Medicare Payment Advisory Commission (MedPAC) and other proponents of the
Hospital Readmissions Reduction Program (HRRP) justified their support for the
HRRP with the claim that research had already demonstrated how hospitals could
reduce readmissions for all Medicare fee-for-service patients, not just
for groups of carefully selected patients. In this three-part series, I am
reviewing the evidence for that claim.
We saw in Part I and Part II that the research MedPAC cited in its 2007 report to Congress (the report Congress relied on in authorizing the HRRP) contained no studies supporting that claim. We saw that the few studies MedPAC relied on that claimed to examine a successful intervention studied interventions administered to carefully selected patient populations. These populations were severely limited by two methods: The patients had to be discharged with one of a handful of diagnoses (heart failure, for example); and the patients had to have characteristics that raised the probability the intervention would work (for example, patients had to agree to a home visit, not be admitted from a nursing home, and be able to consent to the intervention).
In this final installment, I review the research cited by the Yale New Haven Health Services Corporation (hereafter the “Yale group”) in their 2011 report to CMS in which they recommended that CMS apply readmission penalties to all Medicare patients regardless of diagnosis and regardless of the patient’s interest in or ability to respond to the intervention. MedPAC at least limited its recommendation (a) to patients discharged with one of seven conditions/procedures and (b) to patients readmitted with diagnoses “related to” the index admission. The Yale group threw even those modest restrictions out the window.
The Yale group recommended what they called a “hospital-wide (all-condition) readmission measure.” Under this measure, penalties would apply to all patients regardless of the condition for which they were admitted and regardless of whether the readmission was related to the index admission (with the exception of planned admissions). “Any readmission is eligible to be counted as an outcome except those that are considered planned,” they stated. (p. 10)  The National Quality Forum (NQF) adopted the Yale group’s recommendation almost verbatim shortly after the Yale group presented their recommendation to CMS.
In their 2007 report, MedPAC offered these examples of related and unrelated readmissions: “Admission for angina following discharge for PTCA [angioplasty]” would be an example of a related readmission, whereas “[a]dmission for appendectomy following discharge for pneumonia” would not. (p. 109) Congress also endorsed the “related” requirement (see Section 3025 of the Affordable Care Act, the section that authorized CMS to establish the HRRP). But the Yale group dispensed with the “related” requirement with an astonishing excuse: They said they just couldn’t find a way to measure “relatedness.” “[T]here is no reliable way to determine whether a readmission is related to the previous hospitalization …,” they declared. (p. 17) Rather than conclude their “hospital-wide” readmission measure was a bad idea, they plowed ahead on the basis of this rationalization: “Our guiding principle for defining the eligible population was that the measure should capture as many unplanned readmissions as possible across a maximum number of acute care hospitals.” (p. 17) Thus, to take one of MedPAC’s examples of an unrelated admission, the Yale group decided hospitals should be punished for an admission for an appendectomy within 30 days after discharge for pneumonia. 
Picture, if you will, a healthcare sector that costs less, whose share of the national economy is more like it is in other advanced economies—let’s imagine 9% or 10% rather than 18% or 19%.
A big part of this drop is a vast reduction in overtreatment because non-fee-for-service payment systems are far less likely to pay for things that don’t help the patient. Another part of this drop is the greater efficiency of every procedure and process as providers get better at knowing their true costs and cutting out waste. The third major factor is that new payment systems and business models actually drive toward true value for the buyers and healthcare consumers. This includes giving a return on the investment for prevention, population health management, and building healthier communities. This incentive would reduce the large percentage of healthcare costs due to preventable and manageable diseases, trauma, and addictions.
Picture, if you
will, a healthcare sector in which prices are real, known, and reliable.
Price outliers that today may be two, three, five times the industry median
have rapidly disappeared. Prices for comparable procedures have normalized in a
narrower range well below today’s median prices. Most prices are bundled, a
single price for an entire procedure or process, in ways that can be compared
across the entire industry. Prices are guaranteed. There are no circumstances
under which a healthcare provider can decide after the fact how much to charge,
or a health insurer can decide after the fact that the procedure was not
covered, or that the unconscious heart attack victim should have been taken to
a different emergency department farther away.
well-informed, savvy healthcare consumer, with active support and incentives
from their employers and payors, who is far more willing and eager to find out what their choices are and exercise that
choice. They want the same level of service, quality, and financial choices
they get from almost every other industry. And as their financial burden
increases, so do their demands.
Picture a reversing
of consolidation, ending a providers’ ability to demand full-network
contracting with opaque price agreements—and encouraging new market entrants
capable of facilitating a yeasty market for competition. Picture growing
disintermediation and decentralization of healthcare, with buyers increasingly
able to act like real customers, picking and choosing particular services based
on price and quality.
industry whose processes are as revolutionized by new technologies
as the news industry has been, or gaming, or energy. Picture a healthcare
industry in which you simply cannot compete using yesterday’s technologies—not
just clinical technologies but data, communications, and transaction
The system is unstable. We are already seeing the precursor waves of massive and multiple disturbances to come. Disruption at key leverage points, new entrants, shifting public awareness and serious political competition cast omens and signs of a highly changed future.
So what’s the frequency? What are the smart bets for a strategic chief financial officer at a payer or provider facing such a bumpy ride? They are radically different from today’s dominant consensus strategies. In this five-part series, Joe Flower lays out the argument, the nature of the instability, and the best-bet strategies.
Healthcare CFOs must look at the environment in which their system lives: Since 2007 the actual costs for the average middle-class family for many of the basics of life have decreased in real terms, while their actual costs for healthcare have risen 25%, or even more counting co-pays, deductibles, and out-of-pocket expenses. This long, continuing rise in the costs along with the continuing and increasing unreliability of the healthcare system (“Will it actually be there for me when I need it? Will it bankrupt me?”) create unyielding disruption.
I am no fortune
teller, but here are some things we can see right now that give us a sense of
Political shift: Public opinion has shifted. When polled about actual policies, healthcare has been cited repeatedly as the top concern of voters across the country. Voters’ top concerns are cost, the risk to patient protections in the ACA, and threats to “reform” Medicare by weakening it. The popularity of “single payer” proposals is a direct result of the cost and uncertainty of healthcare, a simple cry to “Do something!” Under this pressure we are more likely to see drastic solutions proposed and passed at the federal and state level or embodied in regulatory changes and lawsuits against industry practices.
Degradation of American life: With the opioid epidemic, the rise in suicides, the actual regression in life expectancy, and the increasing income and wealth divide, people increasingly feel that the healthcare industry is just not helping. They feel it is in fact part of the problem. The feeling that there is no one there to help us adds to the desperation of many parts of American society and heightens the political cost of the healthcare issue.
Public awareness: Healthcare is intensely personal, visceral. It’s crazy-making. Surprise bills, balance bills, other bills slipped through loopholes in the fine print or even in unwritten industry practices—what the industry considers standard operating procedure, the customers view as shocking, aggressive, and financially crushing.
The rebellion of the buyers: The percentage of buyers—such as employers, unions, and pension plans—telling various polls that healthcare costs represent a major problem for their business has more than doubled in the last five years and is now a majority. Buyers are pushing for choices to control costs and manage quality. They are beginning in greater numbers to demand reference pricing tied to Medicare rates, direct access to competitive bundled prices, and price transparency through centers of excellence, high performance networks and accountable care organizations. Some 65% of employers plan on implementing direct primary care in onsite or near-site clinics by 2020. Buyers are increasingly willing to take their beneficiaries elsewhere if your business can’t meet their demands.
It is now well established that Americans, in large majorities, favor universal health coverage. As witnessed in the first two Democratic debates, how we get there (Single Payer vs. extension of Obamacare) is another matter altogether.
295 million Americans have some form of health coverage (though increasing numbers are under-insured and vulnerable to the crushing effects of medical debt). That leaves 28 million uninsured, an issue easily resolved, according to former Obama staffer, Ezekiel Emanuel MD, through auto-enrollment, that is changing some existing policies to “enable the government agencies, hospitals, insurers and other organizations to enroll people in health insurance automatically when they show up for care or other benefits like food stamps.”
If one accepts it’s as easy as that, does that really bring to heel a Medical-Industrial Complex that has systematically focused on profitability over planning, and cures over care, while expending twice as much as all other developed nations? In other words, can America successfully expand health care as a right to all of its citizens without focusing on cost efficiency?
The simple answer is “no”, for two reasons. First, excess profitability = greed = waste = inequity = unacceptable variability and poor outcomes. Second, equitable expansion of universal, high quality access to care requires capturing and carefully reapplying existing resources.
It is estimated that concrete policy changes could capture between $100 billion and $200 billion in waste in the short term primarily through three sources.
An official of a health system in North Carolina sent an email to
the entire board of the North Carolina State Health Plan calling them a bunch
of “sorry SOBs” who would “burn in hell” after they
“bankrupt every hospital in the state.”
Wow. He sounds rather upset. He sounds angry and afraid. He
sounds surprised, gobsmacked, face-palming.
Bless his heart. I get it, I really do. Well, I get the fear and
pain. Here’s what I don’t get: the surprise, the tone of, “This came out
of nowhere! Why didn’t anyone tell us this was coming?”
Brother, we did. We have been. As loudly as we can. For years.
Two things to notice here:
What is he so upset about? Under State Treasurer
Dale Folwell’s leadership, the State Health Plan has pegged its payments to
hospitals and other medical providers in the state to a range of roughly 200%
of Medicare payments (with special help for rural hospitals and other
exceptions). In an industry that routinely says that Medicare covers 90% of
their costs, this actually sounds rather generous.
What is the State Health Plan? It’s not a payer,
that is, an insurer. It’s a buyer. Buyers play under a different set of rules
and incentives than an insurer.
We Need Legal Assaults On The Greediest Providers!
When a patient is hospitalized, or diagnosed with a deadly disease, they often have no choice about the cost of their treatment.
They are legally helpless, and vulnerable to price gouging.
Medicare offers decent protection — i.e. limits on balance billing, and no patient liability if a claim is denied.
But under age 65, it is a Wild West — especially for emergency care, and drugs and devices. The more they charge, the more they make. Even good health insurance does not offer complete financial insulation.
We need more legal protection of patients. In some cases we need price controls.
‘Charging what the market will bear’ is inadequate, even childish, when ‘the market’ consists of desperate patients. Where contracts are impossible and there is no chance for informed financial consent, government can and should step in.
This series describes the new laws that we need. Very little is required in tax dollars….but we do require a strong will to protect.
Leading lights of
the health insurance industry are crying that Medicare For All or any kind of
universal health reform would “crash the system” and “destroy
healthcare as we know it.”
They say that like
it’s a bad thing.
They say we should
trust them and their cost-cutting efforts to bring all Americans more
affordable health care.
We should not trust
them, because the system as it is currently structured economically is
incapable of reducing costs.
Why? Let’s do a
quick structural analysis. This is how health care actually works.
Health care, in the
neatly packaged phrase of Nick Soman, CEO of Decent.com, is a “system designed
to create reimbursable events.” For all that we talk of being
“patient-centered” and “accountable,” the fee-for-service, incident-oriented
system is simply not designed to march toward those lofty goals.
The last few weeks had been brutal. Despite working twelve-hour days, he felt that he had little to show for it. His annual board meeting was to take place the next day, and he expected it to be tense.
With a replacement bill for the ACA about to be voted on, and with Trump in the White House, the situation seemed particularly precarious. The board members had asked him to present a contingency plan, in case things in DC didn’t go well.
As CEO of a major health insurance company, Jim was well aware that business as usual had become unsustainable in his line of work. No matter what insurers had tried to do in the last few years—imposing onerous rules, setting high deductibles, pushing for government subsidies—prices had been going up and up.
Premiums, of course, had had to do the same but, evidently, the limit had now been reached. The horror stories being told at town hall meetings across the country were all too real. People were fed up, and politicians were feeling the heat.
Something needed to be done to change course, but what? He did not have any good plan to propose to the board.
Hi, today on THCB I’m glad to introduce Jessica DaMassa a new face who’ll be doing many more interviews in the future, focusing on thought leaders in health and health technology.–Matthew Holt
Ian Morrison is probably the best known health care futurist in America, despite being a Scottish-Canadian-Californian. He gave the keynote at last Fall’s Health 2.0 Conference, and gave his thoughts about the role of technology in the future of care delivery.
The world is not going to end. We witnessed a revolution earlier this week. The people have spoken and they chose the anti-establishment, street smart, government shrinking candidate who bucks the status quo. We find ourselves in uncharted territory, with an unpredictable President-elect, who has unclear plans for healthcare. Here is what we do know. Mr. Trump is a successful entrepreneur. Forbes describes the entrepreneurship pathway as having no clear story line, but a “sense of chaos, hectic decision making, and moments of great fear and doubt.” Improving our broken healthcare system will involve decision making in the face of great uncertainty. Mr. Trump has a well-developed tolerance for this sort of ambiguity and is likely the right man for the job.
Mr. Trump won over the white working-class individuals in small rural areas. Sluggish economic recovery in these areas played a significant role in his unanticipated victory. It is these disenchanted individuals watching the American Dream slip through their fingers who voted for Mr. Trump. Those same people want the freedom to buy the insurance they need, and not what the bloated government shoves down their throats. 25% of the population lives in rural areas yet only 10% of the physicians practice in there. Physicians are leaving the system in droves, closing their patient panels, and not keeping up with demand, thereby threatening patient access in these isolated locales.