By MICHAEL L. MILLENSON

The recent news that thousands of seniors with cancer are being denied treatment with expensive chemotherapy drugs as a result of sequestration-mandated budget cuts raises the question of whether other patients are being equally harmed, but less visibly.

A careful study of the impact of past federal budget cutting suggests a troubling answer. That study, in a National Bureau of Economic Research Working Paper published in 2011 and revised last year, established an eerily direct link between slashing hospital reimbursement and whether Medicare patients with a heart attack live or die.

Using data from California hospitals, researchers Vivian Y. Wu of the University of California and Yu-Chu Shen of the Naval Postgraduate School examined mortality rates for heart attack patients following the Medicare payment cuts resulting from the Balanced Budget Act (BBA) of 1997. The impact of the BBA was not as sudden or clear as the current situation, where Medicare’s two percent across-the-board cut on April 1 instantly transformed some expensive chemotherapy drugs into money losers, but it was significant and long-lasting.

The researchers examined hospitals claims data for a three-year period before the BBA, a three-year period when the BBA first took effect and, finally, a six-year period after budget cuts had either permanently changed care or failed to do so. They also tried to adjust for the severity of illness of the heart attack patients – the condition is formally known as acute myocardial infarction (AMI) – and other factors.

In the end, the researchers were able to trace a clear path from Congressional budget decisions to the patient’s bedside. Payment reductions triggered by the BBA , Wu and Shen concluded, led to “worse Medicare AMI patient outcomes, and more importantly, that the adverse effect only became measurable several years after the policy took place.”

They even quantified the effect: every thousand dollars of Medicare revenue loss from the BBA translated to a six to eight percent increase in mortality rates from heart attack. Continue reading “Why Medicare Cuts Will Quietly Kill Seniors”

By Russ Richmond, MD

The US healthcare system’s myriad of problems again seized the headlines recently with the release of an Institute of Medicine report, which found that 30 percent of healthcare spending in 2009 – around $750 billion – was wasted. Citing the “urgent need for a system-wide transformation,” the report blamed the lack of coordination at every point in the system for the massive amount of money wasted in healthcare each year.

One critical area in particular need of transformation is the business and operating model that drives healthcare in the US. There is broad-based agreement across the healthcare industry that the current fee-for-service model does not work, and needs to be changed. The sweeping health reform law enacted in 2010 included a range of more holistic, value-based payment structures that are now being referred to as “population health.”

Population health is an integrated care model that incentivizes the healthcare system to keep patients healthy, thus lowering costs and increasing quality. In this value-based healthcare approach, patient care is better coordinated and shared between different providers. Key population health models include:

· Bundled/Episodic Payments – This is where provider groups are reimbursed based on an expected cost for a clinically defined episode of care.
· Accountable Care Organizations (ACOs) – This new model ties provider reimbursement to quality and reduction in the total cost of care for a population of patients.

Continue reading “How Using a ‘Scorecard’ Can Smooth Your Hospital’s Transition to a Population Health-based Reimbursement Model”

By Dan Diamond

After a seemingly endless presidential campaign, we’re just days away from the Nov. 6 election. And to be sure, health care issues remain at the forefront.

Both Barack Obama and Mitt Romney have tried to claim the high ground as Medicare’s number one defender. In his latest column, the New York Times’ Paul Krugman argues that next week’s vote “is, to an important degree, really about Medicaid.” And writing on Bloomberg View, columnist Ezra Klein takes an even broader stance, concluding that “this election is all about health care.”

But health care isn’t all about the election, despite politics’ seeming ability to draw every sector into its gravitational pull.

In fact, many of the most significant stories in health care from the past two months haven’t come from the campaign trail — where candidates have mostly rehashed their existing policies — but from the private sector, as employers and providers have made aggressive, and sometimes unexpected, deals and changes. Reforms that will continue regardless of who’s sitting in the Oval Office next year.

Here are some of those stories.

Top Employers Move to Defined Contribution

As previously discussed in “Road to Reform,” Sears Holdings and Darden Restaurants have made plans to shift away from their current “defined benefits” — where they choose a set of health insurance benefits on behalf of their workers — and roll out “defined contribution” instead.

Under that model, firms pay a fixed amount for employees’ health benefits and allow workers to choose their coverage from an online marketplace, such as the Affordable Care Act’s health insurance exchanges or the emerging number of privately run exchanges.

In theory, the model would slow employers’ health costs while allowing employees to have more control over their own health care spending. And Sears and Darden’s announcements aren’t wholly unexpected, given that many employers have signaled their interest in making a similar shift.

But given the long-entrenched employer-sponsored health coverage model, some employers needed to be the first movers before the rest would be ready to follow.

Will they? That will be a major industry issue to watch across the next months.

Continue reading “How Health Care Changed While You Were Watching the Election”

By Wes Champion

In the 1960s, Texas Instruments developed the first handheld calculator. It could display up to 12 digits while performing addition, subtraction, multiplication and division. And it cost $2,200.

Since then, the calculator has come a long way. Competition forced continuous innovations, and today’s models are more lightweight, have longer battery life, are capable of performing more complex computations –all at a dramatically reduced price point.

That’s the typical cycle in virtually every sector of the American economy. Innovations are introduced, competition forces design improvements and cost reductions and products are continually improved until the next big thing comes along to start the process over again.

But that’s not the way things work in healthcare.

Like the calculator, Medicare was first created in the 1960s.

But even though the practice of medicine has changed dramatically over the last 40 years, the Medicare program has stayed largely the same. And, since most commercial insurers tend to follow the government’s lead in terms of payments and benefit design, even private markets have played a role in limiting innovations in the way we pay for healthcare.

Continue reading “How Bundled Payments Just Might Save Health Care From Itself”

By Jeff Goldsmith

In July, 2012, the US economy produced roughly the same volume of goods and services as it did five years earlier with five million fewer workers. Yet, during the first four years of the recession (May 2007 to May 2011), the US health system, despite slowing or declining utilization, added 1.149 million workers. Key sectors, specifically hospitals and physician offices, grew their workforces despite declining admissions and office visit volume. (Employment data in this post comes from the Bureau of Labor Statistics’ (BLS) National 4-digit NAICS Industry-Specific Estimates from May 2007 and May 2011.)

Compared to the rest of the economy, health care seems to exist in an alternate economic universe. This would be good news, rather than a problem, if we were not borrowing roughly half of every dollar of general revenue the federal government is spending on health care and if employers were not robbing their workers of wage increases to fund their health benefits.

Hospitals and physician offices saw declines in their core activity in the past few years. Hospital admissions have been flat the past five years, and have shrunk the past two. Even hospital outpatient volume growth has subsided into the low single digits, only partially offsetting the lost admissions. Yet hospital employment rose by over 220,000 workers, or 4.4 percent from mid-2007 to mid-2011.
Continue reading “Health Care: An Alternate Economic Universe”

By John Goodman

On the eve of the release of this year’s Medicare Trustees report, the Obama administration released its own version of it. In the administration’s telling:

• Health reform (ObamaCare) will save taxpayers $200 billion in the Medicare program through 2016.
• About 90% of these savings will be produced by lowering “excessive payments” to Medicare Advantage plans, lower payments to doctors, hospitals and other providers to reflect their “improved productivity,” and through efficiencies gained by what is learned from “demonstration projects.”
• The demonstration projects include pay for performance, bundling, Accountable Care Organizations, and other frequently discussed ideas.

But whereas the Trustees report is expected to be a serious document, reflecting accepted accounting principles, the administration’s document was clearly a piece of political propaganda — one that stretched the truth so much that the word “spin” would be a charitable description. For example, the administration’s document failed to mention that:

• The Congressional Budget Office has studied the demonstration projects on three separate occasions (here, here and here) and each time has concluded that they are producing no serious savings and are unlikely to do so in the future.
• Medicare’s Actuary has determined that reductions in payments to Medicare Advantage plans will not only result in lower benefits for the one in four seniors who are in these plans, but that about 7 ½ million enrollees will actually lose their coverage and have to seek more expensive Medigap insurance elsewhere.

Continue reading “Bernie Madoff Accounting for Medicare”