The big health care story in Washington, D.C this week comes down to three letters: CBO. The Congressional Budget Office released its latest projections about the Affordable Care Act’s cost and coverage, concluding that the Supreme Court’s changes to the ACA will lead to some states to opt out of its Medicaid reform. As a result, the ACA’s cost would fall by $84 billion over 11 years but lead to about three million fewer people receiving health insurance.
The CBO numbers are incredibly important in one sense: They reframe the debate over the ACA yet again. As I noted last week, more than two-thirds of states are waffling on whether to participate in the law’s Medicaid expansion, and the new CBO numbers will offer new targets for supporters and opponents of ObamaCare to make their case.
But the CBO score is also more of a political story than policy news. And as both parties continue to haggle over the ACA’s price and impact, keep in mind that the CBO’s projections about health law costs are often wrong.
So rather than focus on estimates of future reforms, we’ll focus on results from a current one: the Alternative Quality Contract. It’s an important payment pilot developed by Blue Cross Blue Shield of Massachusetts — and a key forerunner of the ACA’s accountable care organizations.
AQC Offers Template for ACO
Under the AQC, which Blue Cross launched in January 2009, a hospital or physician group negotiates a budget — or global payment — that covers the cost of care for all patients in their practice. If participating providers stay under budget, they receive bonuses; if they overspend, they pay the difference.
Revenues = volume x price. This is the financial reality for every organization that makes its money serving customers, whether for-profit or not-for-profit.
For the U.S. hospital sector, both volumes and prices are falling, leading to a depressed top-line. Reimbursement reductions from Medicare, Medicaid and commercial health plans are all under pressure: that’s the ‘price’ part of the equation. On the volume multiplier, the recession economy has caused patients to delay care, such as elective surgeries. Hospitals are forced to scrutinize every aspect of operations, according to Hospital Revenues in Critical Condition; Downgrades May Follow, from Moody’s Investors Service.
Moody’s points to declines in inpatient admissions, and falling outpatient indicators including ER visits, outpatient visits, and outpatient surgeries, all due to the “sluggish economy,” the agency wrote.
Exacerbating the negative bottom-line impact is the continued growth of uncompensated care: that is, health services provided to patients who leave the hospital without paying their bill.
Medicare took its broadest step yet in moving away from its traditional hospital payment method, finalizing a plan to alter reimbursements based on the quality of care hospitals provide and patients’ satisfaction during their stays.
The initiative is the beginning of a transition from paying hospitals on the basis of the amount of care they provide. Many health care researchers believe this fee-for-service system has encouraged unnecessary care, driving up costs and giving hospitals no incentive to economize.
Medicare’s new “value-based purchasing” program was mandated in last year’s health care law. It has sparked less discussion than has another experiment to change Medicare’s payment system through accountable care organizations, where a select group of doctors and hospitals get bonuses if they find ways to save money.
I’m not quite as convinced as some that there’s too much difference in the amount of consulting being requested and required by health systems now compared to in years past. After all it wasn’t so many years ago that APM made every hospital in America buy physicians one year and sell them the next. And there’s been plenty of cash poured down the drain of Meaningful Use and EMR implementation. But this WaPo article manages to quote 2 of the 3 best known health futurists (FD I know them all well!) not to mention a bunch of others, on the topic of consulting being demanded in the ramp up to ACOs. So while journo Bara Vaida got quotes from Ian Morrison & Jeff Goldsmith, I’m concerned–couldn’t she find Joe Flower’s email?
At a recent talk, Dartmouth’s Elliott Fisher facetiously remarked that we cannot yet be sure whether accountable care organizations (ACOs) will actually be accountable, caring, and organized. Well, if some providers have their way, they certainly won’t be accountable.
This story by Jordan Rau in the Washington Post relates comments being made as Medicare writes its rules governing the ACOs. Here are some quotes:
[S]ome prominent doctor and hospital groups are pushing for features that some experts say could undermine the overall goal – improving care while containing costs. They’re seeking limits on how the quality of their care will be judged, along with bonus rules that would make it easier for them to be paid extra for their work and to be paid quickly.
Here’s the one I like best:
The Federation of American Hospitals, representing for-profit facilities, goes further, urging that ACOs be allowed to choose their patients. “Providers are better positioned than CMS to determine which of their patients would be appropriate candidates,” the federation wrote.
So, we are happy to be held accountable, but only if we get to choose which patients are part of our network.
Many folks criticize pharmaceutical companies for providing physicians’ offices with free drug samples. They claim that this giveaway harms consumers because drug companies must raise their prices to cover the costs of these freebies. Of course, this is undeniable. Any business expense, such as payroll or advertising, has to be covered and is expectedly borne by the consumer. If a company chooses not to advertise, outsources manufacturing to a country with cheaper labor, offers limited benefits to its employees, then they can sell their product at a low price. In this hypothetical example, anemic sales may doom the company quickly.
Naturally, free samples are not really free. The rest of us pay for them. While this is true, I don’t think it is evil. Unlike the U.S. government, at least drug companies are covering their costs and not simply borrowing money every year to meet budget. Interesting concept.
Two of the community hospitals I work at have undergone transformations. One is owned by the dominant health care behemoth in Cleveland and has just completed a near $200 million renovation and expansion. The other smaller hospital is one of the few remaining Cleveland area hospitals that are still independent. I’d like to sneak there at night and hoist up a ‘Live Free or Die’ flag up the flagpole, to celebrate its independent streak, but I’m sure that there are video cameras everywhere and that I would be in violation of several bylaws. The apt punishment might be that I would have to spend a cold Cleveland night chained to the flagpole reading electronic medical record manuals out loud. Continue reading “Free Drug Samples and Hospital Hotels: Which is the Greater Evil?”
Readers know of my criticisms of the electronic medical record (EMR) juggernaut that is oozing over the medical landscape. Ultimately, this technology will make medical care better and easier to practice. All systems will be integrated, so that a physician will have instant access to his patients’ medical data from other physicians’ offices, emergency rooms and hospitals. In addition, data input in the physician’s office will use reliable voice activated technology, so that some antiquated physician behaviors, such as eye contact, can still occur. Clearly, EMR is in transition. I place it on the 40 yard line, a long way from a touch down or field goal position.
A colleague related a distressing meeting he had at the community hospital he works at. This hospital, like nearly every hospital in Cleveland, is owned by one of the two towering medical behemoths. I’m not a businessman, but I have learned that when something owns you, it’s generally better for the owner than the ownee. This meeting was about the hospital’s upcoming EMR policy. Sometimes, these hospital meetings are ostensibly to seek physician input, but the true purpose is to inform the medical staff about decisions that have already been made. In the coming months, this hospital will adopt a computerized ordering system for all patients. In theory, this would be a welcome advance. It would create a digital and permanent record of all physician orders that could be accessed by all medical personnel involved in the patients’ care. It would solve the perennial problem of inscrutable physician handwriting, including mine.
It has become politically incorrect to refer to EHRs as products. Instead, EHRs are now “technologies” as evident in all ONC and CMS published rules and regulations. This subtle change in terminology was intended to encourage, yes you guessed it, Innovation. It was supposed to signal an open market for alternatives to existing EHR products in the form of modular approaches, open platforms, mobile applications and web-based software-as-a-service. Naturally, the industry is obliging and all efforts now are geared towards creating stuff that runs on iPads, preferably “cloud” based and with minimal utility. The new stuff looks very cool and promises to become even cooler, so what’s the problem?
The problem is that these new things do not solve any problems. Traditional product innovation concentrated on identifying problems, designing solutions and then selecting technologies that were capable of enabling those solutions. New technologies were usually born out of the necessity to solve a burning problem and those with enough applicability to larger markets became blockbusters. Every frying-pan today sports technology first invented in the process of creating refrigerants and later used for nuclear destruction (Teflon). Every large enterprise embarking on cost cutting, new markets acquisition, or general improvements, should know all too well that selecting a “cool” technology first, and then attempting to find a good use for it, is recipe for failure.
Hospitals are going to change. What worked in the past will not work in the future. The passage of the federal health care reform law and the inevitable transition from fee for service to global payments is changing the rules of the hospital game. Hospitals will have to make do with less financial support from both government and private payers and at the same time deliver higher quality health care with measurably better outcomes. Hospitals will take care of fewer and fewer patients as care continues to migrate to the outpatient setting, the home, and wherever citizens live carrying their smart phones. The development of Accountable Care Organizations (ACOs) to receive and distribute these global payments will affect hospitals whether they decide to take a leadership role or a wait and see attitude. There will be winners and losers among hospitals; there will be fewer hospitals in America in ten years than there are today in 2011.
Hospitals that survive this transformation of the health care delivery and payment system will become the community hub of wellness and health (CHWH) that citizens turn to in a time of rapid and chaotic change. Becoming a CHWH will require hospitals to expand their services and expertise well beyond the traditional role of an acute care facility. It will also require hospitals to embrace social media and disruptive digital tools that are now available to help care for a defined population living in the community. Hospitals will have to forge a new culture or their ACOs will fail, no matter how sophisticated and expensive their legal structures and physician integration plans become.
Hospital leadership seems ill prepared for this transformation in mission. Robert Naldi, the CFO of Maimonides Hospital in Borough Park, Brooklyn, is not alone when he says, “I don’t spend a lot of time thinking about global issues. When I hear Medicare is being cut six billion dollars over the next ten years, Medicaid cut four billion dollars the next, that ten billion dollars doesn’t change what I do on a Thursday morning…. I don’t spend any energy forecasting the next three or four years, because I don’t think anyone can do that. We’re lucky if we forecast the next six months, things change so rapidly. I just don’t waste time on it.” (http://ow.ly/3Dlxp)