Maryland’s Experiment With Capitated Payments For Rural Hospitals: Large Reductions In Hospital-Based Care

https://www.healthaffairs.org/doi/abs/10.1377/hlthaff.2018.05366?utm_source=Newsletter&utm_medium=email&utm_content=The+Veterans++Health+Advantage+Program%3B+Capitated+Payments+For+Rural+Hospitals&utm_campaign=HAT+4-29-19

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ABSTRACT

In 2010 Maryland replaced fee-for-service payment for some rural hospitals with “global budgets” for hospital-provided services called Total Patient Revenue (TPR).

A principal goal was to incentivize hospitals to manage resources efficiently. Using a difference-in-differences design, we compared eight TPR hospitals to seven similar non-TPR Maryland hospitals to estimate how TPR affected hospital-provided services. We also compared health care use by “treated” patients in TPR counties to that of patients in counties containing control hospitals.

Inpatient admissions and outpatient services fell sharply at TPR hospitals, increasingly so over the period that TPR was in effect.

Emergency department (ED) admission rates declined 12 percent, direct (non-ED) admissions fell 23 percent, ambulatory surgery center visits fell 45 percent, and outpatient clinic visits and services fell 40 percent.

However, for residents of TPR counties, visits to all Maryland hospitals fell by lesser amounts and Medicare spending increased, which suggests that some care moved outside of the global budget.

Nonetheless, we could not assess the efficiency of these shifts with our data, and some care could have moved to more efficient locations. Our evidence suggests that capitation models require strong oversight to ensure that hospitals do not respond by shifting costs to other providers.

 

CMS opening up options for states to better manage dual-eligible patients

CMS opening up options for states to better manage dual-eligible patients

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According to data from CMS, while dual-eligible patients make up only 15 percent of Medicaid enrollees, they are responsible for 33 percent of the program’s expenditures.

The Centers for Medicare & Medicaid Services is looking to partner with states to determine better models to treat the 12 million dual-eligible Medicaid and Medicare beneficiaries in the country.

CMS and states spend more than $300 billion annually on this patient population, many of whom suffer from multiple chronic conditions made more difficult to treat by social and economic barriers.

The cost for dual-eligible population is outsized when compared to its size. According to data from CMS, while dual-eligible patients make up only 15 percent of Medicaid enrollees, they are responsible for 33 percent of the program’s expenditures.

“Less than 10 percent of dually eligible individuals are enrolled in any form of care that integrates Medicare and Medicaid services, and instead have to navigate disconnected delivery and payment systems,” CMS Administrator Seema Verma said in a statement.

“This lack of coordination can lead to fragmented care for individuals, misaligned incentives for payers and providers, and administrative inefficiencies and programmatic burdens for all.”

The goal from the agency is to promote new models which can better integrate Medicare and Medicaid services and create a more seamless experience for both beneficiaries and providers working across the two programs.

One major goal is to allow states to share in savings and benefits gained from investment in better care for the dual-eligible population.

In a letter addressed to state Medicaid leaders, Verma laid out a few potential payment approaches to address the issue of dual eligible patients, including a capitated payment model which would provide the full array of Medicare and Medicaid services with a set dollar reimbursement amount.

Nine states are currently piloting the model, which creates a three-way contract between the state, CMS and Medicare-Medicaid Plans. So far, CMS said state savings for states have averaged 4.4 percent in these test markets.

Through the experiments, Verma said the agency has been able to foster a competitive marketplace with multiple offerings that incentivizes health plans to invest in services that address the patient population.

CMS said it is currently open to extending the initial state pilots and expanding the geographic scope of the capitated programs.

For states that administer dual-eligible patients on a fee-for-service basis, Verma laid out a merged managed care model that would allow states to share in Medicare savings for metrics like reducing hospital readmissions.

Washington and Colorado are currently testing out the model. In one instance, providers in Washington are using Medicaid health homes to deliver high-intensity care to high-risk beneficiaries and sharing in the cost savings.

CMS said preliminary data from Washington’s program has been positive, with gross savings for Medicare Part A and Part B of 11 percent over three years. This has resulted in $36 million in performance payments to the state.

The letter from CMS also opens up the opportunity to potentially partner on state-specific models developed internally meant to better serve dual eligible patients and reduce Medicare and Medicaid expenditures.

CMS has made payment delivery reform a key initiative, with the ultimate goal of moving towards a outcomes-based payment system and reducing expenditures as Medicare faces an uncertain future.

A few recent initiatives include the launch of the agency’s Primary Cares Model, as well as the recent expansion of supplementary benefits for Medicare Advantage beneficiaries meant to tackle social determinants of health.

 

 

 

How Medicare Advantage steers the Silver Tsunami into coordinated, value-based care

https://www.healthcarefinancenews.com/news/how-medicareadvantage-steers-silver-tsunami-coordinated-value-based-care

CMS and other health insurers are using the program to deliver innovative and unique value to customers, both in terms of cost and quality.

Today’s Medicare Advantage plans are flourishing and the Silver Tsunami is among the reasons.

“Over the last four years, Medicare Advantage enrollment increased by more than 30 percent, while the number of people eligible for Medicare grew by about 18 percent,” said Steve Warner, vice president of Medicare Advantage Product for UnitedHealthcare Medicare and Retirement.

Other reasons for the growth: Innovative models from big insurers and upstarts alike that improve care for health plan members and drive revenue for payers as they look beyond fee-for-service.

IT STARTS WITH THE CONSUMER

Consumers are finding unique value in MA, both in terms of the quality of care and in the financial value.

Medicare Advantage, in fact, makes it easier for consumers to navigate the healthcare system and choose providers, in a way that traditional Medicare does not, said those interviewed.

“Actually it’s pretty hard to navigate the healthcare system on your own,” said Tip Kim, chief market development officer at Stanford Health Care. “Most Medicare Advantage plans have some sort of care navigation.”

Warner of UnitedHealth’s Warner added that Medicare Advantage also offers value and simplicity.

“It provides the convenience of combining all your coverage into one plan so you have just one card to carry in your wallet and one company to work with,” Warner said. “Most plans also offer prescription drug coverage and additional benefits and services not available through original Medicare, including dental, vision and fitness.”

REBRANDING FOR THE NEW ERA

MA plans did not emerge out of thin air. By another name, Medicare Advantage is managed care, a term that was the bane of healthcare during the height of HMOs in the 1980s.

“Medicare Advantage has rebranded ‘managed care’ to ‘care coordination,'” said consultant Paul Keckley of The Keckley Report. “Humana and a lot of these folks have done a pretty good job. Coordinating care is a core competence. Managed care seems to be working in this population.”

MA came along at the right time for CMS’s push to value-based care.

“I would suggest on the providers’ side, embracing Medicare Advantage is an opportunity to get off the fee-for-service mill,” said Jeff Carroll, senior vice president of Health Plans for Lumeris, which recently paired with Stanford Health Care on the Medicare Advantage plan, Stanford Health Care Advantage.

“Provider-sponsored Medicare Advantage plans are a way to put teeth into an accountable care organization,” Keckley added. “Medicare Advantage success is a silver tsunami among major tsunamis. Obviously it’s a profitable plan for seniors and profitable for underwriters. The winners in the process will get this to scale.”

MA is an innovative model that is not a government-run system, but a privately-run system essentially funded by the government.

PAYERS IN THE MA GAME

UnitedHealthcare has the largest MA market share of any one insurer.  Twenty-five percent of Medicare Advantage enrollees are in a UnitedHealthcare MA plan, followed by 17 percent in Humana, 13 percent in a Blue Cross Blue Shield and 8 percent in Aetna, according to the Kaiser Family Foundation.

Numerous insurers, in fact, have gotten into the MA market, including Clover Health in San Francisco, a five-year-old startup which has Medicare Advantage as its only business.

Clover is a tech-oriented company that boasts machine learning models that can accurately predict and identify members at risk of hospitalization.

Because Clover focuses only on MA, it can do a better job at problem solving the needs of an older population, said Andrew Toy, president and CTO of Clover Health.

“The problems we face in Medicare Advantage are very different from a younger generation,” Toy said.

Forty percent of the older population is diabetic. Most seniors will be dealing with a chronic disease as they get older.

In other insurance, whether its individual or commercial, the lower cost of the healthier population offsets the cost of the sicker population. MA has no way to offset these costs. Plans can’t cherry-pick consumers or raise premiums for a percentage of the population.

What MA plans can do is design plans that fit the varying needs of the population. A plan can be designed for diabetics. For younger seniors or those not dealing with a chronic disease, a plan can be designed that includes a gym membership.

“All these plans are regulated,” Toy said. “We have the flexibility to move dollars around. We can offer a higher deductible plan, or a nutrition plan. The incentives for us in Medicare Advantage are different than the incentives in Medicare. CMS has explored giving us more leeway for benefits. Consumers have a choice while still having the guarantees of Medicare.”

Toy believes regular Medicare is more expensive because MA offers a more affordable plan based on what an individual needs.

“When you need it, we get more involved in that care,” Toy said, such as “weight control issues for diabetics.”

The drawbacks are narrower networks, though Toy said Clover offers an out-of-network cost sharing that is pretty much in line with being in-network.

UnitedHealthcare’s Medicare Advantage LPPO plans offer out-of-network access to any provider who accepts Medicare, Warner said.

UnitedHealthcare also offers a wide variety of low and even zero-dollar premium Medicare Advantage plans and annual out-of-pocket maximums, Warner said. By contrast, original Medicare generally covers about 80 percent of beneficiaries’ healthcare costs, leaving them to cover the remaining 20 percent out-of-pocket with no annual limit.

“From a consumer value proposition, it makes Medicare Advantage a better deal,” Kim said. “One is Part B, 20 percent of an unknown number. Knowing what the cost will be in a predictable manner is a preferable manner.”

Stanford Health Care launched a Medicare Advantage plan in 2013. Lumeris owned and operated its own plan, Essence Healthcare, for more than eight years. Stanford and Lumeris partnered on Stanford Health Care Advantage in northern California, using Lumeris technology to help manage value-based reimbursementand new approaches to care delivery through artificial intelligence-enabled diagnostic tools and other methods.

“We are not a traditional insurance company,” Kim said. “We’re thinking about benefits from a provider perspective. It’s a different outlook than an insurance company. By definition we’re local.”

MA MARKET STILL HAS ROOM TO GROW

While the Medicare Advantage market is competitive, it is also under-penetrated, Brian Thompson, CEO for UnitedHealthcare Medicare & Retirement, said during a 2018 earnings report.

Currently, about 33 percent of all Medicare beneficiaries are in an MA plan, he added, but UnitedHealth sees a path to over 50 percent market concentration in the next 5-10 years.

It’s a path not so subtly promoted by the Centers for Medicare and Medicaid Services.

As a way to encourage insurers to take risk and get in the market, around 2009, CMS gave MA insurers 114 percent of what it paid for fee-for-service Medicare. The agency began decreasing those payments so that by 2017, traditional Medicare and MA became about even.

MA insurers instead thrive on their ability to tailor benefits toward wellness, coordinate care and contain costs within the confines of capitated payments, the essence of value-based care.

They have received CMS support in recent rate notices that gives them the ability to offer supplemental benefits, such as being able to target care that addresses the social determinants of health. Starting in 2020, telehealth is being added to new flexibility for these plans.

WHAT THE FUTURE MAY HOLD FOR MA

Medicare Advantage plans have expanded and, in so doing, opened innovative new options for plans and their customers alike at the same time that the ranks of people eligible for Medicare continues to swell.

So where is it all going?

Medicare Advantage is changing the way healthcare is paid and delivered to the point that Keckley and Toy agreed the future may not lie in Medicare for All, but in Medicare Advantage for all.

“I think a reasonable place to end, is in some combination where the government is involved in price control, combined with the flexibility of Medicare Advantage,” Toy said. “That’s really powerful.”

 

 

Managing across conflicting business models

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Recall that over the past few weeks, we’ve been sharing our framework for thinking through the path forward for traditional health systems, as they look to drive value for consumers. We began by describing today’s typical health system as “Event Health”, built around a fee-for-service model of delivering discrete, single-serve interactions with patients. We then proposed the concept of “Episode Health”, which would ask the health system to play a coordinating role, curating and managing a range of care interactions to address broader episodic needs. Finally, last week we shared our vision for Member Health, in which the system would re-orient around the goal of building long-term, loyalty-based relationships with consumers, helping them manage health over time. In this broader conception, the health system would “curate” a network of providers of episodes, and events within those episodes, and ensure that the consumer (and their information) moves seamlessly across care interactions.

As we mentioned earlier, most successful health systems will play a combination of these roles at the same time, pursuing strategies that allow them to manage episodes while moving closer to a risk-based model that gives them the ability to create a member value proposition for consumers. As the graphic below illustrates, however, that pluralistic approach will create some important tensions for the health system.

Episode Health is fundamentally a fee-for-service approach—these systems will become specialists in delivering specific episodes (e.g., joint replacement), and will seek to drive increased volume through their model. That may not be an ideal outcome on the Member Health side of the business, however, where more episode volume could mean lower profitability, given the capitation-like incentives of “owning lives”. That’s a tension that faces every health system with its own health plan—even systems that have been pursuing both strategies for years still find it challenging to manage across conflicting incentive models. (Witness Intermountain Healthcare, long a pioneer of the Member Health model, which is in the midst of a structural overhaul to allow it to better manage across the two businesses.)

Recognizing the tensions inherent in shifting away from Event Health toward more comprehensive approaches is critical for organizations looking to make the leap forward. Health systems run the risk of being doomed by their own success if they don’t take steps to realign operating structures, administrative and clinical incentive schemes, and even market-facing branding to navigate the complexity inherent in running parallel business models.

 

Dynamics of Decline: The Truth About HMOs

http://www.chcf.org/articles/2016/11/dynamics-decline-truth-hmos

California Commercial HMO Enrollment, Kaiser Foundation Health Plan ("Kaiser") vs. Non-Kaiser, 2004-2015

California’s commercial health maintenance organization population shrank from 11.9 million to 9.8 million enrollees between 2004 and 2015 (see figure below), a 17.5% decline. But the decline has not been consistent across all HMOs — Kaiser’s commercial enrollment has actually grown during this period.

Two new publications from CHCF take a closer look at how commercial managed care enrollment (including individual enrollment) and the public sector’s embrace of managed care are shifting the way physician organizations are paid — important trends that could affect California’s delivery system.

The first report, As Commercial Capitation Sinks, Can California’s Physician Organizations Stay Afloat?, by Laura Tollen uses quantitative data and findings from stakeholder interviews to shed light on the extent to which commercial capitation is losing ground in California.

A companion set of charts and graphics compiled by Katherine Wilson provides additional detail on health plan enrollment and changes in HMO participation over the past decade.

It is important to look separately at Kaiser and non-Kaiser enrollment. Kaiser is characterized by a mutually exclusive relationship between the health plan (Kaiser Foundation Health Plan) and its two associated Permanente Medical Groups in Northern and Southern California. While Kaiser is by far the largest HMO in California, the health plan offers capitated contracts only to these two medical groups.

Kaiser HMO enrollment increased from 5.6 million to 6.1 million in the last decade, while commercial HMO enrollment for all non-Kaiser plans plummeted, from 6.3 million in 2004 to the current 3.6 million — a loss of more than 40%.

Uncertain Future

The impact of these trends on the state’s non-Permanente physician organizations is uncertain. While declining commercial capitation has not yet had a big effect on their operations, medical group leaders suspect it will soon, according to interviews. The change in commercial payment methods has been slow enough that their organizations have been able to adapt, repurposing some of their HMO-based infrastructure (utilization management tools, for example) for value-oriented payment programs that are FFS-based, such as private accountable care organizations (ACOs).

Among the other findings from the interviews were:

  • Declining capitation and rising fee-for-service will not influence individual physicians’ clinical decisions. All interviewees noted that their organizations’ strong culture of providing high-value care would prevent them from fundamentally changing the way they practice, regardless of payment type.
  • Despite commercial trends, capitation from Medicare Advantage and Medi-Cal managed care plans is on the rise. However, neither of these types of capitation is seen as a substitute for commercial capitation in terms of supporting infrastructure. While the perception is that Medicare Advantage capitation rates are generous, there is also recognition that these patients are costly. Interviewees said Medi-Cal capitation rates are inadequate.
  • Along with the decline in commercial capitation, interviewees expressed alarm at the large increases they observed in patient cost-sharing requirements. All said they fear that patients will not obtain the care recommended by their providers because of high out-of-pocket costs, and some said they already see this happen frequently.

Why This Matters

As more employers shift coverage from HMOs to preferred provider organizations (PPOs) and other non-capitated plans to achieve lower premium rates, they are sacrificing quality and financial protection for employees in exchange for short-term premium savings.

A recent CHCF blog post by Jeff Rideout of the Integrated Healthcare Association highlights the patterns of higher quality / lower cost that distinguish HMO plans in the state (compared to PPOs and other plan types). Large multispecialty physician organizations, which have flourished in California, have a long history and significant expertise in managing risk and coordinating care. These are the very skills that health care purchasers demand from value-based payment programs. Without sufficient infrastructure — which is supported by capitation/prepayment — the foundation of high-value care could crumble.

Given these trends, are employers being penny-wise but pound-foolish in pursuing short-term savings at the expense of longer-term value?

 

California’s New Single-Payer Proposal Embraces Some Costly Old Ways

http://khn.org/news/californias-new-single-payer-proposal-embraces-some-costly-old-ways/

Three of the dirtiest words in health care are “fee for service.”

For years, U.S. officials have sought to move Medicare away from paying doctors and hospitals for each task they perform, a costly approach that rewards the quantity of care over quality. State Medicaid programs and private insurers are pursuing similar changes.

Yet the $400 billion single-payer proposal that’s advancing in the California legislature would restore fee-for-service to its once-dominant perch in California.

A state Senate analysis released last week warned that fee-for-service and other provisions in the legislation would “strongly limit the state’s ability to control costs.” Cost containment will be key in persuading lawmakers and the public to support the increased taxes that would be necessary to finance this ambitious, universal health care system for 39 million Californians.

Several health experts expressed skepticism about the bill’s prospects in its current form.

“Single-payer has its pros and cons, but if it’s built on the foundation of fee-for-service it will be a disaster,” said Stephen Shortell, dean emeritus of the School of Public Health at the University of California-Berkeley. “It would be a huge step backwards in delivering health care.”

Paul Ginsburg, a health economist and professor at the University of Southern California, agreed and said the legislation reads like something out of the 1960s in terms of how it wants to reimburse providers.

“There’s broad consensus we ought to go from volume to value. This bill ignores all the signs pointing to progress and advocates a system that failed,” he said.

Backers of the Healthy California proposal are pushing for a vote in the Senate by Friday so the legislation can go to the state Assembly and remain in play for this year’s session.

The authors say that their single-payer proposal won’t rely entirely on old-fashioned fee-for-service and that there’s plenty of time for the bill to be amended. According to the authors, some of the criticism in the legislative analysis reflects a misreading of the bill: It would, they say, include some use of managed care.

Nonacute Care: The New Frontier

http://www.healthleadersmedia.com/leadership/nonacute-care-new-frontier?spMailingID=10066722&spUserID=MTY3ODg4NTg1MzQ4S0&spJobID=1061461419&spReportId=MTA2MTQ2MTQxOQS2

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What happens outside the hospital is increasingly important to success, so healthcare leaders need to influence or control care across the continuum.

If you’re running a hospital, one irony in the transformation toward value in healthcare is that your future success will be determined by care decisions that take place largely outside your four walls. If you’re running a health system with a variety of care sites and business entities other than acute care, the hospital’s importance is critical, but its place at the top of the healthcare economic chain is in jeopardy.

Certainly, the hospital is the most expensive site of care, so hospital care is still critically important in a business sense, no matter the payment model. But if it’s true that demonstrating value in healthcare will ensure long-term success—a notion that is frustratingly still debatable—nonacute care is where the action is.

For the purposes of developing and executing strategy, one has to assume that healthcare eventually will conform to the laws of economics—that is, that higher costs will discourage consumption at some level. That means delivering value is a worthy goal in itself despite the short-term financial pain it will cause—never mind the moral imperative to efficiently spend limited healthcare dollars.

So no longer can hospitals exist in an ivory tower of fee-for-service. Unquestionably, outcomes are becoming a bigger part of the reimbursement calculus, which means hospitals and health systems need a strategy to ensure their long-term relevance. They can do that as the main cog in the value chain, shepherding the healthcare experience, a preferable position; but physicians, health plans, and others are also vying for that role. Even if hospitals or health systems can engineer such a leadership role, acute care is high cost and to be discouraged when possible.