms (VTEs) from 28,000 in 2010 to 16,000 in 2014, meaning that 12,000 fewer patients had potentially fatal blood clots in 2014.
In addition to using quality measures in payment programs and for quality improvement, making measures public is key to accelerating change. “If transparency were a medication, it would be a blockbuster,” concluded a multi-stakeholder roundtable convened by the National Patient Safety Foundation’s Lucian Leape Institute in 2015. The foundation’s report cited the Leapfrog Group’s first-ever reporting of early elective delivery rates by hospitals in 2010, which galvanized a cascade of efforts to curtail the problem and thus reduce maternal harms and neonatal intensive care unit (NICU) admissions. This was effective: The national mean of early elective deliveries declined from a rate of 17% to 2.8% in only five years.
Using measures improves measurement. Providers and health care executives sometimes point to flaws in their medical-record and billing systems as a main reason certain measures shouldn’t be used. As they see it, their performance on the measures isn’t the issue; it’s their medical records or billing coding that’s the problem. They believe these internal systems should be fixed before measures that use this information are applied in payment formulas or public reporting.
But use of these measures is often necessary to break logjams in correcting the health care industry’s long-neglected weaknesses in data-quality control. Indeed, many of the nuanced imperfections providers criticize were only uncovered by public reporting, which revealed unexpectedly poor performance for some providers, prompting them to research the medical records to find out the reasons.
Even rough measures make a big difference when they are publicly reported. For instance, New York State’s release of surgical mortality data for coronary artery bypass grafting (CABG) procedures jump-started the movement to define and more carefully collect much stronger measures of CABG outcomes, and today we have many advances in cardiac care and its measurement.
In the New York example, the success in generating ever better measures — and more importantly, achieving ever better outcomes for patients — came about because providers made the changes that saved lives, and they deserve all the credit for that. A thorough, respectful process for building scientific and stakeholder consensus around measures has been orchestrated by leaders like the National Quality Forum (NQF) and the National Committee for Quality Assurance (NCQA). Purchasers are committed to partnering in the development and refinement of excellent measures while we advance transparency and payment reform alongside that work.
Returning to fee-for-service is not an option. Given the widely acknowledged waste, heavy costs, and quality-of-care issues produced by the fee-for-service system, the fact that there are rough spots on the road to value-based payment is hardly a justification for slowing down reform. If converting to a more sensible payment system were easy, it would have been done a long time ago.
The change to performance-based payment and market share requires tenacity and patience. Current quality measures may have rough edges, but stakeholders have worked hard to steadily improve their validity and reliability. Employers and other purchasers, such as those involved in our organizations, must work with forward-thinking colleagues in the health care system to continually improve the measures that publicly signal value. It will be a learning process for providers and purchasers as long as we’re guided by a spirit of transparency.
Whatever the risks of imperfect measurement, America’s first priority must be to eliminate avoidable suffering, mortality, and waste in its uniquely costly health care system. We hope that the Trump administration and lawmakers on both sides of the aisle will continue to recognize what our members see clearly: delaying payment reform is not an option.
HENRY KOTULA 