Tag Archives: Medicare

Medicare for All, But All For Medicare?

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It’s 2018 and health insurance remains a major conundrum for America’s leaders, one hot political potato. Our current health system is worth $3.2 trillion to our economy — the most “valuable” in the world — but nearly 44 million people are without health insurance and our life expectancy falls behind thirty-six other nations.

The question remains: How can that be? And is healthcare really “a right” of all Americans?

Many other countries have successfully adopted single-payer systems, which means that no one is without coverage. Sen. Bernie Sanders (I-VT) is busy answering questions about his Medicare for All (M4A) platform, joined frequently by supporter and fellow democratic socialist and New York Congressional candidate Alexandria Ocasio-Cortez (D-NY).

“Health care must be recognized as a right, not a privilege,” he writes on his platform’s web page. “Every man, woman, and child in our country should be able to access the health care they need regardless of their income. The only long-term solution to America’s health care crisis is a single-payer national health care program.”

Summing it all up that way sounds very appealing, but making such a change would entail a seismic shift.

How Do We Really Feel?

A new Reuters/Ipsos survey shares that most of us, 70 percent, are in favor of the single-payer system: 85 percent of Democrats and 52 percent of Republicans. Perhaps even more surprising is that a mere 20 percent of us actually dislike the concept.

Under this plan, we’d all be lumped into one communal pot, run by the government, and we’d no longer have to fret over those confounding deductibles and premiums. We’d experience improved benefits, he promises, such as dental, vision and hearing.

Major tax increases would fund the plan that includes the following:

  • A 6.2 percent income-based health care premium paid by employers.
  • A 2.2 percent income-based premium paid by households.
  • Progressive income tax rates.
  • Taxing capital gains and dividends the same as income from work.
  • Limiting tax deductions for rich.
  • Savings from health tax expenditures.

    The government’s costs would increase to nearly $33 trillion during its first 10 years (2022 to 2031) says a “working paper”reportfrom Charles Blahous at the Mercatus Center at George Mason University. That number assumes enactment this year.

Emory University health policy professor Kenneth Thorpe, who has also studied M4A, says annual costs to the federal government will average between $2.5 trillion to $3 trillion.

The idea of anything “for all” has enormous appeal, but wait just a minute, says The Atlantic. This whole idea of single-payer, “an indulgent fantasy,” evolved because Republicans sought to kill the Affordable Care Act (ACA), or Obamacare, but the party couldn’t unite around a coherent alternative.  What then?

Democrats want to sweep away the complexity of our current health policy status quo, says the author Reihan Salam, who’s not all that optimistic. “All health reformers in America must confront the hospital sector.” The Blahous report says Medicare for All would slice hospital and physician payments by up to 40 percent which would significantly impact physicians and hospitals’ willingness and ability to care for Medicare patients (Medicare currently only covers 92% of costs).

Which “M” Word?

The word “Medicare” may, in fact, be misused when applied to a single-payer program, because, says Politico, Medicare isn’t single payer at all, but a “bewilderingly complex” system, “a massive public-private hybrid coverage scheme, funded mostly by taxes.“

Further, Medicare’s audience is specific: seniors who receive benefits when working-age people’s pay is taxed. We’re talking about greatly expanding the beneficiary pool here: “Paying for everyone’s health care that way would be a radically different proposition, and far more expensive.“

What we’re really talking about is Medicaid for All, suggests the National Review, which reminds us that “the devil really is in the details.” Medicaid is not free and is funded significantly by the Federal Government inversely related to each State’s per capita income and doctors dislike Medicaid with its low reimbursements, and consumers complain about long lines and treatment delays.

Sanders’ plan would say bye-bye to all private health insurance and would mean all abortions are free and that illegal aliens will get free health care courtesy of the taxpayer; things that many Americans will not tolerate.

Comparing Apples to Apples

Looking at the much bigger picture, proponents on the “yea” side of M4A say that its benefits far outweigh the risks. First and foremost, the entire population would have the opportunity to be healthier, since having access to health care improves health.

Currently, under the ACA, employers with 50 or more full-time employees must provide health insurance to all of them. For mega-corporations, that expenditure isn’t a huge ask, but smaller companies may find it a stretch. If the government funds health insurance, that then lightens the load for all companies that may find they can increase employee pay as a result — if they choose to do so, of course.

One point that seems to go “either way”: health care spending per capita. The United States spends nearly twice as much as other wealthy countries, topping out at $10,348 per person, according to 2016 numbers from Peterson-Kaiser. Compare that to the United Kingdom at

$4,192 and Japan at $4,519.

Given our expenditures, this is one tough pill to swallow: According to the latest report from The Commonwealth Fund, even though we spend more, “the U.S. population has poorer health than other countries” and is “failing to deliver indicated services reliably to all who could benefit.“

On the “nay” side of things, opponents cite those major tax hikes and longer waiting times to see a doctor, possibly extending into weeks and months. Add to that the elimination of innovations in the private sector that lead to breakthrough discoveries, all as a result of competition being removed from the medical technology playing field. Finally, funding all of this would require “shifting” funds from other priorities already deemed “urgent,” such as the nation’s infrastructure, those crumbling roads, and bridges now made more urgent due to the disastrous effects of climate change.

There’s no indication that this problem will be quickly solved, only that discussions will continue, while any momentum to effect positive change remains questionable. Americans would like to take the healthcare insurance coverage bull by the horns, but unfortunately, understand it’s just not within their power to do so. Until then, it’s a waiting game and may be for some time.

 

 

CHS subsidiary to pay $262M to settle fraud probe

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https://www.beckershospitalreview.com/legal-regulatory-issues/chs-unit-to-pay-262m-to-settle-fraud-probe.html

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Franklin, Tenn.-based Community Health Systems subsidiary Health Management Associates has agreed to pay the federal government $262 million to settle fraudulent billing and kickback allegations.

The settlement resolves allegations that HMA billed government payers for inpatient services that should have been billed as less costly observation or outpatient services, paid physicians in exchange for referrals, and submitted claims to Medicare and Medicaid for falsely inflated emergency department facility fee charges.

HMA’s conduct occurred between 2003 and 2012, before CHS acquired HMA. HMA was facing multiple qui tam lawsuits and was the subject of criminal and civil investigations when it was acquired by CHS, and CHS cooperated with the government in its investigation.

“Since acquiring HMA in 2014, it has been our goal to resolve the government’s investigation into all of these allegations which occurred prior to the acquisition and which were already under investigation at the time of the transaction,” CHS said in a press release.

In addition to the $262 million settlement, HMA entered a nonprosecution agreement with the Justice Department. Under the NPA, the government agreed not to bring criminal charges as long as HMA and CHS cooperate with the investigation, report evidence of violations of federal healthcare offenses, and ensure their compliance and ethics programs satisfy the requirements of a corporate integrity agreement between CHS and HHS’ Office of Inspector General.

Under the settlement, Carlisle HMA, the HMA-affiliated entity that formerly operated Carlisle (Pa.) Regional Medical Center, agreed to plead guilty to one count of conspiracy to commit healthcare fraud. CHS divested Carlisle Regional in 2017.

“We are pleased to have reached the settlement agreements so we can move forward now without the burden or distraction of ongoing litigation,” said CHS. “As an organization, we are committed to doing our very best to always comply with the law in what is a very complex regulatory environment and to operate our business with integrity, ethical practices and high standards of conduct.”

 

Congress Is Making Quiet Progress on Drug Costs

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https://www.commonwealthfund.org/blog/2018/congress-making-quiet-progress-drug-costs?omnicid=EALERT1477719&mid=henrykotula@yahoo.com

Progress on drug costs

While the Trump administration has taken small steps to implement its blueprint to lower prescription drug prices, Congress has recently made quiet progress on some policies that could help lower drug costs for patients.

First, both the Senate and House advanced legislation to ban “gag clauses” that prevent pharmacists from telling patients that they can save money on medications by paying for them out of pocket. Certain prescription benefit managers (PBMs) have used gag clauses as part of their formulary design. While this is not a widespread industry practice, a 2016 survey of community pharmacists found that nearly 60 percent had encountered a gag clause in the previous 10 months. Two bills (S. 2553 and H.R. 6733) would prohibit private Medicare plans from instituting gag clauses. A third, related bill (S. 2554) — passed by the Senate on Monday with overwhelming support — prohibits private health insurance plans from using them. While they enable pharmacists to advise patients on how to spend less at the pharmacy counter, these bans won’t necessarily lower the prices of drugs.

Second, a lesser-known provision of S. 2554, added by the Senate Committee on Health, Education, Labor and Pensions (HELP), could help lower drug prices by shedding light on patent-settlement agreements between drug manufacturers. Brand-name manufacturers sometimes use these agreements to extend their monopolies and keep drug prices higher by directly and indirectly compensating generic manufacturers for voluntarily delaying generics from coming to market. The Congressional Budget Office has found that setting a standard to rein in these types of settlements would produce $2.4 billion in savings over 10 years.

The HELP committee provision would require manufacturers of biologics (large-molecule drugs) and biosimilars (nearly identical copies of original biologics) to report patent-settlement agreements to the Federal Trade Commission (FTC) — an important step in understanding and preventing abuse of what is sometimes referred to as “pay for delay.”

Pay-for-Delay Stalls Drug Competition, Costing Patients Billions

In 2003, Congress required patent-settlement agreements between brand-name and generic small-molecule drug manufacturers to be filed with the FTC for review after they are made. (Currently most drugs sold are small-molecule drugs, but the biologics market is growing rapidly.) Such agreements effectively delay the sale of lower-cost generic drugs by nearly 17 months longer than agreements without payments, according to a 2010 report by the FTC. These anticompetitive agreements cost taxpayers approximately $3.5 billion each year.

In 2012, the U.S. Supreme Court decided in FTC v. Actavis that a brand-name drug manufacturer’s payment to a generic competitor to settle patent litigation can violate antitrust law. After the Court’s decision, the number of pay-for-delay agreements declined two years in a row. With drug companies now required to report these settlements to the FTC, the agency has been able to act to protect patients from anticompetitive deals that delay cheaper, generic drug products from coming to market. The FTC reviews reported settlements and, if it determines an agreement violates antitrust law, the agency challenges the agreement in the courts.

For example, in 2008 the FTC sued Cephalon, Inc., for paying four generic companies $300 million to delay marketing of their generic versions of Cephalon’s sleep-disorder drug, Provigil, until 2012. In 2015, the FTC reached a settlement with Cephalon’s owner, Teva Pharmaceutical Industries, Ltd., which agreed to ending pay-for-delay agreements for all their U.S. operations. The company also paid $1.2 billion in compensation for Cephalon’s anticompetitive behavior.

FTC Reporting Requirement Does Not Apply to Biologic and Biosimilar Manufacturers

The FTC reporting requirement applies only to small-molecule drugs, however, and not to far more expensive biologics and biosimilars. The potential savings of having biosimilars available for sale are significant: even one biosimilar competing against a brand-name biologic can result in a 35 percent lower price for patients and payers. Without delays in competition with brand-name biologics, biosimilars could save $54 billion to $250 billion over 10 years.

But there are concerns that manufacturers are entering into pay-for-delay agreements to keep prices for these drugs artificially high. Since 2015, when the biosimilar pathway was implemented, the FDA has approved 12 biosimilars, yet only three are currently available to patients — likely because of patent litigation and pay-for-delay agreements.

FTC Review Is Part of the Solution

In his remarks upon releasing the U.S. Food and Drug Administration’s Biosimilars Action Plan in July, FDA commissioner Scott Gottlieb noted the FTC’s key role in monitoring U.S. markets to protect consumers from anticompetitive behaviors, including those of prescription drug manufacturers. He also pointed out the patent litigation tactics manufacturers use to delay biosimilar competition.

As it does for the small-molecule drug market, the FTC can play a proactive role in monitoring what is happening in the biologic and biosimilar markets. At a workshop on drug pricing held last year, acting FTC chair Maureen Ohlhausen said that while her agency has been making progress in eliminating pay-for-delay agreements, it has not seen the last of them. She said they will remain a target. But to move forward, the FTC needs clearer authority to review patent settlements between biologic and biosimilar manufacturers.

With Senate passage of S. 2554 and its FTC reporting provision, Congress has taken an important step in encouraging a robust biosimilar market. (While the House has not passed a similar measure, the Senate bill could be added to a reconciliation of the House and Senate gag clause bills.) Engaging all the relevant market regulators — including the FTC, the U.S. Patent and Trademark Office, the Centers for Medicare and Medicaid Services, and the FDA — will inject needed competition into this nascent market and help lower drug prices for U.S. consumers.

 

How hospitals protect high prices

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Large hospital systems don’t command high prices just because patients like them, or just because they have strong market share. There’s also another big reason: their contracts with insurance companies actively prohibit the sort of competitive pressures a free market is supposed to support.

“The free market has been distorted in an unhealthy way,” health care consultant Stuart Piltch told the Wall Street Journal’s Anna Wilde Mathews for this deep dive into hospitals’ pricing practices.

How it works: Hospital systems are consolidating rapidly and buying up physicians’ practices (which charge higher prices once they’re part of a hospital).

On top of that, per WSJ: Hospitals’ deals with insurance companies “use an array of secret contract terms to protect their turf and block efforts to curb health-care costs.”

  • Some hospitals do not allow their prices to be posted on the comparison-shopping sites insurers provide to their customers.
  • They often require insurers to cover every facility or doctor the hospital owns, and prohibit insurers from offering incentives — like lower copays — for patients to use less expensive competitors.
  • When Walmart, the country’s biggest private employer, wanted to exclude the lowest-quality 5% of providers from its network, its insurers couldn’t do so because of their hospital contracts.

The other side: Hospital executives told the Journal that mergers don’t drive higher prices, and reiterated their position that hospitals have to collect higher payments from private insurance to make up for the lower rates they get from Medicare and Medicaid.

My thought bubble: High-deductible health plans are increasingly popular, in part, because of the idea that patients will use their purchasing power to drive a more efficient system overall.

  • But if Walmart doesn’t have enough market power to actually penalize low-quality providers, you and I definitely don’t, either — especially if we can’t find out what the prices are, and especially if we only have one hospital to choose from in the first place.

Go deeper: Think drug costs are bad? Try hospital prices

 

 

Can Paying for a Health Problem as a Whole, Not Piece by Piece, Save Medicare Money?

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Can Paying for a Health Problem as a Whole, Not Piece by Piece, Save Medicare Money?

Among the standard complaints about the American health care system is that care is expensive and wasteful. These two problems are related, and to address them, Medicare has new ways to pay for care.

Until recently, Medicare paid for each health care service and reimbursed each health care organization separately. It didn’t matter if tests were duplicated or if a more efficient way of delivering care was available — as long as doctors and organizations were paid for what they did, they just kept providing care the way they always had.

But ordinary people do not think this way. We focus on solving our health problem, not which — or how many — discrete health care services might address it. New Medicare programs are devised to more closely align how care is paid for with what we want that care to achieve.

One of these programs is known as bundled payments. Instead of paying separately for every health care service associated with a medical event, you pay (or Medicare pays, in this case) one price for the entire episode. If health care providers can address the problem for less, they keep the difference, or some of it. If they spend more, they lose money. Bundled payment programs vary, but some also include penalties for poor quality or bonuses for good quality.

Medicare has several bundled payment programs for hip and knee replacements — the most common type of Medicare procedures — and associated care that takes place within 90 days. This includes the operation itself, as well as follow-up rehabilitation (also known as post-acute care). In theory, if doctors and hospitals get one payment encompassing all this, they will better coordinate their efforts to limit waste and keep costs down.

Do bundled payments work? They certainly appear promising, at least for some treatments. But it’s important to conduct rigorous evaluations.

Previous studies for Medicare by the Lewin Group and other researchers suggest that Medicare’s Bundled Payments for Care Improvement program has reduced the amount Medicare pays for each hip and knee replacement.

But that doesn’t mean the program saved money over all.

One possible issue would be if, despite saving money per procedure, health care providers wastefully increased the number of procedures — replacing hips and knees that they might not otherwise. A related concern is if hospitals try to increase profits by nudging services toward patients who may not need a procedure as much as patients with more severe and more expensive conditions. An average joint replacement costs $26,000, split almost equally between the initial procedure and post-acute care. But more expensive cases can be $75,000 to $125,000 — a costly proposition for hospitals.

A recent study published in JAMA examined whether the volume of Medicare-financed hip and knee replacements changed in the markets served by hospitals that volunteered for a bundled payments program, relative to markets with no hospitals joining the program. It found no evidence that the bundled payment program increased hip and knee replacement volume, and it found almost no evidence that hospitals skewed their services toward patients whose procedures cost less.

“These results suggest bundled payments are a win-win,” said Ezekiel Emanuel, a co-author of the study. “They save payers like Medicare money and encourage hospitals and physicians to be more efficient in the delivery of care.”

But Robert Berenson, a fellow at the Urban Institute, urges some caution. “Studying one kind of procedure doesn’t tell you much about the rest of health care,” he said. “A lot of health care is not like knee and hip replacements.”

Michael Chernew, a Harvard health economist, agreed. “Bundles can certainly be a helpful tool in fostering greater efficiency in our health care system,” he said. “But the findings for hip and knee replacements may not generalize to other types of care.”

Christine Yee, a health economist with the Partnered Evidence-Based Policy Resource Center at the Boston Veterans Affairs Healthcare System, has studied Medicare’s previous efforts and summarized studies about them. (I and several others were also involved in compiling that summary.) “Medicare has tried bundled payments in one form or another for more than three decades,” Ms. Yee said. “They tend to save money, and when post-acute care is included in the bundle, use of those kinds of services often goes down.”

One limitation shared by all of these studies is that they are voluntary: No hospital is required to participate. Nor are they randomized into the new payment system (treatment) or business as usual (control). Therefore we can’t be certain that apparent savings are real. Maybe hospitals that joined the bundled payment programs are more efficient (or can more easily become so) than the ones that didn’t.

Another new study in JAMA examines a mandatory, randomized trial of bundled payments. On April 1, 2016, Medicare randomly assigned 75 markets to be subject to bundled payments for knee and hip replacements and 121 markets to business as usual. This policy experiment, known as the Comprehensive Care for Joint Replacement program, will continue for five years. The JAMA study analyzed just the first year of data.

“In this first look at the data, we examined post-acute care because it is an area where there is concern about overuse,” said Amy Finkelstein, an M.I.T. health economist and an author of the study. “In addition, prior work suggested that it’s a type of care that hospitals can often avoid.”

The study found that bundled payments reduced the use of post-acute care by about 3 percent, which is less than what prior studies found. “Those prior studies weren’t randomized trials, so some of the savings they estimate may really be due to which hospitals chose to participate in bundled payment programs,” Ms. Finkelstein said. Despite reduced post-acute care use, the study did not find savings to Medicare once the costs of paying out bonuses were factored in. The study also found no evidence of harm to health care quality, no increase in the volume of hip and knee replacements, and no change in the types of patients treated.

“Savings could emerge in later years because it may take time for hospitals to fully change their behavior, “ Ms. Finkelstein said. In addition, the program’s financial incentives will increase over time; bonuses for saving money and penalties for failing to do so will rise.

On the other hand, Dr. Berenson said, health care providers could figure out how to work the system: “In three to five years, we may see volume go up in a way that offsets savings through reduced payments for a procedure. We’ll wait and see.”

Medicare put its best foot forward by using a randomized design. Not only were the markets selected in a randomized fashion, but providers in those markets were also required to participate. Though common in medical studies, randomization is rare in health care policy, as is mandatory participation. Nearly 80 percent of medical studies are randomized trials, but less than 20 percent of studies testing health system change are. Organizations that would be subject to the experiments often strongly resist randomizing health system changes and forcing providers to participate.

Unfortunately, the randomization of the Comprehensive Care for Joint Replacement program will be partly compromised in coming years. The Centers for Medicare and Medicaid Services announced last year that hospitals in only half of markets under the program would have to stay in it. Participation is voluntary in the other half, and only one-quarter of hospitals opted in.

Going to a partly voluntary program will make it harder to learn about longer-term effects, Ms. Finkelstein said, and to get at the answers we’re seeking.

Bundled Payment Program Does Not Drive Hospitals to Increase Volume

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https://www.commonwealthfund.org/publications/journal-article/2018/sep/bundled-payment-program-does-not-drive-hospitals-increase?omnicid=EALERT1467649&mid=henrykotula@yahoo.com

Lower extremity joint replacement

The Issue

In 2013, the Centers for Medicare and Medicaid Services (CMS) introduced a voluntary program for hospitals called Bundled Payments for Care Improvement (BPCI). Under this alternative payment model, CMS makes a single, preset payment for an episode, or “bundle,” of care, which may include a hospitalization, postacute care, and other services. Evaluations of the program for lower extremity joint replacement surgery (e.g., a hip or knee replacement) have found that it reduced spending. But experts wonder if bundled payments could encourage hospitals to perform more surgeries than they would otherwise or to cherry-pick lower-risk patients. Commonwealth Fund–supported researchers explore these issues of volume and case mix in the Journal of the American Medical Association.The authors used Medicare claims data from before and after the launch of BPCI, comparing markets that did and did not participate in the program.

What the Study Found

3.8%

increase in mean quarterly market volume in non-BPCI markets after the program was launched

4.4%

increase in mean quarterly market volume in BPCI markets after the program was launched

  • Participation in the BPCI program was not significantly associated with an overall change in the volume of surgeries performed.
  • The mean quarterly market volume in non-BPCI markets increased 3.8 percent after the program was launched. For BPCI markets, the increase was 4.4 percent.
  • The analysis found only one change in case mix: patients who had previously used skilled nursing facilities were slightly less likely to undergo a lower extremity joint replacement surgery at a hospital participating in BPCI.

The Big Picture

Results from this study alleviate concerns that hospitals’ participation in voluntary bundles may increase the overall number of joint replacement surgeries paid for by Medicare. In particular, the savings per episode observed in prior BPCI evaluations are not diminished or eliminated by an increase in procedure volume. The findings do raise concerns: if patients with prior use of skilled nursing facilities are less likely to undergo procedures at BPCI-participating hospitals, perhaps it is because hospitals avoid them based on perceived risk. On the other hand, the authors note, these decisions could have been based on clinically appropriate factors, like risk of complications.

The Bottom Line

Hospital participation in a bundled care program did not change overall volume, thereby alleviating the risk of eliminating savings related to the program. In addition, participation was generally not associated with changes in case mix.

 

 

 

The health of 44M seniors is jeopardized by cuts to Medicare lab services

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PAMA

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The Protecting Access to Medicare Act (PAMA)

Congress passed the Protecting Access to Medicare Act (PAMA) in 2014 to help safeguard Medicare beneficiaries’ access to needed health services, including laboratory tests. Unfortunately, the U.S. Department of Health and Human Services (HHS) has taken a flawed and misguided approach to PAMA implementation. As a result of the Department’s actions, seniors will face an estimated $670 million in cuts to critical lab services this year alone, leaving the health of 57 million Medicare beneficiaries hanging in the balance.

PAMA cuts will be particularly burdensome to the most vulnerable seniors, such as those in skilled nursing facilities, those managing chronic conditions, and seniors living in medically underserved communities. The American Clinical Laboratory Association has raised significant concerns about the impact of Medicare lab cuts on seniors and their access to lifesaving diagnostics and lab services.

Learn more about the harm posed by these cuts on seniors here. Read the lawsuit ACLA has filed against HHS here.

WHAT’S AT STAKE

In 2016, seniors enrolled in Medicare received an average of

16 individual lab tests per year

Test tubes
People

80% of seniors

have at least one chronic disease and 77% have at least two—successful disease monitoring and management requires reliable access to routine testing

House

1 million

seniors are living in assisted living or skilled nursing homes

Hands

3.5 million

homebound seniors
rely on skilled home health care services

Map pin

An estimated

10 million

seniors live in rural areas

LACK OF ACCESS TO LAB TESTS

can result in undiagnosed conditions, lack of treatment for sick patients, and the failure to monitor and treat chronic conditions before they become worse—
resulting in a decline in overall health and longevity.

The PAMA cuts will also have a broad impact on laboratories across the country. Those that will face the brunt of the cuts are the very labs and providers that are uniquely positioned to provide services—like house-calls, 24-hour emergency STAT testing, and in-facility services at skilled nursing facilities—that are particularly important to seniors who are more likely to be homebound, managing multiple chronic conditions, or living in rural areas that are medically underserved.

 

 

 

 

 

How to Tame Health Care Spending? Look for One-Percent Solutions

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The health care system in the United States costs nearly double that of its peer countries, without much better outcomes. Many scholars and policymakers have looked at this state of affairs and dreamed big. Maybe there’s some broad fix — high deductibles, improvements in end-of-life care, a single-payer system — that can make United States health care less expensive.

But what if the most workable answer isn’t something big, but hosts of small tweaks? A group of about a dozen health economists has begun trying to identify policy adjustments, sometimes in tiny slices of the health care system, that could produce savings worth around 1 percent of the country’s $3.3 trillion annual health spending. If you put together enough such fixes, the group points out, they could add up to something more substantial.

This is a shift from the kind of research that is typically rewarded by big journal editors and tenure committees, but it could turn out to have a crucial role in understanding why our health care system is so expensive, and so unusual.

“I think focusing on the forest misses the fact that there are trees encroaching out of the forest,” said Fiona Scott Morton, a health economist at the Yale School of Management. “And we need to start cutting them down.”

A working paper published Monday proposes one possible fix. In the 1980s, Congress carved out a small group of hospitals from its normal rules for payment. These “long-term care hospitals,” which treated patients with tuberculosis and chronic diseases, could earn far more money than traditional hospitals and nursing homes if they cared for patients who stayed with them for an average of 25 days. Since then, the number of these hospitals has mushroomed, from a few dozen to more than 400, most run by two for-profit chains.

For years, analysts and policymakers have wondered about the value of these hospitals, which tend to treat very sick patients who need a lot of care, such as mechanical ventilation or dialysis. Several analyses have suggested that Medicare may be overpaying for their services. And Congress has made some small changes to limit the number of patients who are eligible for such care.

The new paper, from researchers at the Massachusetts Institute of Technology, Stanford University, and the University of Chicago, took a close look at what happened to patients as new long-term care hospitals opened around the country in places that had none.

The study, covering 1990 to 2014, found that when such a hospital opened, the odds increased that very sick patients leaving a normal hospital would end up going next to a long-term care hospital, generating a growing bill for both Medicare and the patients themselves. But the researchers found no benefit when it came to patients’ chances of dying or going home within 90 days.

The researchers concluded that the health care system could probably save a lot of money — around $5 billion a year — by paying the long-term care hospitals the same prices that are paid to skilled nursing facilities, the places that most long-term patients end up in when there is no long-term care hospital nearby.

The hospital industry disagrees with the paper’s conclusion and disputes the notion that the extra money they get is wasteful. The American Hospital Association noted that since the study ended, Congress has changed the rules for long-term care hospitals so that fewer of their patients qualify for the highest payment rates. That means that the study results might be different if they looked at long-term hospital care in more recent years.

Select Medical, one of the large chains of long-term care hospitals, said in a statement that measuring only whether the long-term care patients died or went home did not capture other, more subtle health benefits that the hospitals provided compared with other options. But the industry does not collect such measures of quality in a standardized way, making that theory hard to test.

The National Association of Long Term Hospitals, a trade group, also noted that the paper’s policy proposals were more extreme than those from other critics, who had suggested more minor changes to how the hospitals should be paid.

Neale Mahoney, a health economist at the University of Chicago Booth School of Business, who was one of the working paper’s co-authors, said the history of long-term care hospitals fit together with the economic analysis to suggest that the special hospital payment probably wasn’t appropriate.

“What’s convinced me that these institutions are a source of waste is a constellation of evidence rather than one piece of evidence,” he said.

Dr. Jeremy Kahn, a critical care physician and professor of health policy at the University of Pittsburgh, who has studied long-term care hospitals extensively, said there are some patients with particular ailments who benefit from the setting, but agreed with the economists that the hospitals are a historical accident, defined more by payment rules than patient needs.

“Long-term care hospitals aren’t to blame here,” he said. “If you see a dollar on the ground, you will pick it up, and that’s what’s going on here.”

Mr. Mahoney said the economics profession is fond of broad conclusions. The typical paper takes a narrow case and tries to draw a broader conclusion about how the world works. But he increasingly thinks that there may be value in thinking small, doing more of what he calls “forensic economics.”

One of his co-authors, Amy Finkelstein, says she has been inspired by a colleague who works in development economics, Esther Duflo, who recently delivered a speech titled “The Economist as Plumber,” arguing that her colleagues should not look down on tinkering as unworthy of the profession.

“We may need to do more health care plumbing rather than health care big theories,” said Ms. Finkelstein, a health economist at M.I.T. “The history of long-term care hospitals suggests the industry will always innovate ahead of you, and you may actually have to roll up your sleeves and find these pockets of waste.”

The researchers have begun to chat during coffee breaks at conferences and in long phone conversations. Small possible sources of inefficiency, like drug co-payment coupons for generic drugs or high out-of-network payments for emergency room care, could start to add up.

The scholars involved in the project know that they are not the first group to think small. The sort of deep and narrow investigations they are undertaking have long been the focus of groups like the Medicare Payment Advisory Commission, a group that recommends changes to Congress and that had even flagged long-term care hospitals for overhaul years ago. Washington policymakers and think tanks have long assembled briefing books of options to help them nip and tuck dollars out of government health programs.

But the new effort by academics may expand the impact of such suggestions. New data about not just government spending but also private insurance has enabled researchers to examine spending and inefficiency in the health care system more broadly than ever before. After all, the health care system is much bigger than just Medicare.

“I think people say that’s too small — it’s not going to change the trajectory — therefore we shouldn’t spend time on it,” said Ms. Morton, the Yale economist. “And they are forgetting how many dollars there are.”

 

 

What Have We Learned About Bundling Medical Conditions?

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As an alternative payment model, bundled payments hold the potential to improve the value of care by holding clinicians and organizations accountable for episode-specific quality and costs. Medicare has scaled bundled payments nationwide via several programs that define episodes based on hospitalization and up to 90 days of post-acute care.

However, the impact of bundled payments appears to differ between surgical and medical episodes. On one hand, Medicare has achieved promising results from bundling surgical care for lower extremity joint replacement. Medicare’s evaluation of its largest national bundled payment program, the Bundled Payments for Care Improvement (BPCI) initiative, has demonstrated that participation in joint replacement bundles is associated with a 3.8 percent decrease in per-episode spending with stable-to-improved quality. Other work evaluating the experience of high performers in BPCI demonstrates that bundled payments may reduce the costs of joint replacement episodes by up to 20 percent, with sizeable bonuses to physicians and hospitals and small improvements in quality – outcomes that, if scalable, would represent a win for patients, clinicians, organizations, and Medicare alike. On the other hand, recent evidence corroborates analyses conducted by Medicare and its contractor, suggesting that as designed, bundles for medical conditions such as congestive heart failure (CHF) and chronic obstructive pulmonary disease (COPD) are not associated with significant changes in quality or Medicare spending.

Therefore, one critical aspect of understanding the impact of bundled payments is evaluating how and why it differs for surgical versus medical care. This insight is particularly important given that surgical and medical episodes will be further expanded at a national scale in the forthcoming Bundled Payments for Care Improvement Advanced (BPCI-Advanced) program. In this post, we describe why the lack of episode savings in Medicare’s medical bundles may not be unexpected, why policymakers should not abandon medical bundles, and why existing evidence poses three important policy implications for the future of medical bundles.

Why Results May Differ For Surgical Versus Medical Bundles

By designing bundles that span hospitalization and post-acute care, Medicare has emphasized reductions in post-acute utilization and spending as major financial savings opportunities. While this approach suits surgical care in which a procedure triggers a cascade of acute and post-acute care, it may pose several challenges for episodes related to medical conditions. First, spending patterns for surgical versus medical care differ, more predictably spiking after surgical procedures but adopting a more cyclical pattern for chronic medical conditions. Accordingly, hospitalization may be more appropriate as an episode trigger for surgical episodes than for medical ones.

In surgical care such as joint replacement, hospitalization is a clear, distinct trigger before which there would be no expected episode-related utilization (e.g., little to no joint replacement-associated services prior to the surgery) and after which there is a distinct cascade of related utilization (e.g., physical rehabilitation, wound care, and post-surgical follow-up). In contrast, hospitalization only represents one aspect and phase of management for medical conditions such as CHF and COPD, which span outpatient, inpatient, emergency department, and post-acute settings over longer periods.

Second, physicians’ and hospitals’ ability to impact post-acute care utilization and spending may differ between surgical and medical episodes. This difference is not simply a reflection of the proportion of total episode spending paid to institutional post-acute care providers. For example, spending on skilled nursing facilities and inpatient rehabilitation facilities was only marginally higher for joint replacement compared with five medical conditions (26 versus 24 percent, respectively).

Rather, differences in the ability to impact post-acute care utilization may relate to the types of services provided in institutional post-acute settings for surgical versus medical patients. For surgical episodes, care at skilled nursing facilities often involves discrete, time-limited activities such as physical rehabilitation to achieve post-surgical recovery (e.g., strengthening, functional improvement). In contrast, given the natural history of diseases such as CHF and COPD, institutional post-acute care services for medical patients generally involve complex tasks such as medication management(e.g., diuretics) and multifaceted occupational therapy to promote self-care and activities of daily living. Consequently, hospitals in surgical bundles have achieved savings without compromising quality by shifting discharges from skilled nursing facilities and inpatient rehabilitation facilities towards home, with either home health or self-care. However, it remains unclear if similar efforts are possible or appropriate for the types of post-acute care that are often required as part of medical bundles. In turn, discharge patterns in medical bundles may reflect the less predictably defined roles of institutional post-acute care providers.

Another reason that shifting discharges away from institutional post-acute care providers may prove challenging under medical bundles is that they involve different types of patients than those often involved in surgical bundles. As noted recently, patients in medical bundles tend to be older and at higher risk for poverty and disability than patients in joint replacement bundles. In turn, patients receiving care for medical conditions may have greater clinical needs during and after hospitalization than patients undergoing surgical procedures.

Implications For The Design Of Medical Bundles

Collectively, these dynamics offer insight into why clinicians bundling care for medical conditions have not achieved savings in BPCI. They also have implications for the design of medical bundles going forward.

First, Medicare could consider modifying when and how medical episodes begin. Rather than being a necessary pre-condition for an episode, hospitalization itself may be a modifiable element of variation in medical conditions. Consequently, unlike in surgical procedures, using hospitalization as a medical episode trigger may miss the opportunity to include cost and utilization variation across the care continuum. As an alternative, if medical episodes were triggered in the outpatient setting – for example, after two specialty office visits within one month — provides might be better able to coordinate medical bundles with other efforts to improve value (e.g., payment models such as accountable care organizations and policies such as the Hospital Readmissions Reduction Program).

Second, Medicare could design medical bundles so that the emphasis on improvement is not restricted to care delivered in the post-discharge period. While variation reduction is not an absolute requisite for performance in bundled payments, care standardization remains an important organizational strategy for improving episode-based care. Creating incentives to focus on outpatient and pre-discharge elements may be particularly fruitful for medical bundles given the complexities of ongoing (in the ambulatory setting) and acute (in the hospital setting) management, and the possibility that practice redesign may require more time and greater effort than in surgical episodes.

Third, more data are needed to understand the impact of medical bundles and how best to design them in the future. To date, we have only early evidence about the impact of medical bundles in BPCI (the mean number of months of BPCI participation was 7 months for these hospitals). Given that other alternative payment models such as accountable care organizations have required three or more years before participants achieved savings, medical bundled payment policy should be guided by longer-term evaluations. Such evaluations should also closely monitor the programs for unintended effects: while it may be reassuring that medical bundles have not appeared to inadvertently lead to more readmissions or emergency department visits, vigilance is nonetheless required given the history of racial disparities in access that stem from quality- and value-based policies. Finally, future work can speed progress towards improvement by providing more detailed descriptions of the utilization and spending patterns of patients involved in medical bundles, as well as highlighting the experiences of high-performing providers.

Looking Ahead

While existing evidence suggests that medical bundles may not improve the value of care, these findings are not necessarily unexpected, and policymakers should not abandon the effort to bundle the care of medical conditions. Instead, in addition to more long-term evaluations, the design of medical bundles may be improved in the future by modifying how they are triggered and which phases of care they capture.